0000793952hog:MotorcyclesAndRelatedProductsOperationsMembercountry:CA2019-01-012019-12-31



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ý☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2018
2020
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9183
Harley-Davidson, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin39-1382325
(State of organization)(I.R.S. Employer Identification No.)
Wisconsin39-1382325
(State of organization)(I.R.S. Employer Identification No.)
3700 West Juneau Avenue
Milwaukee, Wisconsin
MilwaukeeWisconsin53208
(Address of principal executive offices)(Zip code)
Registrant's telephone number:number, including area code: (414) 342-4680
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
COMMON STOCK,Common Stock Par value, $.01 PAR VALUE PER SHAREper shareHOGNEW YORK STOCK EXCHANGENew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yesý☒No ¨☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨☐Noý☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesý☒No ¨☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesý☒  No¨☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large accelerated filerý☒Accelerated filer¨☐Emerging growth companyo☐
Non-accelerated filer¨☐Smaller reporting company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes¨☐No  ý☒
Aggregate market value of the voting stock held by non-affiliates of the registrant at July 1, 2018: $6,987,984,229June 28, 2020: 3,468,117,883
Number of shares of the registrant’s common stock outstanding at February 1, 2019: 159,543,955January 31, 2021: 153,313,450 shares
Documents Incorporated by Reference
Part III of this report incorporates information by reference from registrant’s Proxy Statement for the annual meeting of its shareholders to be held on May 9, 2019

20, 2021





Harley-Davidson, Inc.
Form 10-K
For The Year Ended December 31, 2018
2020
Page
Part I
Item 1.
Business
3
Item 1.
3
Item 1A.
1011
Item 1B.
18
Item 2.
18
Item 3.
1918
Item 4.
2018
Part II
Part II
Item 5.
2019
Item 6.
2220
Item 7.
2320
Item 7A.
4537
Item 8.
4739
Item 9.
11096
Item 9A.
11096
Part III
Part III
Item 10.
11197
Item 11.
11197
Item 12.
11197
Item 13.
11298
Item 14.
11298
Part IV
Part IV
Item 15.
11399
Item 16.
11399
120106



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PART I
(1) Note regarding forward-looking statements
The Company intends that certain matters discussed by the Company in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” “may,” “will,” “estimates,” “targets,” “intend,” or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including under the caption “Risk Factors” in Item 1A of this report 1A. Risk Factors and under “Cautionary Statements”the Cautionary Statements section in Item 77. Management's Discussion and Analysis of this report.Financial Condition and Results of Operations. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included inunder the Overview and Outlook section ofGuidance sections in Item 7. Management's Discussion and Analysisof Financial Condition and Results of Operations are only made as of January 29, 2019February 2, 2021 and the remaining forward-looking statements in this report are made as of the date indicated or, if a date is not indicated, as of the date of the filing of this report (February 28, 2019)(February 23, 2021), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. 
Item 1. Business
General
Harley-Davidson Motor Company was founded in 1903. Harley-Davidson, Inc. was incorporated in 1981, at which time it purchased the Harley-Davidson®Harley-Davidson® motorcycle business from AMF Incorporated in a management buyout. In 1986, Harley-Davidson, Inc. became publicly held. Harley-Davidson, Inc. is the parent company of the group of companies referred to as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). Unless the context otherwise requires, all references to the “Company” include Harley-Davidson, Inc. and all of its subsidiaries. Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company hasoperates in two reportable segments: the Motorcycles and Related Products (Motorcycles) segment and Financial Services. The Company's reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.
Strategy(1)
During 2020, the Company executed a set of actions, referred to as The Rewire. The Rewire was a critical overhaul of the Company's business to set the Company on a new course and provide a solid foundation to execute its new 2021-2025 strategic plan, The Hardwire. The Rewire is discussed further under Item 7. Management's Discussion and Analysisof Financial Services segment.
StrategyConditionandResults of Operations.
The Hardwire is the Company's 2021-2025 strategic plan guided by its mission and vision, which the Company introduced on February 2, 2021. The plan targets long-term strategy, announced in 2017,profitable growth through focused efforts that extend and strengthen the brand and drive value for its shareholders. The Company's ambition is to buildenhance its position as the next generationmost desirable motorcycle brand in the world. Desirability is a motivating force driven by emotion. Harley-Davidson has long been associated with igniting desirability, and it is embedded in its vision; it is at the heart of its mission and it is part of its 118-year legacy. To drive desirability, the Company will:
•Design, engineer and advance the most desirable motorcycles in the world - reflected in quality, innovation, and craftsmanship
•Build a lifestyle brand valued for the emotion reflected in every product and experience for riders and non-riders alike
•Focus on customers, delivering adventure and freedom for the soul
The Hardwire strategic priorities are as follows:
Profit focus: Investing in its strongest motorcycle segments – Harley-Davidson riders globallyplans to invest significant time and resources on strengthening and growing its leadership positions in its strongest, most profitable motorcycle segments: Touring, large Cruiser and Trike.
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Selective expansion and redefinition: To win in attractive motorcycle segments and markets – The Company plans to selectively expand into and within motorcycle segments, focusing on product segments that are profitable and aligned with the Company's product and brand capabilities, such as Adventure Touring and middleweight Cruiser.
The Company plans to focus on approximately 50 global markets that matter most to its future growth. This includes the following 2027 objectives:priority markets: United States, DACH (Germany, Austria, and Switzerland), Japan, China, Canada, France, United Kingdom, Italy, Australia, and New Zealand. The Company will also continue to test further avenues for desirable long-term growth such as premium low displacement motorcycles.

Build two million new Harley-Davidson ridersLead in Electric: Investing in leading the electric motorcycle market – Electric motorcycles are important to Harley-Davidson’s future and it is committed to and passionate about leading the electric motorcycle market. The focus will be on technology development, with an approach to product and go-to-market actions that reflect the expectations of the targeted customer to deliver the most desirable electric motorcycles in the U.S.world.
GrowGrowth beyond bikes: Expanding complementary businesses and engaging beyond product – Harley-Davidson creates products, services and experiences that inspire its customers to discover adventure, find freedom for the soul and live the Harley-Davidson international businesslifestyle. The Company's Parts & Accessories, General Merchandise and Financial Services businesses are all important pillars of the Company's future success as a global lifestyle brand. Through The Hardwire, the Company plans to 50 percentgrow the profitability of these businesses through refreshed product and program offerings, stronger execution and additional digital and in-dealership purchase opportunities.
Customer experience: Growing our connection with riders and non-riders – The Hardwire puts customers at the forefront of the Company's products, experiences and investments – from the rider who may dream of motorcycling or just learned to ride, all the way to riders who are deeply passionate about and invested in the Harley-Davidson lifestyle. The Company recognizes the different needs and expectations of its total annual volumecustomers and is creating touchpoints tailored to individual needs. Powered by integrated data, the goal is to seamlessly engage with customers, creating a meaningful, unique and personalized experience with Harley-Davidson each and every time.
Launch 100 new, high-impact Harley-Davidson motorcyclesInclusive Stakeholder Capitalism: Prioritizing people, planet and profit – The Company strives to deliver long-term value to all stakeholders – people (employees, independent dealers, customers, suppliers, investors, and society), planet, and profit. Inclusive Stakeholder Management is the unifying theme for how the Company will help drive additional shareholder value for its investors.
Deliver superior return on invested capitalThe Hardwire financial targets are as follows:
•Mid single-digit revenue growth from 2021 through 2025 in the Motorcycles segment, with solid growth expectations for HDMC that fallsMotorcycles, Parts & Accessories and General Merchandise.
•Steady improvement in Motorcycles segment operating margin compared to 2019 (most recent comparable year) through 2025 driven by increased efficiencies across operations and leverage within selling, general and engineering expenses, as the top quartileCompany maintains a lean cost structure. This includes anticipated continued investments in the business and brand.
•Double-digit growth in Financial Services segment operating income from 2021 through 2025 behind growth in the Motorcycles segment and optimization of the S&P 500Company’s digital platform.
Grow the business without growing its environmental impact•Low double-digit diluted earnings per share growth from 2021 through 2025.

•Capital investments between $190 million to $250 million annually.
On July 30, 2018, the Company disclosed its “More RoadsCash allocation priorities are first to Harley-Davidson” planfund growth through The Hardwire initiatives, then to acceleratereward shareholders through dividends.
The Hardwire replaces the Company's previous long-term strategy to buildand objectives and the next generation of riders globally. Thepreviously disclosed More Roads to Harley-Davidson plan through 2022 includes three growth catalysts:

plan.
New products - keep current riders engaged and inspire new riders by extending heavyweight leadership and expanding into new markets and segments
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Broader access - meet customers where they are and how they want to engage with a multi-channel retail experience
Stronger dealers - drive a performance framework to improve dealer financial strength and the Harley-Davidson customer experience
Motorcycles and Related Products Segment
The Motorcycles segment consists of HDMC which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles as well as motorcycle parts, accessories, general merchandise and related services. The CompanyMotorcycles segment conducts business on a global basis, with sales in the United States (U.S.), Canada, Latin America, Europe/Middle East/Africa (EMEA), Asia Pacific, and Asia Pacific.Latin America. The Company's products are sold to retail customers primarily through a network of independent dealers. Independent dealerships generally stock and sell the Company's motorcycles, Parts & Accessories (P&A), General Merchandise, licensed products, and perform services on Harley-Davidson motorcycles.

Independent Harley-Davidson dealers are located worldwide. Independent dealership points by geographic location as of December 31, 2020 were as follows:

 U.S.CanadaEMEAAsia PacificLatin AmericaTotal
Independent dealership points630 51 369 282 47 1,379 
The followingCompany also distributes its motorcycles through a third-party distributor in India. The distributor sells the Company's products through independent Harley-Davidson dealers, included in the table includes above, and their own existing dealer network.
P&A and General Merchandise are also retailed through eCommerce channels in certain markets. In the U.S., the Company operates an eCommerce site that offers products sold through participating authorized U.S. independent Harley-Davidson dealers. In select international markets, the Company utilizes third-party eCommerce websites.
Motorcycles segment revenue by product line as a percent of total revenue for the last three fiscal years(a) was as follows:
202020192018
Motorcycles72.0 %77.4 %78.1 %
Parts & Accessories20.2 %15.6 %15.2 %
General Merchandise5.7 %5.2 %4.9 %
Licensing0.9 %0.8 %0.8 %
Other products and services1.2 %1.0 %1.0 %
100.0 %100.0 %100.0 %
  2018 2017 2016
Motorcycles 78.1% 76.6% 76.9%
Parts & Accessories 15.2% 16.3% 15.9%
General Merchandise 4.9% 5.3% 5.4%
Licensing 0.8% 0.8% 0.8%
Other 1.0% 1.0% 1.0%
  100.0% 100.0% 100.0%
(a)In connection with the adoption of ASU 2014-09, the Company has changed its presentation of disaggregated Motorcycles segment revenue and the prior period has been recast to reflect the new presentation.
Motorcycles -– Harley-Davidson offers both internal combustion and electric powered motorcycles. The Company's current Harley-Davidson motorcycle offerings include cruiser and touring models that feature unique styling, innovative design, distinctive sound, and superior quality with the ability to customize. These Harley-Davidson motorcyclesinternal combustion engines generally have engines with displacements that are greater than 601cc's,600 cubic centimeters (cc), up to a maximum displacement of approximately 1900cc's.1900cc and electric motors with kilowatt (kW) peak power equivalents greater than 600cc.
The total on-road motorcycle marketindustry is comprised of the following segments:
•Cruiser (emphasizes– emphasizes styling, customization and owner customization);casual riding
•Touring (emphasizes– emphasizes rider comfort and load capacity and incorporates features such as fairings and luggage compartments);compartments ideal for long rides, including the Company's three-wheeled Trike models
•Standard (a– a basic motorcycle which usually featurestypically featuring upright seating for one or two passengers);passengers
•Sportbike (incorporates– incorporates racing technology and performance and aerodynamic styling low handlebars with a “sport”and riding position and high performance tires); and
•Dual (designed– designed with the capability for use on public roadson-road as well as for some off-highwayoff-road recreational use).use, including Adventure Touring
The Company's current lineup of motorcycles offered through 2020 competes primarily in the cruiser and touring segments ofsegments. Beginning in 2021, the market. Company is expanding into Adventure Touring with its new Pan America™ motorcycle.
Competition in the segments of the motorcycle market in which the Company currently competesindustry is based upon a number of factors including product capabilities and features, styling, price, quality, reliability, warranty, availability of financing, and quality of the dealer networknetworks that sellssell the product.products. The Company believes its motorcycles continue to generally command a premium price at retail relative to competitors’ motorcycles. Harley-Davidson motorcycles feature unique styling, customization, innovative design, distinctive sound, superior quality, reliability and include a warranty. The Company emphasizes remarkable styling, customization, innovation, sound, quality and reliability in its products and generally offers a two-year warranty for its motorcycles. The Companyalso considers the availability of aits line of motorcycle partsParts & accessoriesAccessories and general merchandise,General Merchandise, the availability of financing through HDFS and its global network of independent dealers to be competitive advantages.
Under the More Roads to Harley-Davidson plan, the Company intends to introduce new products including electric motorcycles; a new middle-weight platform of motorcycles that includes adventure touring, custom and streetfighter models with engine displacements ranging from 500cc's to 1250cc's; and smaller displacement motorcycles for emerging markets. The Company plans to introduce these new motorcycles between 2019 and 2022, starting with a new electric motorcycle, LiveWireTM, in the second half of 2019.
Motorcycle Industry Data -– Industry data includes on-road motorcycles with internal combustion engines with displacements greater than 600cc and electric motorcycles with kW peak power equivalents greater than 600cc (601+cc). In 2018, the U.S. and European markets accounted for2020, approximately 76%78% of the total annual independent dealer retail sales of new Harley-Davidson motorcycles. The mostmotorcycles were sold in the
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U.S. and European 601+cc markets. Other significant other markets for the Company, based on the Company's 20182020 retail sales data, wereinclude Japan, Australia and New Zealand, China and Canada.
In the U.S., the retail registration data(a)(b) for 601+cc portion of the motorcycle market represented approximately 77% of the total motorcycle marketmotorcycles was as follows:
202020192018
Industry new motorcycle registrations241,792 252,842 263,750 
Harley-Davidson new motorcycle registrations101,744 124,040 131,064 
Harley-Davidson U.S. market share42.1 %49.1 %49.7 %
(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt (kW) peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street®500 motorcycles is not included in 2018, based on new units registered. The cruiser and touring segments accounted for approximately 70% of the this table.
(b)U.S. 601+cc market in 2018. Harley-Davidson has been the historical market share leader in the U.S. 601+cc portion of the motorcycle market (U.S. industry data source:is derived from information provided by the Motorcycle Industry Council).


Council. This third-party data is subject to revision and update. The following chart includes U.S. retail registration data for Harley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in Item 7. Management's Discussion and Analysis and Results of Operations (Item 7). The Company’s source for retail sales data in Item 7 is sales and warranty registrations provided by independent Harley-Davidson dealers as compiled by the Company. The retail sales data in Item 7 includes sales of Harley-Davidson Street® 500 motorcycles which are excluded from this table. In addition, small differences may arise related to the timing of data submissions to the independent sources.
European retail registration data(a)(b) for 601+cc motorcycles for the years 2016 through 2018:was as follows:
U.S. Motorcycle Registration Data(a)(b)
202020192018
Industry new motorcycle registrations411,079 413,254 405,304 
Harley-Davidson new motorcycle registrations31,547 37,619 41,004 
Harley-Davidson European market share7.7 %9.1 %10.1 %
(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt (kW) peak power equivalents greater than 600cc's (601+cc). On-road 601+cc (Unitsmodels include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street®500 motorcycles is not included in thousands)this table.
  2018 2017 2016
Total new motorcycle registrations 263.8
 288.8
 311.7
Harley-Davidson new registrations 131.1
 146.5
 159.5
  49.7% 50.7% 51.2%

(a)
Data includes on-road 601+cc models. On-road 601+cc models include dual purpose models, three-wheeled vehicles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.
(b)
U.S. industry data is derived from information provided by the Motorcycle Industry Council (MIC).(b)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Industry data is derived from information provided by Management Services Helwig Schmitt GmbH. Prior year registrations have been revised to exclude Greece and Portugal registrations. This third-party data is subject to revision and update. The retail registration data for Harley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in Item 7 of this report. The Company’s source for retail sales data in Item 7 of this report is sales and warranty registrations provided by Harley-Davidson dealers as compiled by the Company. The retail sales data in Item 7 includes sales of Harley-Davidson Street® 500 motorcycles which are excluded from the 601+cc units included in the retail registration data in this table. In addition, small differences may arise related to the timing of data submissions to the independent sources.
The European 601+cc motorcycle market is larger than the U.S. market and customer preferences differ from those of U.S. customers. The touring and cruiser segments represented approximately 51% of the European 601+cc market in 2018 compared to approximately 70% of the 601+ cc market in the U.S.
The following chart includes European retail registration data for 601+ccHarley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in Item 7. Management's Discussion and Analysis and Results of Operations (Item 7). The Company’s source for retail sales data in Item 7 is sales and warranty registrations provided by Harley-Davidson dealers as compiled by the years 2016 through 2018:Company. The retail sales data in Item 7 includes sales of Harley-Davidson Street® 500 motorcycles which are excluded from this table. In addition, some differences may arise related to the timing of data submissions to the independent sources.
European Motorcycle Registration Data(a)(b)
601+cc (Units in thousands)
  2018 2017 2016
Total new motorcycle registrations 397.7
 390.6
 391.9
Harley-Davidson new registrations 40.9
 38.1
 42.3
  10.3% 9.8% 10.8%
(a)
On-road 601+cc models include dual purpose models, three-wheeled vehicles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.
(b)
Europe data includes retail sales in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data is derived from information provided by the Association des Constructeurs Europeens de Motocycles (ACEM), an independent agency. This third-party data is subject to revision and update. The retail registration data for Harley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in Item 7 of this report. The Company’s source for retail sales data in Item 7 of this report is sales and warranty registrations provided by Harley-Davidson dealers as compiled by the Company. The retail sales data in Item 7 includes sales of Harley-Davidson Street® 500 motorcycles which are excluded from the 601+cc units included in the retail registration data in this table. In addition, some differences may arise related to the timing of data submissions to the independent sources.
Parts & Accessories (P&A) and General Merchandise – The Company offers a complete line of Harley-Davidson P&A and General Merchandise. P&A products are comprised of Genuine Motor Parts and Genuine Motor Accessories. Genuine Motor Parts include replacement parts (Genuineand Genuine Motor Parts) andAccessories includes mechanical and cosmetic accessories (Genuine Motor Accessories).accessories. General Merchandise includes MotorClothes®riding gear and apparel, and riding gear.including Genuine MotorClothes®.
Licensing – The Company creates anreach and awareness of the Harley-Davidson brand among its customers and the non-riding public by licensing the name “Harley-Davidson” and other trademarks owned by the Company for use on a wide range of products for enthusiasts and others.products.
Patents and Trademarks – The Company strategically manages its portfolio of patents, trade secrets, copyrights, trademarks and other intellectual property.


The Company owns, and its subsidiaries own, and continuecontinues to obtain, patent rights that relate to its motorcycles and related products and processes for their production. Certain technology-related intellectual property is also protected, where appropriate, by license agreements, confidentiality agreements or other agreements with suppliers, employees and other third parties. The Company diligently protects its intellectual property, including patents and trade secrets, and its rights to innovative and proprietary technologytechnologies and designs. This protection, including enforcement, is important as the Company moves forward with investments in new products, designs and technologies. While the Company believes patents are important to its business operations and in the aggregate constitute a valuable asset, the success of the business is not dependent on any one patent or group of patents. The Company’s active patent portfolio has an average remaining age for patents of approximately sevensix years. A patent review committee manages the patent strategy and portfolio of the Company.
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Trademarks are important to the Company’s motorcycle businessand related products businesses and licensing activities. The Company has a vigorous worldwide program of trademark registration and enforcement to maintain and strengthen the value of the trademarks and prevent the unauthorized use of those trademarks. The HARLEY-DAVIDSON trademark and the Bar and Shield trademark are each highly recognizable to the public and are very valuable assets. Additionally, the Company uses numerous other trademarks, trade names and logos which are registered worldwide. The following are among the Company’s trademarks: HARLEY-DAVIDSON, H-D, HARLEY, the Bar & Shield Logo, MOTORCLOTHES, the MotorClothes Logo, the #1 Logo, the Willie G Skull Logo, HARLEY OWNERS GROUP, H.O.G., the H.O.G. Logo, LIVEWIRE, SOFTAIL and SPORTSTER. The HARLEY-DAVIDSON trademark has been used since 1903 and the Bar and Shield trademark since at least 1910. Substantially all of the Company’s trademarks are owned by H-D U.S.A., LLC, a subsidiary of the Company, which also manages the Company’s global trademark strategy and portfolio.
Marketing and Customer Experiences– The Company’s brand, products and the riding experience are marketed to retail customers worldwideconsumers worldwide. Marketing occurs primarily through digital and experiential activities as well as through more traditional promotional and advertising activities. Additionally, the Company'sCompany’s independent dealers engage in a wide range of local marketing and experiential activities in part supported by cooperative programsevents.
Experiences that build community and connect consumers with the Company.
Customer experiencesHarley-Davidson brand and with one another have traditionally been at the center of much of the Company’s marketing.marketing efforts. To attract customersdevelop, engage and achieve its goals,retain committed riders, the Company participates in and sponsors motorcycle rallies, and special motorcycle events around the world, racing activities, music festivals sports events and other special events.
The This includes events sponsored by the Harley Owners Group (H.O.G.®) promotes Harley-Davidson productsto build community and the related lifestyle and sponsors motorcycle events, including rallies and rides forconnect Harley-Davidson motorcycle enthusiasts throughoutriders around the world.
These activities help inspire interest in riding, foster motorcycle culture and build a passionate community of Harley-Davidson riders. The Company's Harley-Davidson® Riding Academy offers a series of rider education experiences that provide both new and experienced riders with deeper engagement in the sport of motorcycling by teaching basic and advanced motorcycling skills and knowledge. The courses are conducted by a network of participating Harley-Davidson dealerships in the U.S., China, Mexico and Colombia, enabling students to experience the Harley-Davidson lifestyle, environment, people and products as they learn.
ThroughCOVID-19 pandemic has limited the Company's agreement with EagleRider, riders in the U.S. can rent Harley-Davidson motorcycles andability to participate in motorcycle tours. EagleRider is the exclusive provider of Harley-Davidson touring and cruiser motorcycle rentals and has locations throughout the U.S., including at select Harley-Davidson dealerships. Outside the U.S., riders can rent Harley-Davidson motorcycles from participating dealers through the Company's Authorized Rental Program and participate in tours through the Company's Harley-Davidson Authorized Tours Program.
The Company's Harley-Davidson Museum in Milwaukee, Wisconsin is a unique destination that the Company believes builds and strengthens bonds between riders and Harley-Davidson and enhances the Harley-Davidson brand among the public at large.
Distribution – The Company’s products are retailed primarily through a network of independent dealers, of which the majority sell Harley-Davidson motorcycles exclusively. These dealerships stock and sell the Company’s motorcycles, P&A, general merchandise and licensed products, and perform service on Harley-Davidson motorcycles.sponsor certain events. The Company believesexpects to resume these activities as the quality retail experience that its independent dealers provide is a differentiating and strategic advantage for the Company.COVID-19 pandemic subsides.


The Company distributes its motorcycles and related products to a network of independent dealers located in approximately 100 countries worldwide. The following table includes the number of worldwide Harley-Davidson independent dealerships by geographic location as of December 31, 2018:
  United States Canada Latin America EMEA Asia Pacific Total
Dealerships 691
 69
 64
 412
 299
 1,535
P&A, general merchandise and licensed products are also retailed through eCommerce channels in certain markets. In the U.S., the Company operates an eCommerce site that offers products sold through participating authorized U.S. Harley-Davidson dealers and also sells directly to consumers through a well-known third-party eCommerce site. The Company also utilizes third-party eCommerce sites in select international markets.
Retail Customer and Dealer FinancingSeasonality – The Company believes that HDFS, as well as other third-party financial institutions, provide access to financing for Harley-Davidson dealers and their retail customers. HDFS provides financing to Harley-Davidson independent dealers and retail customers of independent dealers in the U.S. and Canada. The Company’s independent dealers and their retail customers in EMEA, Asia Pacific and Latin America are not directly financed by HDFS, but have access to financing through other established financial services companies, some of which have licensing or branding agreements with HDFS.
Seasonality – The timing of retail sales made by the Company’s independent dealers tracks closely with regional riding seasons. The seasonality of the Company’s wholesale motorcycle shipments primarilygenerally correlates with the timing of retail sales. The Company utilizes flexible or surge manufacturing capabilitiessales made by independent dealers. Retail sales generally track closely with regional riding seasons. In addition, during 2020, wholesale shipments and retail sales were impacted by the Company's decision to help align the production and wholesale shipment of motorcycles with the retail selling season. This provides the Company the ability to reduce the impact of seasonality on inventory levelsreset, beginning in the U.S. and Canada. In EMEA, Asia Pacific and Latin America, the Company utilizes a distribution process whereby Company-owned inventory is maintained locally at a level sufficient to fulfill dealer orders as needed.
Motorcycle Manufacturing – The Company has a flexible manufacturing process designed to help ensure it is well-positioned to meet customer demand in a timely and cost-effective manner.(1) This flexible or surge manufacturing capability allows the Company to increase the production of motorcycles ahead of and during the peak retail selling season to more closely correlate2020, the timing of production and wholesale shipmentsits annual new model year introduction from the third quarter to the retail selling season. It also allowsfirst quarter. As a result of this change, initial shipments of new model year 2021 motorcycles did not occur until the Company to respond to the desired model mix to meet customer demand.first quarter of 2021.
Motorcycle Manufacturing – The majority of the Company's motorcyclesmanufacturing processes are manufacturedperformed at facilities located in the U.S. The Company's U.S. manufacturing facilities supply the U.S. market as well as certain international markets. Additionally, the Company operates facilities in Thailand Brazil, India and Australia.Brazil. The Company began producing at its newCompany's Thailand facility in Thailand in 2018, which currently manufactures motorcycles for certain Asian and European markets. In Brazil, the Company operates a Complete Knock Down (CKD) assembly facility whichthat assembles motorcycles sold in Brazil from component kits sourced from the Company’s U.S. plantsfacilities and suppliers. In India, the Company operates aThe Company's global manufacturing facility that includes both CKD assembly of certain motorcycles for sale in India and production of the Company’s Street 750® motorcycles for distribution to markets outside of North America. Like its U.S. manufacturing facilities, the Company’s Thailand, Brazil and India operations are focused on driving world-class quality and performance. The motorcycles assembled at the Company's international facilities have the same authentic look, sound, feel and quality of a motorcycle manufactured by the Company's U.S. facilities. These international facilities enableA global manufacturing footprint enables the Company to be close to the customer,customers, provide quality products at a competitive price and grow its overall international business. In early 2019, the Company will cease operation of its manufacturing facility in Australia, which had produced a portion of its wheels for its motorcycles. These wheels will be sourced from other current suppliers.
Raw Materials and Purchased Components – The Company continues to establish and reinforce long-term, mutually beneficial relationships with its suppliers. Through these collaborative relationships, the Company gains access to technical and commercial resources for application directly to product design, development and manufacturing initiatives. In addition, through a continued focus on collaboration and strong supplier relationships, the Company believes it will be positioned to achieve its strategic objectives and deliver cost and quality improvements over the long-term.(1)
The Company's principal raw materials that are purchased include steel and aluminum castings, forgings, steel sheet and bar. The Company also purchases certain motorcycle components including, but not limited to, electronic fuel injection systems, batteries, tires, seats, electrical components, instruments and wheels. The Company closely monitors the overall viability of its supply base. At this time, theThe Company does not anticipate material difficulties in obtaining raw materials or components.(1)The Company is proactively working with its suppliers to limit the risk of interruptions related to the COVID-19 pandemic.
Regulation – International, federal, state and local authorities have various environmental control requirements relating to air, water and noise that affect the business and operations of the Company. The Company strives to ensure that its facilities and products comply with all applicable environmental regulations and standards.


The Company’s motorcycles and certain other products that are sold in the United StatesU.S. are subject to certification by the U.S.United States Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) for compliance with applicable emissions and noise standards. Certain Harley-Davidson products are designed to comply with EPA and CARB standards and the Company believes it will comply with future requirements when they go into effect.(1) Additionally, certain of the Company’s products must comply with the motorcycle emissions, noise and safety standards of Canada, the European Union, Japan, Brazil and certain other foreign markets where they are sold, and the Company believes its products currently comply with those standards. BecauseAs the Company expects that environmental standards willto become more stringent over time, the Company will continue to incur research, development and production costs in this area for the foreseeable future.(1)
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The Company, as a manufacturer of motorcycle products, is subject to the U.S. National Traffic and Motor Vehicle Safety Act, which is administered by the U.S. National Highway Traffic Safety Administration (NHTSA). The Company has certified to NHTSA that certain of its motorcycle products comply fully with all applicable federal motor vehicle safety standards and related regulations. The Company has from time to time initiated certain voluntary recalls. During the last three years ending in 2020, the Company has accrued $110.0$54.6 million associated with 910 voluntary recalls related to Harley-Davidson motorcycles.recalls.
Employees – As of December 31, 2018,2020, the Motorcycles segment had approximately 5,300 employees.

Approximately 2,2004,600 employees, including approximately 1,800 hourly unionized employees at theits U.S. manufacturing facilities, are represented with collective bargaining agreements as follows:
•York, Pennsylvania -– International Association of Machinist and Aerospace Workers (IAM), collective bargaining agreement will expire on October 15, 2022
Kansas City, Missouri -•Milwaukee, Wisconsin – United Steelworkers of America (USW) and IAM, collective bargaining agreement will expire on December 31, 2019
Milwaukee, Wisconsin - USW and IAM, collective bargaining agreements will expire on March 31, 20192024
•Tomahawk, Wisconsin -– USW, collective bargaining agreement will expire on March 31, 20192024
Financial Services Segment
The Financial Services segment consists of HDFS which is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans, primarily for the purchase of Harley-Davidson motorcycles. HDFS also works with certain unaffiliated insurance companies to provide motorcycle insurance and protection products to motorcycle owners. HDFS conducts business principally in the U.S. and Canada. The Company’s independent dealers and their retail customers in EMEA, Asia Pacific and Latin America are not financed by HDFS, butgenerally have access to financing through other third-party financial institutions, some of which have licensing or branding agreements with the Company or HDFS.
Wholesale Financial Services – HDFS provides wholesale financial services to U.S. and Canadian independent Harley-Davidson dealers, including floorplan and open account financing of motorcycles and motorcycle partsP&A. All U.S. and accessories. HDFS offers wholesale financial services to Harley-Davidson dealers in the United States and Canada, and during 2018, all of suchCanadian independent dealers utilized those servicesHDFS' financing programs at some point during the year.2020.
Retail Financial Services – HDFS provides retail financing to consumers, consisting primarily of installment lending for the purchase of new and used Harley-Davidson motorcycles. HDFS’ retail financial services are available through most independent Harley-Davidson dealerships in the United StatesU.S. and Canada.
Insurance Services – HDFS works with certain unaffiliated insurance companies which offer point-of-sale protection products through most independent Harley-Davidson dealers in both the U.S. and Canada, including motorcycle insurance, extended service contracts and motorcycle maintenance protection. HDFS also direct-markets motorcycle insurance and extended service contracts to owners of Harley-Davidson motorcycles. In addition, HDFS markets a comprehensive package of business insurance coverages and services to owners of independent Harley-Davidson dealerships.
Licensing –HDFS has licensing arrangements with third-party financial institutions that issue credit cards bearing the Harley-Davidson brand in the U.S. and certain international markets. Internationally, HDFS licenses the Harley-Davidson brand to local third-party financial institutions that offer products to the Company’s retail customers such as financing and insurance.
Funding – The Company believes a diversified and cost-effective funding strategy is important to meet HDFS’ goal of providing credit while delivering appropriate returns and profitability. Financial Services operations have beenin 2020 were funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities asset-backed securitizations and asset-backed securitizations.deposits.
Competition – The Company regards its ability to offer a package of wholesale and retail financial services in the U.S. and Canada as a significant competitive advantage. Competitors in the financial services industry compete for business based


largely on price and, to a lesser extent, service. HDFS competes on convenience, service, brand association, dealer relations, industry experience, terms, and price.
In the United States,U.S. and Canada, HDFS financed 64.9%67.6% and 42.2% of new Harley-Davidson motorcycles retailed by independent dealers during 2018,2020, respectively, compared to 61.2% in 2017. In Canada, HDFS financed 39.9% of new Harley-Davidson motorcycles retailed by independent dealers65.9% and 45.0%, respectively, during 2018, compared to 41.9% in 2017.2019. Competitors for retail motorcycle finance business are primarily banks, credit unions and other financial institutions. In the motorcycle insurance business, competition primarily comes from national insurance companies and from insurance agencies serving local or regional markets. For insurance-related products such as extended service contracts, HDFS faces competition from certain regional and national industry participants as well as dealer in-house programs. Competition for the wholesale motorcycle finance business primarily consists of banks and other financial institutions providing wholesale financing to independent Harley-Davidson dealers in their local markets.
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Trademarks – HDFS uses various trademarks and trade names for its financial services and products, which are licensed from H-D U.S.A., LLC, including HARLEY-DAVIDSON, H-D and the Bar & Shield logo.
Seasonality – HDFS experiences seasonal variations in retail financing activities based on the timing of regional riding seasons in the U.S. and Canada. In general, from mid-March through August, retail financing volume is greatest. HDFS wholesale financing volume is affected by inventory levels at independent Harley-Davidson dealers. DealersIndependent dealers generally have higher inventory in the first half of the year. As a result, outstanding wholesale finance receivables are generally higher during the same period.
Regulation – Operations of HDFS (both U.S. and foreign)operations are generally subject in certain instances, to supervision and regulation by statefederal and federalstate administrative agencies and various foreign governmental authorities. Many of the requirements imposed by such entities are in place to provide consumer protection as it pertains to the selling and servicing of financial products and services. Therefore, HDFS operations may be subject to limitations imposed by regulations, laws and judicial and/or administrative decisions. In the U.S., for example, applicable laws include the federal Truth-in-Lending Act, Equal Credit Opportunity Act and Fair Credit Reporting Act.
Depending on the specific facts and circumstances involved, non-compliance with these laws may result in consequences such as limitinglimit the ability of HDFS to collect all or part of the principal or interest on applicable loans, entitling the borrower to rescind the loan or to obtain a refund of amounts previously paid, or could subject HDFS to the payment of damages or penalties and administrative sanctions, including “cease and desist” orders, and could limit the number of loans eligible for HDFSHDFS' securitization programs.
The Dodd-Frank Wall Street Reform and Consumer Protection Act granted the federal Consumer Financial Protection Bureau (the Bureau) significant supervisory, enforcement and rule-making authority in the area of consumer financial products and services. Certain Bureau actions and regulations of the Bureau will directly impact HDFS and its operations. For example, the Bureau has supervisory authority over non-bank larger participants in the vehicle financing market, which includes a non-bank subsidiary of HDFS.
Such regulatory requirements and associated supervision also could limit the discretion of HDFS in operating its business. Noncompliance with applicable statutes or regulations could result in the suspension or revocation of any charter, license or registration at issue, as well as the imposition of civil fines, criminal penalties and administrative sanctions.
A subsidiary of HDFS, Eaglemark Savings Bank (ESB), a subsidiary of HDFS, is a Nevada state thrift chartered as an Industrial Loan Company (ILC).Company. The activities of this subsidiaryESB are governed by federal laws and regulations as well asand State of Nevada banking laws, and arelaws. ESB is subject to examination by the Federal Deposit Insurance Corporation (FDIC) and Nevada state bank examiners. ESB originates retail loans, retains certain of those loans and sells the remaining loans to a non-banking subsidiary of HDFS. This process allows HDFS to offer retail products with many common characteristics across the United StatesU.S. and to similarly service loans to U.S. retail customers.
Employees – As of December 31, 2018,2020, the Financial Services segment had approximately 600550 employees.
Human Capital Management
Under The Rewire, the Company undertook a thorough review of its operating model, resulting in a complete organizational restructuring that resulted in the elimination of approximately 700 positions globally, including the termination of approximately 500 employees. The result is, as of December 31, 2020, a global workforce of approximately 5,200 employees. As part of The Rewire, the Company's Inclusive Stakeholder Management (ISM) team was formed, bringing together personnel focused on key elements of inclusion, sustainability, social impact and future of work. One of the Company's first commitments under ISM was to extend employee ownership to all employees by offering an equity grant to approximately 4,500 employees not otherwise eligible for equity grants, including hourly production workers, in February 2021.
The Company believes that the success of The Hardwire will be realized through the engagement and empowerment of its employees. The Company believes all stakeholders are more successful when they are included. Key areas of focus for the Company include:
Diversity, Equity and Inclusion (DEI) –The Company understands that the strength of its brand worldwide requires a diverse and inclusive workforce. The Company is committed to building a more equitable workplace and is revamping talent acquisition, development and recognition practices accordingly. Harley-Davidson's DEI strategy focuses on three core principles: Invite Everyone In, Illuminate the Issues, and Infuse Talent. To create a culture of inclusion and a workplace that supports diversity of background, thought, and perspectives, Business Employee Resource Groups (BERGs) provide opportunities for employees to exchange ideas, influence and deliver programming, grow and develop professionally and
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personally, as well as support business initiatives. Currently, the following BERGs have been established and participation is open to all employees: African American, Asian Professionals, Latin American Professionals, LGBTQ+, Military, Women, and Young Professionals.Based on employee provided identity information, 71.4% of the Company’s workforce is male, 82.0% is White and 85.3% is U.S. based.
Health and Safety –The Company believes that providing and expecting a healthy and safe work environment is vital to our success. It has created a world-class safety program that reduces safety risk by instilling a company-wide safety culture, instituting proactive engineering standards, implementing work-hardening programs, and providing on-site ergonomic resources and medical clinics. This cornerstone of the Company's workplace environment became even more front and center with the onset of the COVID-19 pandemic. Harley-Davidson quickly pivoted the majority of its salaried workforce to predominately remote work in March 2020. The Company's manufacturing facilities largely shut down mid-March through May 2020 resulting in layoffs for hourly workers, in accordance with the Company's collective bargaining agreements. As production resumed, the Company implemented strict protocols following best practice guidance from the Center for Disease Control (CDC) and World Health Organization (WHO), all while exceeding the Company's world class health and safety metrics (2020 OSHA Recordable Rate: 0.3, down 0.3 from 2019).
Talent and Culture –The Company launched H-D #1 leadership principles to its global workforce in 2020 to serve as a guide in its cultural journey to become a high-performing organization. The Company is committed to making Harley-Davidson synonymous with highly desirable, inspiring, and engaged workplaces. The Company is evolving its workspaces and work ways, as well as its talent, employee development and retention practices to advance its five-year strategic plan, The Hardwire.
Internet Access
The Company’s website address is http://www.harley-davidson.com. The Company’s website address for investor relations is http://investor.harley-davidson.com/.
The Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports, are available on its investor relations website free of charge as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the United States Securities and Exchange Commission (SEC).
In addition, the Company makes available, through its investor relations website, the following corporate governance materials: (a)(i) the Company’s Corporate Governance Policy; (b)(ii) Committee Charters approved by the Company’s Board of Directors for the


Audit and Finance Committee, Human Resources Committee, Nominating and Corporate Governance Committee and Brand and Sustainability Committee; (c)(iii) the Company’s Financial Code of Ethics; (d)(iv) the Company’s Code of Business Conduct (the Code of Conduct); (e)(v) the Conflict of Interest Process for Directors, Executive Officers and Other Employees (the Conflict Process); (f)(vi) a list of the Company’s Board of Directors; (g)(vii) the Company’s Bylaws; (h)(viii) the Company’s Environmental and Energy Policy; (i)(ix) the Company’s Policy for Managing Disclosure of Material Information; (j)(x) the Company’s Supplier Code of Conduct in four languages including English; (k)Conduct; (xi) the Sustainability Strategy Report; (l) the list of compensation survey participants used as market reference points for various components of compensation as reported in the Company’s Notice of Annual Meeting and Proxy Statement filed with the SEC on March 29, 2018, which compensation relates to the Company’s named executive officers; (m)(xii) the California Transparency in Supply Chain Act Disclosure; (n)(xiii) the Statement on Conflict Minerals; (o)(xiv) the Political Engagement and Contributions 2017-2018;2017-2020; and (p)(xv) the Company's Clawback Policy. The Company's Notice of Annual Meeting and Proxy Statement to be filed with the SEC on or about March 29, 2019,for its 2021 annual meeting of shareholders, which will include information related to the compensation of the Company's named executive officers, will be made available through its investor relations website.
The Company satisfies the disclosure requirements under the Code of Conduct, the Conflict Process and applicable New York Stock Exchange listing requirements regarding waivers of the Code of Conduct or the Conflict Process by disclosing the information in the Company’s proxy statement for its annual meeting of shareholders or on the Company’sits investor relations website. The Company is not including the information contained on or available through any of its websitewebsites as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.
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Item 1A. Risk Factors
An investment in Harley-Davidson, Inc. involves risks, including those discussed below. These risk factors should be considered carefully before deciding whether to invest in the Company.

Operational Risks
The Company may not be able to successfully execute its long-term business strategy. There is no assurance that the Company will be able to drive growth and increase ridership to the extent desired through its focus of efforts and resources on its long-term business strategy and the Harley-Davidson brand, or to enhance productivity and profitability to the extent desired through pricing and continuous improvement.

•The Company’s strategy to grow ridershipoperations have been and may not be successful. The Company has been successful in marketing its products in large part by promoting the experience of Harley-Davidson motorcycling. To sustain and grow the business over the long-term, the Company must grow the sport of motorcycling and continue to be successful selling productsdisrupted to varying degrees due to the COVID-19 pandemic. The spread of COVID-19 and promoting the experiencesubsequent actions taken to mitigate the spread impacted the Company's operations and ability to carry out its business as usual. The Company closed facilities, including temporarily suspending its global manufacturing starting in March 2020 through May 2020. At the end of motorcyclingApril 2020, nearly sixty percent of the Company's global dealer network was temporarily closed due to new customers, including new riders, competitive ridersvarious federal, state and those who have motorcycle licenses but do not currently ride.local government actions that were implemented to attempt to mitigate the public health crisis. The Company’s efforts toward building two million riders inworldwide retail sales of new Harley-Davidson motorcycles were down significantly versus the U.S. between 2017 and 2027 and growing ridership internationally may not be successful, and achieving such growth in ridership may still not adequately meet the desired result of driving unit sales growth. Further, growing ridership in the U.S. may be challenging because the motorcycle market in the U.S. has been stagnant or declining, and the Company expects those conditions to continue. Failure to successfully drive demand for the Company's products may have a material adverse effect on the Company's business and results of operations.

Changes in trade policies, including the imposition of tariffs, their enforcement, and downstream consequences, may continue to have a material adverse impact on our business, results of operations, and outlook. Tariffs and/or other developments with respect to trade policies, trade agreements, and government regulations could have a material adverse impact on the Company's business, financial condition and results of operations. To date, the European Union has placed a 25% incremental tariff (31% total tariff) on motorcycles imported into the European Union from the U.S., and that is scheduled to increase to a 50% incremental tariff (56% total tariff) effective June 1, 2021. Shipments of motorcyclesprior year due to the European Union are a significant and growing portion of the Company’s total motorcycle sales. The China tariffs on Harley-Davidson motorcycles exported from the U.S. increased from 30% to 55%, effective August 23, 2018, and are set to remain in place indefinitely.temporary dealer closures. In addition, the U.S governmentCOVID-19 pandemic has imposed tariffs of 25% on steel imports and 10% on aluminum imports from certain countries, which has resulted in increased costs to the Company for these materials.

Without limitation, (i) tariffs currently in place, (ii) the imposition by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition by foreign countries of tariffs on U.S. products, including tariffs imposed in response to U.S. tariffs, could materially increase: (a) the cost of our products that we are offering for sale in relevant countries, (b) the cost of certain products that we source from foreign manufacturers, and (c) certain raw materials that we utilize, the prices of which tariffs may impact. We may not be able to pass such increased costs on to our dealers or their customers, and we may not be able to secure sources of certain products and materials that are not subject to


tariffs on a timely basis. Such developments could have a material adverse impact on our business, financial condition and results of operations.

The Company previously disclosed plans to mitigate the impact of the current incremental European Union and China tariffs by the end of 2019. The Company is pursuing regulatory approvals for motorcycles sourced in Thailand to receive lower tariff treatment, but it is uncertain whether the Company will succeed in obtaining these regulatory approvals. As a result, the Company is considering multiple other options to serve the EU market should they be required. Options other than assembling motorcycles in Thailand would likely not result in mitigating the full impact of the current incremental European Union tariffs by the end of 2019.

The Company must effectively execute its manufacturing optimization plan within expected costs and timing. In January 2018, the Company announced a multi-year manufacturing optimization plan anchored by the consolidation of its final assembly plant in Kansas City, Missouri, into its York, Pennsylvania plant, and the closure of its wheel operations in Australia. These actions are designed to eliminate excess capacity and reduce production costs and component supply costs. Effectively executing these plans within expected costs and realizing expected benefits will depend upon a number of factors, including the time required to complete planned actions and effective collaboration with the unions representingdisrupted the Company’s employees, the absence of material issues associated with workforce reductions, availability ofsupply chain, including shortages and effective use of third-party service providers to assist in implementing the actions, the ability and effectiveness of current suppliers to take on additional component production volume, avoidance of unexpected disruptions in production, retention of key employees involved in implementing the restructuring plans andshipment delays; limited the ability of the CompanyCompany’s distributors and independent dealers to disposeoperate; caused some retail customers to delay their purchase decisions; adversely impacted the ability of vacated facilitiesthe Company’s retail credit customers to meet their loan obligations on a timely basis and made collection efforts more difficult; disrupted global capital markets impacting the Company’s access to capital, cost of capital, and overall liquidity levels; delayed the Company’s new product development efforts; and resulted in the cancellation or adjustments to the scope of riding and similar events that are important to the Company’s marketing efforts. While many of actions implemented to mitigate the spread of COVID-19 have been rolled back in certain markets, the continued spread of COVID-19, and the efforts to avoid that, could do the following, each of which could be material: (i) result in further disruptions of the Company’s supply chain; (ii) again limit the ability of the Company’s distributors and independent dealers to operate, which could impact their ability to purchase and sell the Company’s products and meet their loan obligations to the Company; (iii) continue to cause some retail customers to delay their purchase decisions, which could cause a cost effective manner.
decrease in demand for the Company’s product; (iv) continue to adversely impact the ability of the Company’s retail credit customers to meet their loan obligations on a timely basis and make collection efforts more difficult; (v) result in further disruption of global capital markets; (vi) continue to delay the Company’s new product development efforts; and (vii) cause other unpredictable events.

•The Company’s ability to remain competitive is dependent upon its capability to develop and successfully introduce new, innovative and compliant products. The motorcycle market continues to change in terms of styling preferences and advances in new technology,technologies, and at the same time, it is subject to increasing regulations related to safety and emissions. The Company must continue to distinguish its products from its competitors’ products with unique styling and new technologies. The Company may not be able to achieve its goal of introducing 100technologies that consumers desire. Introducing new high-impact motorcycle models between 2017 and 2027, and introducing those models may still not lead to the desired result of driving unit sales growth. As the Company incorporates new and different features and technology into its products, the Company must protect its intellectual property from imitators and ensure its products do not infringe the intellectual property of other companies. In addition, these new products must comply with applicable regulations worldwide and satisfy the potential demand for products that produce lower emissions and achieve better fuel economy. The Company must make product advancements to respond to changing consumer preferences and market demands while maintaining the unique look, sound and feel associated with Harley-Davidson products, and development of electric vehicles will present challenges to the Company’s ability to maintain such look, sound and feel.demands. The Company must also be able to design and manufacture these products and deliver them to a global marketplace in an efficient and timely manner and at prices that are attractive to customers. There can be no assurances that the Company will be successful in these endeavors or that existing and prospective customers will like or want the Company’s new products.

•Increased supply of and/or declining prices for used motorcycles and excess supply of new motorcycles may adversely impact retail sales of new motorcycles by the Company’s independent dealers. The Company has observed that when the supply of used motorcycles increases or the prices for used Harley-Davidson motorcycles decline, there can be reduced demand among retail purchasers for new Harley-Davidson motorcycles (at or near manufacturer’s suggested retail prices). Further, the Company and its independent dealers can and do take actions that influence the markets for new and used Harley-Davidson motorcycles. For example, introduction of new motorcycle models with significantly different functionality, technology or other customer satisfiers can result in increased supply of used motorcycles, which could result in declining prices for used motorcycles and prior model-year new motorcycles. Also, while the Company has taken steps designedis operating with a remodeled approach to balance production volumes for its new motorcycles with demand, those stepssupply and inventory management, that approach may not be effective, or the Company’s competitors could choose to supply new motorcycles to the market in excess of demand at reduced prices, which could also have the effect of reducing demand for new Harley-Davidson motorcycles (at or near manufacturer’s suggested retail prices). Ultimately, reduced demand among retail purchasers for new Harley-Davidson motorcycles leads to reduced shipments by the Company.
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•The motorcycle industry has become increasingly competitive. Many of the Company’s competitors are more diversified than the Company, and they may compete in all segments of the motorcycle market, other powersports markets and/or the automotive market. Certain competitors appear to be increasing their investment in products that compete with the Company's products. Also, the Company’s manufacturer’s suggested retail price for its motorcycles is generally higher than its competitors, and as price becomes a more important competitive factor for consumers in


the markets in which the Company competes, the Company may be at a competitive disadvantage. Furthermore, many competitors headquartered outside the U.S. experience a financial benefit from a strengthening in the U.S. dollar relative to their home currency that can enable them to reduce prices to U.S. consumers. The Company is also subject to policies and actions of the U.S. Securities and Exchange Commission (SEC) and New York Stock Exchange (NYSE). Many major competitors of the Company are not subject to the requirements of the SEC or the NYSE rules. As a result, the Company may be required to disclose certain information that may put the Company at a competitive disadvantage to its principal competitors. In addition, the Company’s financial services operations face competition from various banks, insurance companies and other financial institutions that may have access to additional sources of capital at more competitive rates and terms, particularly for borrowers in higher credit tiers. The Company's responses to these competitive pressures, or its failure to adequately address and respond to these competitive pressures, may have a material adverse effect on the Company’s business and results of operations.

Changes in general economic and business conditions, tightening of credit and retail markets, political events or other factors may adversely impact dealers’ retail sales. The motorcycle industry is impacted by general economic conditions over which motorcycle manufacturers have little control. These factors can weaken the retail environment and lead to weaker demand for discretionary purchases such as motorcycles. Weakened economic conditions in certain business sectors and geographic areas can also result in reduced demand for the Company's products. Tightening of credit can limit the availability of funds from financial institutions and other lenders and sources of capital which could adversely affect the ability of retail consumers to obtain loans for the purchase of motorcycles from lenders, including HDFS. Should general economic conditions or motorcycle industry demand decline, the Company’s results of operations and financial condition may be substantially adversely affected. The motorcycle industry can also be affected by political conditions and other factors over which motorcycle manufacturers have little control.

Expanding international sales and operations subjects the Company to risks that may have a material adverse effect on its business. Expanding international sales and operations is a part of the Company’s long-term business strategy, particularly in light of the U.S. market conditions. There is no assurance that the Company will accomplish this successfully. Further, to support that strategy, the Company must increase its presence outside the U.S., including additional employees and investment in business infrastructure and operations. International operations and sales are subject to various risks, including political and economic instability, local labor market conditions, the imposition of foreign tariffs and other trade barriers, the impact of foreign government laws and regulations and U.S. laws and regulations that apply to international operations, and the effects of income and withholding taxes, governmental expropriation and differences in business practices. The Company may incur increased costs and experience delays or disruptions in product deliveries and payments in connection with international operations and sales that could cause loss of revenues and earnings. Unfavorable changes in the political, regulatory and business climate could have a material adverse effect on the Company’s net sales, financial condition, profitability or cash flows. This includes, for example, the uncertainty related to the United Kingdom’s withdrawal from the European Union (commonly known as “Brexit”). Business practices that may be accepted in other countries can violate U.S. or other laws that apply to the Company. Violations of laws that apply to the Company's foreign operations, such as the U.S. Foreign Corrupt Practices Act, could result in severe criminal or civil sanctions, could disrupt the Company's business and result in an adverse effect on the Company's reputation, business and results of operations.

The Company may not be able to successfully execute its manufacturing strategy. The Company’s manufacturing strategy is designed to continuously improve product quality and increase productivity, while reducing costs and increasing flexibility to respond to ongoing changes in the marketplace. Based on the Company’s strategy, the Company may, from time to time, open, close, expand, contract or restructure one or more of its manufacturing facilities. The Company believes flexible manufacturing, including flexible supply chains and flexible labor agreements, is the key element to enable improvements in the Company’s ability to respond to customers in a cost effective manner. To execute this strategy, the Company must be successful in its implementation of facility changes and in its continuous improvement efforts, all of which are dependent on the involvement of management, production employees and suppliers. Any inability to achieve these objectives could adversely impact the profitability of the Company’s products and its ability to deliver the right product at the right time to the customer.

•The Company must prevent and detect issues with its products, components purchased from suppliers and its suppliers’ manufacturing processes to reduce the risk of recall campaigns, increased warranty costs, or litigation, increased product liability claims, or litigation, delays in new model launches and inquiries or investigations by regulatory agencies.investigations. The Company must also complete any recall campaigns within cost expectations. The Company must continually improve and adhere to product development and manufacturing processes and ensure that its suppliers and their sub-tier suppliers adhere to product development and manufacturing processes, to ensure high quality products are sold to retail customers. If product designs or manufacturing processes are defective, the Company could experience delays in new model launches, field actions such as product programs and product recalls, inquiries or investigations from regulatory agencies, and warranty claims and product liability claims, which may involve purported class actions. While the Company uses reasonable methods to estimate the cost of


warranty, recall and product liability costsliabilities and appropriately reflects those in its financial statements, there is a risk the actual costs could exceed estimates and result in damages that are not covered by insurance. Further, selling products with poor quality issues, the announcement of recalls and the filing of product liability claims (whether or not successful), may also adversely affect the Company’s reputation and brand strength.strength with a resulting adverse impact on sales of new products.

•A cybersecurity breach may adversely affect the Company’s reputation, revenue and earnings. The Company and certain of its third-party service providers and vendors receive, store and transmit digital personal information in connection with the Company’s human resources operations, financial services operations, e-commerce, the Harley Owners Group, independent dealer management, mobile applications planned connected vehicle services offerings and other aspects of its business. The Company’s information systems, and those of its third-party service providers and vendors, are vulnerable to the continually evolving cybersecurity risks. The Company's plan to offer connected vehicle services will heighten these risks. Unauthorized parties have attempted to and may attempt in the future to gain access to these systems or the information the Company and its third-party service providers and vendors maintain and use through fraud or other means of deceiving ourthe Company's employees and third-party service providers and vendors. Hardware, software or applications the Company develops or obtains from third-parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security and/or the Company’s operations. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or detect. The Company has implemented and regularly reviews and updates processes and procedures to protect against unauthorized access to or use of secured data and to prevent data loss. However, the ever-evolving threats mean the Company and third-party service providers and vendors must continually evaluate and adapt systems and processes, and there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data. The Company has experienced information security attacks, but to date they have not materially compromised the Company’s computing environment or resulted in a material impact on the Company’s business or operations or the release of confidential information about its employees, customers, dealers, suppliers or other third parties. Any future significant compromise or breach of the Company’s data security, whether external or internal, or misuse of customer, employee, dealer, supplier or Company data could result in disruption to the Company’s operations, significant costs, lost sales, fines and lawsuits and/or damage to the Company’s reputation. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous with new and evolving requirements, compliance could also result in the Company being required to incur additional costs.
•The Company relies on third-party suppliers to obtain raw materials and provide component parts for use in the manufacture of its motorcycles. The Company may experience supply problems relating to raw materials and
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components such as unfavorable pricing, poor quality or untimely delivery. In certain circumstances, the Company relies on a single supplier to provide the entire requirement of a specific part, and a change in this established supply relationship may cause disruption in the Company’s production schedule. In addition, the price and availability of raw materials and component parts from suppliers can be adversely affected by factors outside of the Company’s control such as the supply of a necessary raw material, natural disasters or widespread infectious disease like COVID-19. Further, the Company's suppliers may experience difficulty in funding their day-to-day cash flow needs because of tightening credit caused by financial market disruption. In addition, adverse economic conditions and related pressure on select suppliers due to difficulties in the global manufacturing arena could adversely affect their ability to supply the Company. Changes in laws and policies relating to trade and taxation may also adversely impact the Company's foreign suppliers. These supplier risks may have a material adverse effect on the Company’s business and results of operations.
•The Company primarily sells its products at wholesale and must rely to a large extent on a network of independent dealers and distributors to manage the retail distribution of its products. The Company depends on the capability of its distributors and independent dealers to develop and implement effective retail sales plans to create demand among retail purchasers for the motorcycles and related products and services that the dealers purchase from the Company. If the Company’s distributors and independent dealers are not successful in these endeavors, or do not appropriately adapt to the evolving retail landscape, then the Company will be unable to maintain or grow its revenues and meet its financial expectations. Further, distributors and independent dealers may experience difficulty in funding their day-to-day cash flow needs and paying their obligations resulting from adverse business conditions, such as weakened retail sales and tightened credit. If distributors and independent dealers are unsuccessful, they may exit or be forced to exit the business or, in some cases, the Company may seek to terminate relationships with certain distributors and independent dealerships. As a result, the Company could face additional adverse consequences related to the termination of distributor and independent dealer relationships. Additionally, liquidating a former distributor or independent dealer’s inventory of new and used motorcycles can add downward pressure on new and used motorcycle prices. Further, the unplanned loss of any of the Company’s distributors or independent dealers may lead to inadequate market coverage for retail sales of new motorcycles and for servicing previously sold motorcycles, create negative impressions of the Company with its retail customers, and adversely impact the Company’s ability to collect wholesale receivables that are associated with that independent dealer.
•Weather may impact retail sales by the Company's independent dealers. The Company has observed that abnormally cold and/or wet conditions in a region, including impacts from hurricanes or unusual storms, could have the effect of reducing demand or changing the timing for purchases of new Harley-Davidson motorcycles. Reduced demand for new Harley-Davidson motorcycles ultimately leads to reduced shipments by the Company.
•The Company’s Motorcycles segment is dependent upon unionized labor. A substantial portion of the hourly production employees working in the Motorcycles segment are represented by unions and covered by collective bargaining agreements. The Company is exposedcurrently a party to three collective bargaining agreements with local affiliates of the International Association of Machinists and Aerospace Workers and the United Steelworkers of America. Current collective bargaining agreements with hourly employees in Wisconsin will expire in 2024, and the agreement with employees in Pennsylvania will expire in 2022. There is no certainty that the Company will be successful in negotiating new agreements with these unions that extend beyond the current expiration dates or that these new agreements will be on terms that will allow the Company to be competitive. The Company's decisions regarding opening, closing, expanding, contracting or restructuring its facilities may require changes to existing or new bargaining agreements. Failure to renew agreements when they expire or to establish new collective bargaining agreements on terms acceptable to the Company and the unions could result in the relocation of production facilities, work stoppages or other labor disruptions which may have a material adverse effect on the Company’s business and results of operations.
•The Company incurs substantial costs with respect to employee pension and healthcare benefits. The Company’s cash funding requirements and its estimates of liabilities and expenses for pensions and healthcare benefits for both active and retired employees are based on several factors that are outside the Company’s control. These factors include funding requirements of the Pension Protection Act of 2006, the rate used to discount the future estimated liabilities, the rate of return on plan assets, current and projected healthcare costs, healthcare reform or legislation, retirement age and mortality. Changes in these factors can impact the expense, liabilities and cash requirements associated with these benefits which could have a material adverse effect on future results of operations, liquidity or shareholders’ equity. In addition, costs associated with these benefits put the Company under significant cost pressure as compared to its competitors that may not bear the costs of similar benefit plans.
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•The Company relies on third parties to perform certain operating and administrative functions for the Company. Similar to suppliers of raw materials and components, the Company may experience problems with outsourced services, such as unfavorable pricing, untimely delivery of services, or poor quality. Also, these suppliers may experience adverse economic conditions due to difficulties in the global economy that could lead to difficulties supporting the Company's operations. In light of the amount and types of functions that the Company has outsourced, these service provider risks may have a material adverse effect on the Company's business and results of operations.
Strategic Risks
•The Company may not be able to successfully execute its short-term and long-term business plans and strategies. There is no assurance that the Company will be able to execute its business plans and strategies, including the Company’s recently announced strategic plan, The Hardwire. The Company’s ability to meet the strategic priorities in The Hardwire depends upon, among other factors, the Company’s ability to: (i) realize expectations concerning market riskdemand for electric, middleweight, and small-displacement models, which may depend in part on the building of necessary infrastructure for electric models, (ii) develop and introduce products on a timely basis that the market accepts, that enable the Company to generate desired sales levels and that provide the desired financial returns, (iii) successfully carry out its global manufacturing and assembly operations, (iv) effectively implement changes relating to its dealers and distribution methods, (v) accurately analyze, predict and react to changing market conditions, (vi) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors, and (vii) avoid adverse impacts to its operations and/or demand for its products that may result due to the ongoing COVID-19 pandemic.
•International sales and operations subject the Company to risks that may have a material adverse effect on its business. While the Company has narrowed its geographic reach on an international basis, international operations and sales remain an important part of the Company’s strategy. There is no assurance that the Company will succeed with its new approach to international markets which includes focusing on high potential markets, and exiting or reducing its presence in remaining markets. Further, international operations and sales are subject to various risks, including political and economic instability, local labor market conditions, the imposition of foreign tariffs and other trade barriers, the impact of foreign government laws and regulations and U.S. laws and regulations that apply to international operations, the effects of income and withholding taxes, governmental expropriation and differences in business practices. The Company may incur increased costs and experience delays or disruptions in product deliveries and payments in connection with international operations and sales that could cause loss of revenues and earnings. Unfavorable changes in the political, regulatory and business climate could have a material adverse effect on the Company’s net sales, financial condition, profitability and cash flows. Business practices that may be accepted in other countries can violate U.S. or other laws that apply to the Company. Violations of laws that apply to the Company's foreign exchange rates, commodity pricesoperations, such as the U.S. Foreign Corrupt Practices Act, could result in severe criminal or civil sanctions, could disrupt the Company's business and interest rates.result in an adverse effect on the Company's reputation, business and results of operations.
•The Company’s success depends upon the continued strength of the Harley-Davidson brand. The Company sells its products internationally and in most markets those sales are made inbelieves that the foreign country’s local currency. As a result, a weakening in those foreign currencies relativeHarley-Davidson brand has significantly contributed to the U.S. dollar cansuccess of its business and that maintaining and enhancing the brand is critical to expanding its customer base. Failure to protect the brand from infringers or to grow the value of the Harley-Davidson brand may have a material adverse effect on the Company’s business and results of operations.
•The timing of a launch of a premium low displacement motorcycle for the China market is uncertain. The Company has identified China as a priority geographic market, and its objectives include launching a premium low displacement motorcycle for the China market. In 2019, the Company announced a collaboration with Zhejiang Qianjiang Motorcycle Co., Ltd. to support the launch of a smaller, more accessible Harley-Davidson motorcycle planned for the China market in 2020. To date, the Company has not launched a premium low displacement motorcycle through this collaboration. If this collaboration is not productive, although the Company believes it could collaborate with others, there is no assurance that would be the case. If the Company is not able to launch a premium low displacement motorcycle for the China market, that would adversely affect the Company's revenue and margin, and cause volatility in results of operations. Furthermore, many competitors headquartered outside the U.S. experience a financial benefit from a strengthening in the U.S. dollar relative to their home currency that can enable them to reduce prices to U.S. consumers. its growth plans for China.
•The Company is also subjectcontinues to risks associated with changes in prices of commodities. Earnings fromexplore and consider the Company’s financial services business are affected by changes in interest rates. Although the Company uses derivative financial instrumentsdetails related to some extent to attempt to manage a portion of its exposure to foreign currency exchange rateselectric motorcycle strategy and commodity prices, the Company does not attempt to manage its entire expected exposure, and these instruments generally do not extend beyond one year andultimate approach may expose the Company to credit riskrisks. The Company is focusing its electric strategy through a separate division with a dedicated leadership team. While the objective is to allow for greater flexibility in product development and in the eventcreation of counterparty default to the derivative financial instruments. There can bean innovative go-to-market strategy for its electric motorcycles, there is no assurance that in the future the Company will be able to create a successful electric motorcycle strategy or successfully manage these risks.execute it.
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Financial Risks
•The Financial Servicesfinancial services operations are exposed to credit risk on its retail and wholesale finance receivables. Credit risk is the risk of loss arising from a failure by a customer, including the Company's independent dealers, to meet the terms of any contract with the Company’s financial services operations. Credit losses are influenced by general business and economic conditions, including unemployment rates, bankruptcy filings and other factors that negatively affect household incomes, as well as contract terms and customer credit profiles. Credit losses are also influenced by the markets for new and used motorcycles, and the Company and its independent dealers can and do take actions that impact those markets. For example, the introduction of new models by the Company that represent significant upgrades on previous models may result in increased supply or decreased demand in the market for used Harley-Davidson branded motorcycles, including those motorcycles that serve as collateral or security for credit that HDFS has extended. This in turn could adversely impact the prices at which thoserepossessed motorcycles may be sold, which may lead to increased credit losses for HDFS. Negative changes in general business, economic or market factors may have an additional adverse impact on the Company’s financial services credit losses and future earnings. The Company believes HDFS' retail credit losses may continue to increase over time due to changing consumer credit behavior, and HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers, as well as actionsand new financing programs that may result in different loan performance than our existing programs.
•The Company is exposed to market risk from changes in foreign currency exchange rates, commodity prices and interest rates. The Company sells its products globally and in most markets outside the U.S. those sales are made in the foreign country’s local currency. As a result, a weakening in those foreign currencies relative to the U.S. dollar can adversely affect the Company's revenue and margin, and cause volatility in its results of operations. Furthermore, many competitors headquartered outside the U.S. experience a financial benefit from a strengthening in the U.S. dollar relative to their home currency that can enable them to reduce prices to U.S. consumers. The Company is also subject to risks associated with changes in prices of commodities. Earnings from the Company’s financial services business are affected by changes in interest rates. Although the Company has takenuses derivative financial instruments to some extent attempt to manage a portion of its exposure to foreign currency exchange rates, commodity prices, and could take that impact motorcycle values. Increasesinterest rate risks, the Company does not attempt to manage its entire expected exposure, and these derivative financial instruments generally do not extend beyond one year and may expose the Company to credit risk in the frequencyevent of losscounterparty default to the derivative financial instruments. There can be no assurance that in the future the Company will successfully manage these risks.
•The financial services operations are highly dependent on accessing capital markets to fund operations at competitive interest rates, the Company’s access to capital and decreasesits cost of capital are highly dependent upon its credit ratings, and any negative credit rating actions will adversely affect its earnings and results of operations. Liquidity is essential to the Company’s financial services business. Disruptions in


the value of repossessed Harley-Davidson branded motorcycles also adversely impact credit losses. If there are adverse circumstances that involve a material decline in values of Harley-Davidson branded motorcycles, those circumstances financial markets may cause lenders and institutional investors to reduce or any related decline in resale values for Harley-Davidson branded motorcycles could contributecease to increased delinquencies and credit losses.

loan money to borrowers, including financial institutions. The Company’s success depends uponfinancial services operations may be negatively affected by difficulty in raising capital in the continued strength of the Harley-Davidson brand. The Company believes that the Harley-Davidson brand has significantly contributed to the success of its businesslong-term and that maintaining and enhancing the brand is critical to expanding its customer base. Failure to protect the brand from infringers or to grow the value of the Harley-Davidson brandshort-term capital markets. These negative consequences may have a material adverse effect onin turn adversely affect the Company’s business and results of operations.

The Company’s operations are dependent upon attractingin various ways, including through higher costs of capital and retaining skilled employees, including skilled labor, executive officersreduced funds available through its financial services operations to provide loans to independent dealers and other senior leaders. The Company’s future success depends on its continuingtheir retail customers. Additionally, the ability to identify, hire, develop, motivate, retain and promote skilled personnel for all areas of its organization, and to effectively execute reorganization actions within expected costs and realize the expected benefits of those actions. The Company’s current and future total compensation arrangements, which include benefits and incentive awards, may not be successful in attracting new employees and retaining and motivating the Company’s existing employees. In addition, the Company must cultivate and sustain a work environment where employees are engagedits financial services operations to access unsecured capital markets is influenced by their short-term and energized in their jobs to maximize their performance, and the Company must effectively execute reorganization actions. If the Company does not succeed in attracting new personnel, retaining existing personnel, implementing effective succession plans and motivating and engaging personnel, including executive officers, the Company may be unable to develop and distribute products and services and effectively execute its plans and strategies.
The Company sells its products at wholesale and must rely on a network of independent dealers to manage the retail distribution of its products. The Company depends on the capability of its independent dealers to develop and implement effective retail sales plans to create demand among retail purchasers for the motorcycles and related products and services that the dealers purchase from the Company.long-term credit ratings. If the Company’s independent dealerscredit ratings are not successful in these endeavors,downgraded or its ratings outlook is negatively changed, then the Company will be unable to maintain or grow its revenuesCompany’s cost of borrowing could increase, which may result in reduced earnings and meet its financial expectations. Further, independent dealers may experience difficulty in funding their day-to-day cash flow needsreduced interest margins, and paying their obligations resulting from adverse business conditions such as weakened retail sales and tightened credit. If dealers are unsuccessful, they may exit or be forced to exit the business or, in some cases, the Company may seek to terminate relationships with certain dealerships. As a result, the Company could face additional adverse consequences related to the termination of dealer relationships. Additionally, liquidating a former dealer’s inventory of new and used motorcycles can add downward pressure on new and used motorcycle prices. Further, the unplanned loss of any of the Company’s independent dealersaccess to capital may lead to inadequate market coverage for retail salesbe disrupted or impaired.
Legal, Regulatory & Compliance Risks
•Changes in trade policies, including the imposition of new motorcyclestariffs, their enforcement and for servicing previously sold motorcycles, create negative impressions of the Company with its retail customers, and adversely impact the Company’s ability to collect wholesale receivables that are associated with that dealer.

The Company must invest in and successfully implement new information systems and technology. The Company is continually modifying and enhancing its systems and technology to increase productivity and efficiency and to mitigate failure risks from older/aged technologies currently in its portfolio. The Company has several large, strategic information system projects in process. As new systems and technologies (and related strategies) are implemented, the Company could experience unanticipated difficulties resulting in unexpected costs and adverse impacts to its manufacturing and other business processes. When implemented, the systems and technology may not provide the benefits anticipated and could add costs and complications to ongoing operations and older technologies may fail, whichdownstream consequences, may have a material adverse effectimpact on our business, results of operations and outlook. Tariffs and/or other developments with respect to trade policies, trade agreements and government regulations could have a material adverse impact on the Company’sCompany's business, financial condition and results of operations. InWithout limitation, (i) tariffs currently in place, (ii) the caseimposition by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition by foreign countries of tariffs on U.S. products could materially increase: (a) the cost of Harley-Davidson products that the Company is offering for sale in relevant countries, (b) the cost of certain products that the Company sources from foreign manufacturers and (c) the prices of certain raw materials that the Company utilizes. The Company may not be able to pass such increased costs on to distributors, independent dealers or their customers, and the Company may not be able to secure sources of certain products and materials that are not subject to tariffs on a timely basis. Such developments could have a material adverse impact on the Company's planned electronic vehicle services offering,business, financial condition and results of operations. As an example, in 2018, the European Union (EU) placed an
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incremental tariff on motorcycles imported into the EU from the U.S., which is scheduled to increase effective June 1, 2021. In addition, the U.S. government imposed increased tariffs on imports from China (Section 301 tariffs), which has resulted in higher costs for components and products sourced from China. The ongoing impact of these risks are heightened becausetariffs will depend on future trade discussions between the U.S. and China or the Company’s ability to avoid or offset these services are dependent on (1)costs should the successful implementation of complex third-party cloud solutions, (2) the ability of a rider's motorcycle and mobile application to successfully connect to each other, and (3) the support of cellular carriers.
tariffs remain in place.

•The Company must comply with governmental laws and regulations that are subject to change and involve significant costs. The Company’s sales and operations in areas outside the U.S. may be subject to foreign laws, regulations and the legal systems of foreign courts or tribunals. These laws and policies governing operations of foreign-based companies may result in increased costs or restrictions on the ability of the Company to sell its products in certain countries. U.S. laws and policies affecting foreign trade and taxation may also adversely affect the Company's international sales operations.

The Company’s domesticU.S. sales and operations are subject to governmental policies and regulatory actions of agencies of the United States Government, including the United States Environmental Protection Agency (EPA), SEC, National Highway


Traffic Safety Administration, U.S. Department of Labor and Federal Trade Commission. In addition, the Company’s sales and operations are also subject to laws and actions of state legislatures and other local regulators, including independent dealer statutes and licensing laws. Changes in regulations, changes in interpretations of regulations by governmental agencies, or the imposition of additional regulations may have a material adverse effect on the Company’s business and results of operations.
Tax - –The Company is subject to income and non-income based taxes in the U.S. federal and state jurisdictions and in various foreign jurisdictions. Significant judgment is required in determining the Company's worldwide income tax liabilities and other tax liabilities including the impact of the 2017 Tax Cuts and Jobs Act (2017 Tax Act). The Company believes that it complies with applicable tax law.laws. If the governing tax authorities have a different interpretation of the applicable lawlaws or if there is a change in tax law,laws, the Company's financial condition and/or results of operations may be adversely affected. To the extent there are considerable changes to tax laws, the Company may need to readjust its tax strategy, and may not be able to take full advantage of such changes.
Environmental - –The majority of the Company’s motorcycle products use internal combustion engines. These motorcycle products are subject to statutory and regulatory requirements governing emissions and noise, including standards imposed by the EPA, state regulatory agencies, such as the California Air Resources Board and regulatory agencies in certain foreign countries where the Company’s motorcycle products are sold. The Company is also subject to statutory and regulatory requirements governing emissions and noise in the conduct of the Company’s manufacturing operations. Any significant change to the regulatory requirements governing emissions and noise may substantially increase the cost of manufacturing the Company’s products. If the Company fails to meet existing or new requirements, then the Company may be unable to produce and sell certain products or may be subject to fines or penalties.
Further, in response to concerns about global climate changes and related changes in consumer preferences, the Company mayis likely to face greater regulatory orand customer pressure to develop products that generate less emissions. This maywill require the Company to spend additional funds on research, product development and implementation costs, and subject the Company to the risk that the Company’s competitors may respond to these pressures in a manner that gives them a competitive advantage.
Financial Services - –The Company’s financial services operations are governed by a wide range of foreign,U.S. federal and state and foreign laws that regulate financial and lending institutions, and financial services activities. In the U.S. for example, these laws include the federal Truth-in-Lending Act, Equal Credit Opportunity Act and Fair Credit Reporting Act. The financial services operations originate the majority of its consumer loans through its subsidiary, Eaglemark Savings Bank, a Nevada state thrift chartered as an industrial loan company. FederalIndustrial Loan Company. U.S. federal and state bodies may in the future impose additional laws, regulation and supervision over the financial services industry.
Violations of, or non-compliance with, relevant laws and regulations may limit the ability of HDFS to collect all or part of the principal or interest on applicable loans, may entitle the borrower to rescind the loan or obtain a refund of amounts previously paid, could subject HDFS to payment of damages, civil fines, or criminal penalties and administrative sanctions and could limit the number of loans eligible for HDFS securitizations programs. Such regulatory requirements and associated supervision also could limit the discretion of HDFS in operating its business, such as through the suspension or revocation of any charter, license or registration at issue, as well as the imposition of administrative sanctions, including "cease and desist" orders. The Company cannot assure that the applicable laws or regulations will not be amended or construed in ways that are adverse to HDFS, that new laws and regulations will
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not be adopted in the future, or that laws and regulations will not attempt to limit the interest rates or convenience fees charged by HDFS, any of which may adversely affect the business of HDFS or its results of operations.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) is a sweeping piece of legislation impacting financial services and the full effect will not be fully known for years,continues to evolve as regulations that are intended to implement the Dodd-Frank Act are adopted, and the text of the Dodd-Frank Act is analyzed by stakeholders and possibly the courts. The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the Bureau). The Bureau has significant enforcement and rule-making authority in the area of consumer financial products and services. The direction that the Bureau will take, the regulations it will adopt, and its interpretation of existing laws and regulations are all elements that are not yet fully known.known and subject to change. Compliance may be costly and could affect operating results as the implementation of new forms, processes, procedures and controls and infrastructure may be required. Compliance may create operational constraints and place limits on pricing. Failure to comply, as well as changes to laws and regulations, or the imposition of additional laws and regulations, could affect HDFS’ earnings, limit its access to capital, limit the number of loans eligible for HDFS securitization programs and have a material adverse effect on HDFS’ business and results of operations. The Bureau also has supervisory authority over certain non-bank larger participants in the vehicle financing market, which includes a non-bank subsidiary of HDFS, allowing the Bureau to conduct comprehensive and rigorous on-site examinations that could result in enforcement actions, fines, changes to processes and procedures, product-related changes or consumer refunds, or other actions.


U.S. Public Company - The Company is also subject to policies and actions of the SEC and New York Stock Exchange (NYSE). Many major competitors of the Company are not subject to the requirements of the SEC or the NYSE rules. As a result, the Company may be required to disclose certain information that may put the Company at a competitive disadvantage to its principal competitors.

Weather may impact retail sales by the Company's independent dealers. The Company has observed that abnormally cold and/or wet conditions in a region, including impacts from hurricanes or unusual storms, could have the effect of reducing demand or changing the timing for purchases of new Harley-Davidson motorcycles. Reduced demand for new Harley-Davidson motorcycles ultimately leads to reduced shipments by the Company.

The Company relies on third-party suppliers to obtain raw materials and provide component parts for use in the manufacture of its motorcycles. The Company may experience supply problems relating to raw materials and components such as unfavorable pricing, poor quality, or untimely delivery. In certain circumstances, the Company relies on a single supplier to provide the entire requirement of a specific part, and a change in this established supply relationship may cause disruption in the Company’s production schedule. In addition, the price and availability of raw materials and component parts from suppliers can be adversely affected by factors outside of the Company’s control such as the supply of a necessary raw material or natural disasters. Further, Company suppliers may experience difficulty in funding their day-to-day cash flow needs because of tightening credit caused by financial market disruption. In addition, adverse economic conditions and related pressure on select suppliers due to difficulties in the global manufacturing arena could adversely affect their ability to supply the Company. Changes in laws and policies relating to trade and taxation may also adversely impact the Company's foreign suppliers. These supplier risks may have a material adverse effect on the Company’s business and results of operations.

The Company’s Motorcycles segment is dependent upon unionized labor. Substantially all of the hourly production employees working in the Motorcycles segment are represented by unions and covered by collective bargaining agreements. Harley-Davidson Motor Company is currently a party to five collective bargaining agreements with local affiliates of the International Association of Machinists and Aerospace Workers and the United Steelworkers of America. Current collective bargaining agreements with hourly employees in Missouri and Wisconsin will expire in 2019, and agreements with employees in Pennsylvania will expire in 2022. There is no certainty that the Company will be successful in negotiating new agreements with these unions that extend beyond the current expiration dates or that these new agreements will be on terms that will allow the Company to be competitive. The Company's decisions regarding opening, closing, expanding, contracting or restructuring its facilities may require changes to existing or new bargaining agreements. Failure to renew agreements when they expire or to establish new collective bargaining agreements on terms acceptable to the Company and the unions could result in the relocation of production facilities, work stoppages or other labor disruptions which may have a material adverse effect on the Company’s business and results of operations.

The ability of the Company to expand international sales may be impacted by existing or new laws and regulations that impose motorcycle licensing restrictions and limit access to roads and highways. Expanding international sales is a part of the Company’s long-term business strategy. A number of countries have tiered motorcycle licensing requirements that limit the ability of new and younger riders to obtain licenses to operate the Company’s motorcycles, and many countries are considering the implementation of such requirements. These requirements only allow new and/or younger riders to operate smaller motorcycles for certain periods of time. Riders typically are only permitted to obtain a license to ride larger motorcycles upon reaching certain ages and/or having been licensed to ride smaller motorcycles for a certain period of time, and only after passing additional tests and paying additional fees. These requirements pose obstacles to large displacement motorcycle ownership. Other countries have laws and regulations that prohibit motorcycles from being operated on certain roads and highways. These types of laws and regulations could adversely impact the Company’s plans to expand international sales.

The Company is and may in the future become subject to legal proceedings and commercial or contractual disputes. The uncertainty associated with substantial unresolved claims and lawsuits may harm the Company’s business, financial condition, reputation and brand. The defense of the lawsuits may result in the expenditures of significant financial resources and the diversion of management’s time and attention away from business operations. In addition, although the Company is unable to determine the amount, if any, that it may be required to pay in connection with the resolution of the lawsuits by settlement or otherwise, any such payment may have a material adverse effect on the Company’s business and results of operations. Refer to the Company’s disclosures concerning legal proceedings in this Form 10-K and in the other periodic reports that the Company files with the Securities and Exchange Commission (SEC) for additional detail regarding lawsuits and other claims against the Company.



The Company, its suppliers, and its independent dealers must successfully accommodate a seasonal retail motorcycle sales pattern. The Company records the wholesale sale of a motorcycle when it is shipped to the Company’s independent dealers. The Company's flexible production capability allows it to more closely correlate motorcycle production and wholesale shipments with the retail selling season. Any difficulties in executing flexible production could result in lost production or sales. The Company, its suppliers, and its independent dealers must be able to successfully manage changes in production rates, inventory levels and other business processes associated with flexible production. Failure by the Company, its suppliers, or its independent dealers to make such adjustments may have a material adverse effect on the Company’s business and results of operations.

The Financial Services operations rely on external sources to finance a significant portion of its operations. Liquidity is essential to the Company’s Financial Services business. Disruptions in financial markets may cause lenders and institutional investors to reduce or cease to loan money to borrowers, including financial institutions. The Company’s Financial Services operations may be negatively affected by difficulty in raising capital in the long-term and short-term capital markets. These negative consequences may in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital, reduced funds available through its financial services operations to provide loans to independent dealers and their retail customers, and dilution to existing share value through the use of alternative sources of capital.

The Financial Services operations are highly dependent on accessing capital markets to fund their operations at competitive interest rates, the Company’s access to capital and its cost of capital are highly dependent upon its credit ratings, and any negative credit rating actions will adversely affect its earnings and results of operations. The ability of the Company and its Financial Services operations to access unsecured capital markets is influenced by their short-term and long-term credit ratings. If the Company’s credit ratings are downgraded or its ratings outlook is negatively changed, the Company’s cost of borrowing could increase, resulting in reduced earnings and interest margins, or the Company’s access to capital may be disrupted or impaired. The Company borrowed $750,000,000 in 2015 to fund the repurchase of its Common Stock, which increased the Company's leverage. Having increased leverage increases the risk of a downgrade in the Company's credit ratings.

The Company incurs substantial costs with respect to employee pension and healthcare benefits. The Company’s cash funding requirements and its estimates of liabilities and expenses for pensions and healthcare benefits for both active and retired employees are based on several factors that are outside the Company’s control. These factors include funding requirements of the Pension Protection Act of 2006, the rate used to discount the future estimated liability, the rate of return on plan assets, current and projected healthcare costs, healthcare reform or legislation, retirement age and mortality. Changes in these factors can impact the expense, liabilities and cash requirements associated with these benefits which could have a material adverse effect on future results of operations, liquidity or shareholders’ equity. In addition, costs associated with these benefits put the Company under significant cost pressure as compared to its competitors that may not bear the costs of similar benefit plans. Furthermore, costs associated with complying with the Patient Protection and Affordable Care Act may produce additional cost pressure on the Company and its health care plans.

The Company must maintain stakeholder confidence in its operating ethics and corporate governance practices. The Company believes it has a history of good corporate governance and operating ethics. The Company has a Code of Business Conduct that defines how employees interact with various Company stakeholders and addresses issues such as confidentiality, conflict of interest and fair dealing. Failure to maintain its reputation for good corporate governance and strong operating ethics may have a material adverse effect on the Company’s business and results of operations.

•The Company’s operations may be affected by greenhouse emissions and climate change and related regulations. Climate change is receiving increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. The U.S. Congress has previously considered and may in the future implement restrictions on greenhouse gas emissions. In addition, several U.S. states, including states where the Company has manufacturing plants,facilities, have previously considered and may in the future implement greenhouse gas registration and reduction programs. Energy security and availability and its related costs affect all aspects of the Company’s manufacturing operations in the United States,U.S., including the Company’s supply chain. The Company’s manufacturing plantsfacilities use energy, including electricity and natural gas, and certain of the Company’s plantsfacilities emit amounts of greenhouse gas that may be affected by these legislative and regulatory efforts. Greenhouse gas regulation could increase the price of the electricity the Company purchases, increase costs for use of natural gas, potentially


restrict access to or the use of natural gas, require the Company to purchase allowances to offset the Company’s own emissions or result in an overall increase in costs of raw materials, any one of which could increase the Company’s costs, reduce competitiveness in a global economy or otherwise negatively affect the Company’s business, operations or financial results. Many of the Company’s suppliers face similar circumstances. Physical risks to the Company’s business operations as identified by the Intergovernmental Panel on Climate Change and other expert bodies include scenarios such as sea level rise, extreme weather conditions and resource shortages. Extreme weather may disrupt the production and supply of component parts or other items such as natural gas, a fuel necessary for the manufacture of motorcycles and their components. Supply disruptions would raise market rates and jeopardize the continuity of motorcycle production.

•Regulations related to materials that the Company purchases to use in its products could cause the Company to incur additional expenses and may have other adverse consequences. Laws or regulations impacting ourthe Company's supply chain, such as the UK Modern Slavery Act, could affect the sourcing and availability of some of the raw materials that the Company uses in the manufacturing of its products. The Company's supply chain is complex, and if it is not able to fully understand its supply chain, then the Company may face reputational challenges with customers, investors or others.others and other adverse consequences. For example, many countries in which the Company distributes its products are beginning to introduceintroducing regulations that require knowledge and disclosure of virtually all materials and chemicals in the Company’s products. Accordingly, the Company could incur significant costs related to the process of complying with these laws, including potential difficulty or added costs in satisfying the disclosure requirements.
General Risks
•Changes in general economic and business conditions, tightening of credit and retail markets, political events or other factors may adversely impact independent dealers’ retail sales. The motorcycle industry is impacted by general economic conditions over which motorcycle manufacturers have little control. These factors can weaken the retail environment and lead to weaker demand for discretionary purchases such as motorcycles. Weakened economic conditions in certain business sectors and geographic areas can also result in reduced demand for the Company's products. Tightening of credit can limit the availability of funds from financial institutions and other lenders and sources of capital which could adversely affect the ability of retail consumers to obtain loans for the
17


purchase of motorcycles from lenders, including HDFS. Should general economic conditions or motorcycle industry demand decline, the Company’s results of operations and financial condition may be substantially adversely affected. The motorcycle industry can also be affected by political conditions and other factors over which motorcycle manufacturers have little control.
•The Company relies on third partiesis and may in the future become subject to perform certain operatinglegal proceedings and administrative functions forcommercial or contractual disputes. The uncertainty associated with substantial unresolved claims and lawsuits may harm the Company. Similar to suppliersCompany’s business, financial condition, reputation and brand. The defense of raw materialsthe lawsuits may result in the expenditures of significant financial resources and components,the diversion of management’s time and attention away from business operations. In addition, although the Company is unable to determine the amount, if any, that it may experience problemsbe required to pay in connection with outsourced services, such as unfavorable pricing, untimely delivery of services, or poor quality. Also, these suppliers may experience adverse economic conditions due to difficulties in the global economy that could lead to difficulties supporting the Company's operations. In lightresolution of the amount and types of functions that the Company has outsourced, these service provider riskslawsuits by settlement or otherwise, any such payment may have a material adverse effect on the Company'sCompany’s business and results of operations.
Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of certain legal proceedings in which the Company is involved.
The Company disclaims any obligation to update these Risk Factorsrisk factors or any other forward-looking statements. The Company assumes no obligation, (andand specifically disclaims any such obligation)obligation, to update these Risk Factorsrisk factors or any other forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements. 
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The following is aA summary of the principal operating properties of the Company as of December 31, 2018:
Motorcycles and Related Products Segment
2020 is as follows:
Type of FacilityLocation
Approximate
Square Feet
Status
Corporate OfficeMotorcycle and Related Products:Milwaukee, WI515,000
Owned
MuseumMilwaukee, WI130,000
Owned
Manufacturing(1)
Menomonee Falls, WI915,000
Owned
Product Development CenterWauwatosa, WI409,000
Owned
Manufacturing(2)
Tomahawk, WI226,000
Owned
Manufacturing(3)
York, PA571,000
Owned
Manufacturing(4)
Kansas City, MO456,000
Owned
Manufacturing(5)
Rayong, Thailand220,000
Owned
Manufacturing(6)
Manaus, Brazil108,000
Lease expiring 2019
Regional OfficeOxford, England39,000
Lease expiring 2022
Manufacturing(7)
Bawal, India68,000
Lease expiring 2019
Regional OfficeSingapore24,000
Lease expiring 2020
Manufacturing(8)
Adelaide, Australia485,000
Lease expiring 2019



(1)Corporate officeMotorcycle powertrain production.Milwaukee, WIOwned
(2)Product development centerPlastic parts production and painting.Wauwatosa, WIOwned
Manufacturing(a)
Menomonee Falls, WIOwned
Manufacturing(b)
Tomahawk, WIOwned
Manufacturing(c)
York, PAOwned
Manufacturing(d)
Rayong, ThailandOwned
Manufacturing(e)
Manaus, BrazilLeased
(3)
Motorcycle parts fabrication, painting and Softail® and touring model assembly.
(4)
Motorcycle parts fabrication, painting and Dyna®, Sportster®, Softail® and Street platform assembly. The Kansas City plant will be closed in 2019 in the course of the Company's manufacturing optimization plan.
(5)Production of select models for certain Asian markets.
(6)Assembly of select models for the Brazilian market.
(7)Assembly of select models for the Indian market and production of the Street platform for non-North American markets.
(8)Motorcycle wheel production. The Adelaide plant will be closed in 2019 in the course of the Company's manufacturing optimization plan.
Financial Services Segment
Type of FacilityLocation
Approximate
Square Feet
Status
Office(1)
Chicago, IL26,000
Lease expiring 2022
Office(2)
Plano, TX69,000
Lease expiring 2025
Office(3)
Carson City, NV100,000
Owned
(1)Corporate headquarters
(2)Financial Services:
Corporate officeChicago, ILLeased
Wholesale and retail operations officePlano, TXLeased
Retail operations office(f)
(3)Retail operations
(a)Motorcycle powertrain production
(b)Production and painting of motorcycle component parts
(c)Motorcycle parts fabrication, painting and assembly
(d)Motorcycle production for certain Asian and European markets
(e)Assembly of select models for the Brazilian market
(f)HDFS completed a sale of its Carson City, NV facility in December 2020 and plans to move retail operations to Reno, NV in April 2021
Item 3. Legal Proceedings
The Company is subjectRefer to lawsuits and other claims related to environmental, product and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter.
Environmental Protection Agency Notice:
In December 2009, the Company received formal, written requests for information from the United States Environmental Protection Agency (EPA) regarding: (i) certificates of conformity for motorcycle emissions and related designations and labels, (ii) aftermarket parts, and (iii) warranty claims on emissions related components. The Company promptly submitted written responses to the EPA’s inquiry and has engaged in information exchanges and discussions with the EPA. In August 2016, the Company entered into a consent decree with the EPA regarding these issues, and the consent decree was subsequently revised in July 2017 (the Settlement). In the Settlement, the Company agreed to, among other things, pay a fine, and not sell tuning products unless they are approved by the EPA or California Air Resources Board. In December 2017, the EPA filed the Settlement with the U.S. District Court for the District of Columbia for the purpose of obtaining court approvalNote 16 of the Settlement. Three amicus briefs opposing portionsNotes to Consolidated financial statements for a discussion of the Settlement were filed with the court by the deadline of January 31, 2018. On March 1, 2018, the Company and the EPA each filed separate response briefs. The Company is awaiting the court's decision on whether or not to finalize the Settlement. The Company has an accrual associated with this mattercertain legal proceedings in which is included in accrued liabilities in the consolidated balance sheets, and as a result, if it is finalized, the Settlement would not have a material adverse effect on the Company's financial condition or results of operations. The Settlement is not final until it is approved by the court, and if it is not approved by the court, the Company cannot reasonably estimate the impact of any remedies the EPA might seek beyond the Company's current reserve for this matter.
York Environmental Matters:
The Company is involved with government agencies and groups of potentially responsible parties related to a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. The Company has been working with the Pennsylvania Department of Environmental Protection (PADEP) since 1986 and with the U.S. Environmental Protection Agency (EPA) in undertaking environmental investigation and remediation activities, including a site-wide remedial investigation/feasibility study (RI/FS).
In January 1995, the Company entered into a settlement agreement (the Agreement) with the Navy, and the parties amended the Agreement in 2013 to address ordnance and explosive waste. The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of costs associated with environmental investigation and


remediation activities at the York facility (Response Costs). The trust administers the payment of the Response Costs incurred at the York facility as covered by the Agreement.
The Company has an accrual for its estimate of its share of the future Response Costs at the York facility which is included in other long-term liabilities in the consolidated balance sheets. While the work on the RI/FS is now complete and the final remedy was proposed in late 2018, it has not yet been approved, and given the uncertainty that exists concerning the nature and scope of additional environmental remediation that may ultimately be required under the approved final remedy, the Company is unable to make a reasonable estimate of those additional costs, if any, that may result.involved.
The estimate of the Company's future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date, and the estimated costs to complete the necessary investigation and remediation activities.
Product Liability Matters:
The Company is involved in product liability suits related to the operation of its business. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and that product liability suits will not have a material adverse effect on the Company’s consolidated financial statements.
Item 4. Mine Safety Disclosures    
Not ApplicableApplicable.
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PART II
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Harley-Davidson, Inc. common stock is traded on the New York Stock Exchange Inc. under the trading symbol HOG.
As of February 1, 2019,January 31, 2021, there were 70,32766,959 shareholders of record of Harley-Davidson, Inc. common stock.
The Company’s share repurchases, include discretionary share repurchases andwhich consisted of shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock awards. The following table contains detail related to the Company's repurchase of its common stock based on the date of tradeunits were as follows during the quarter ended December 31, 2018:2020:
2020 Fiscal MonthTotal Number of
Shares Purchased		Average Price
Paid per Share		Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs		Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
September 28 to November 1738 $24 738 18,246,721 
November 2 to November 29556 $33 556 18,246,721 
November 30 to December 311,849 $40 1,849 18,246,721 
3,143 $35 3,143 
2018 Fiscal Month 
Total Number of
Shares Purchased
 
Average Price
Paid per Share
 
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
 
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
October 1 to November 4 1,951,787
 $40
 1,951,787
 19,363,944
November 5 to December 2 2,129,526
 $41
 2,129,526
 17,234,544
December 3 to December 31 824,477
 $36
 824,477
 16,410,310
Total 4,905,790
 $40
 4,905,790
  
In February 2016, the Company's Board of Directors authorized the Company to repurchase up to 20.0 million shares of its common stock with no dollar limit or expiration date. In February 2018, the Company's Board of Directors authorized the Company to repurchase up to 15.0 million shares of its common stock on a discretionary basis with no dollar limit or expiration date. In February 2020, the Company's Board of Directors authorized the Company to repurchase up to 10.0 million additional shares of its common stock on a discretionary basis with no dollar limit or expiration date. As of December 31, 2018, 16.42020, 18.2 million shares remained under these authorizations. The Company repurchased no shares on a discretionary basis during the quarter ended December 31, 2020.
Under the share repurchase authorizations,authorization, the Company’s common stock may be purchased through any one or more of a Rule 10b5-1 trading plan and discretionary purchases on the open market, block trades, accelerated share repurchases or privately negotiated transactions. The number of shares repurchased, if any, and the timing of repurchases will depend on a number of factors, including share price, trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors. The repurchase authority has no expiration date but may be suspended, modified or discontinued at any time.
The Harley-Davidson, Inc. 20142020 Incentive Stock Plan and predecessor stock plans permit participants to satisfy all or a portion of the statutory federal, state, and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares otherwise issuable under the award, (b) tender back shares received in connection with


such award or (c) deliver other previously owned shares, in each case having a value equal to the amount to be withheld. During the fourth quarter of 2018,2020, the Company acquired 9,6023,143 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock awards.units.
Item 1212. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters within Part III of this Annual Report on Form 10-K contains certain information relating to the Company’s equity compensation plans.
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The following information in this Item 5 is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into such a filing: the SEC requires the Company to include a line graph presentation comparing cumulative five year Common Stockcommon stock returns with a broad-based stock index and either a nationally recognized industry index or an index of peer companies selected by the Company. The Company has chosen to use the Standard & Poor’s 500(S&P) MidCap 400 Index as the broad-based index and the Standard & Poor’s MidCap 400 Index as a more specific comparison.index. The Standard & Poor’sS&P MidCap 400 Index was chosen becauseas the Company does not believe that any other published industry or line-of-business index adequately represents the current operations of the Company. The graph assumes a beginning investment of $100 on December 31, 20132015 and that all dividends are reinvested.
hog12-31x201_chartx27395a05.jpghog-20201231_g1.jpg
201520162017201820192020
Harley-Davidson, Inc.$100 $132 $119 $83 $94 $94 
S&P MidCap 400 Index$100 $121 $140 $125 $157 $179 

  2013 ($) 2014 ($) 2015 ($) 2016 ($) 2017 ($) 2018 ($)
Harley-Davidson, Inc. 100
 97
 68
 90
 81
 56
Standard & Poor’s MidCap 400 Index 100
 108
 104
 126
 146
 130
Standard & Poor’s 500 Index 100
 114
 115
 129
 157
 150


Item 6. Selected Financial Data
Not Applicable.
(In thousands, except per share amounts) 2018 2017 2016 2015 2014
Statement of income data:          
Revenue:          
Motorcycles and Related Products $4,968,646
 $4,915,027
 $5,271,376
 $5,308,744
 $5,567,681
Financial Services 748,229
 732,197
 725,082
 686,658
 660,827
Total revenue $5,716,875
 $5,647,224
 $5,996,458
 $5,995,402
 $6,228,508
Net income $531,451
 $521,759
 $692,164
 $752,207
 $844,611
Weighted-average common shares:          
Basic 165,672
 171,995
 179,676
 202,681
 216,305
Diluted 166,504
 172,932
 180,535
 203,686
 217,706
Earnings per common share:          
Basic $3.21
 $3.03
 $3.85
 $3.71
 $3.90
Diluted $3.19
 $3.02
 $3.83
 $3.69
 $3.88
Dividends paid per common share $1.48
 $1.46
 $1.40
 $1.24
 $1.10
Balance sheet data:          
Total assets(a)
 $10,665,664
 $9,972,672
 $9,890,240
 $9,972,977
 $9,515,870
Total debt(a)
 $7,599,276
 $6,988,009
 $6,807,567
 $6,872,198
 $5,492,402
Total equity(b)
 $1,773,949
 $1,844,277
 $1,920,158
 $1,839,654
 $2,909,286
(a)The Company adopted ASU No. 2015-03 and ASU No. 2015-15 on January 1, 2016. Upon adoption, the Company reclassified debt issuance cost, other than debt issuance costs related to line of credit arrangements (which include its asset-backed commercial paper and commercial paper programs and its credit facilities), from other assets to debt.
(b)The Company adopted ASU No. 2014-09 on January 1, 2018. Upon adoption, the Company recorded a net increase to the opening balance of retained earnings of $6.0 million, net of income taxes, to recognize the cumulative effect of the adoption.



Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Harley-Davidson, Inc. is the parent company of the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). Unless the context otherwise requires, all references to the "Company" include Harley-Davidson, Inc. and all its subsidiaries. The Company operates in two reportable segments: Motorcycles and Related Products (Motorcycles) and Financial Services.
The “% Change” figures included in the “Results of Operations” section were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented. 

Certain “% Change” deemed not meaningful (NM) have been excluded.
(1) Note Regarding Forward-Looking Statements

The Company intends that certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes”, “anticipates”, “expects”, “plans”, or “estimates”“believes,” “anticipates,” “expects,” “plans,” “may,” “will,” “estimates,” “targets,” “intend” or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-lookingforward-
20

looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including in Item 1A. Risk Factors and under the caption “Risk Factors” in Item 1A and under “Cautionary Statements” section in this Item 7 of this report.7. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in the Outlook section“Overview” and “Guidance” sections in this Item 7 are only made as of January 29, 2019February 2, 2021 and the remaining forward-looking statements in this report are only made as of the date of the filing of this report (February 28, 2019)23, 2021), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Overview(1)
The Company’s net income for 20182020 was $531.5$1.3 million, or $3.19$0.01 per diluted share, compared to $521.8$423.6 million, or $3.02$2.68 per diluted share in 2017.
Operating2019 on lower operating income fromin both the Motorcycles and Financial Services segments.
The Motorcycles segment reported an operating loss of $186.1 million in 20182020 down $475.7 million from operating income of $289.6 million in 2019. The decline in operating income was down $184.4 million compared to 2017 due primarily to lowera 32.1% decrease in wholesale motorcycle shipments, a less favorable product mix and higher costs related to the impact of incremental tariffs, increased metals costs, voluntary recallsrestructuring expenses, partially offset by reduced selling, administrative and restructuring activities.
During 2018, incremental European Union and China tariffs were imposed on the Company's products shipped from the U.S., as well as U.S. incremental tariffs on certain items imported from certain international markets. The European Union tariffs on Harley-Davidson motorcycles exported from the U.S. increased from 6% to 31% effective June 22, 2018. By their current terms, these tariffs are scheduled to increase to 56% effective June 1, 2021. The China tariffs on Harley-Davidson products exported from the U.S. increased from 30% to 55%, effective August 23, 2018, and are set to remain in place indefinitely. The Company also experienced increased costs for metals resulting from U.S. steel and aluminum tariffs, but the Company does not refer to these costs as part of incremental tariffs.engineering expenses.
Operating income from the Financial Services segment in 20182020 was up $15.9down $70.2 million or 5.8%26.4% compared to prior year,2019 due primarily due to higher revenues and a loweran increase in the provision for credit losses.
losses, higher interest expense and restructuring charges. The overall decline in the Company's consolidated operating income during 2018provision for credit losses was more than offset by lower income tax expense which decreased $186.9 million in 2018 primarilyhigher due to negative economic conditions during 2020 and also reflects the favorablecontinued impact of the Tax Cuts and Jobs Act (2017 Tax Act) enacted in December 2017.2020 adoption of a new accounting standard related to the recognition of expected credit losses. The new standard requires recognition of full lifetime expected credit losses upon initial recognition of a financial instrument carried at amortized cost, replacing the prior, incurred loss methodology. The Company adopted the new accounting standard on January 1, 2020 using a modified retrospective approach. As a result, prior period results were not restated.
Worldwide independent dealer retail sales of new Harley-Davidson motorcycles decreased 6.1%17.4% in 20182020 compared to the prior year. U.S. retail2019. Retail sales fell 10.2% on continued weaknesswere adversely impacted primarily in the U.S. industry which declined 8.7% for the same period. Retail sales in international markets increased 0.4% compared to 2017.
The Company expects the U.S. industry to remain challenged into 2019 and will continue to address these weak conditions. In the near-term, the Company is introducing exciting new products and adding innovation that customers value on its new motorcycles. The Company will continue to aggressively manage supply and execute marketing efforts to encourage motorcycle trials and increase the conversionfirst half of these trials into sales. The Company is also working to accelerate its strategy to build the next generation of Harley-Davidson riders through 2022 through its More Roads to Harley-Davidson (More Roads) plan. During 2018, it met or exceeded all2020, by a temporary suspension of the More Roads plan milestones.Company's manufacturing operations, from mid-March through May 2020, and independent dealer closures related to the COVID-19 pandemic. The Company believes its More Roads plan is


designed to build the proper foundation and drive the right fundamentals to help steer the U.S. industry back to health and drive significant growth across international markets. The Company ended 2018 with over 52,000 more Harley-Davidson ridersretail sales in the U.Ssecond half of 2020, compared to prior year, (Source: IHS Markit Motorcycleswere adversely impacted by the Company's decision to reset its new model year launch timing, beginning in Operation (MIO) data2020, from the third quarter to the first quarter. In addition, the Company believes lower dealer inventory levels related to its new approach to supply and inventory management also resulted in lower retail sales during the second half of 2020 compared to the same period last year.
COVID-19 Pandemic Response and Recovery Actions(1)
Cash Preservation – During 2020, the Company delivered on its previously disclosed plans to reduce planned capital and planned non-capital spending to preserve approximately $250 million of cash in 2020. The spending reductions exclude the impact of restructuring charges as discussed further under “Restructuring Plan Costs and Savings”. Also, during 2020, the Company suspended discretionary share repurchases and reduced its cash dividend to $0.02 per share for On-Highwaythe second, third and Dual Purpose bikesfourth quarters of 2020.
Liquidity – At the end 2020, the Company had $4.7 billion of available liquidity through cash, cash equivalents and availability under its credit and conduit facilities. Liquidity is discussed in more detail under “Liquidity and Capital Resources”.
Supporting Dealers and Riders – The Company's response and recovery plans have included supporting global dealers and customers. HDFS continues to work with qualified retail borrowers who have been impacted by the COVID-19 pandemic by offering short-term adjustments to payment due dates. These temporary extensions do not affect the associated interest rate or loan term. At the end of 2020, the volume of payment extensions on eligible retail loans declined, but has not yet returned to pre-COVID-19 pandemic levels. The Company continues to grant payment extensions to customers in accordance with its policies.
Community Strength – The Company continues to proactively manage through the COVID-19 pandemic and has implemented robust protocols to keep workers safe in its manufacturing facilities. Most non-production workers continue to work remotely in light of the COVID-19 pandemic.
The full impact of the COVID-19 pandemic on future results depends on future developments, such as the ultimate duration and scope of the pandemic, the success of vaccination programs, and its impact on the Company's customers, independent dealers, distributors, and suppliers. While the Company's manufacturing operations were temporarily suspended and subsequently resumed in 2020, COVID-19 pandemic related impacts and disruptions could occur in the U.S.future. Future
21

impacts and disruptions could have an adverse effect on production, supply chains, distribution, and demand for the Company's products. Refer to Item 1A. Risk Factors for additional information regarding the potential impact of the COVID-19 pandemic on the Company.
The Rewire
During 2020, the Company executed a set of actions, referred to as The Rewire. The Rewire was a critical overhaul of Jan 1, 2019 comparedthe Company's business to previous yearsset the Company on a new course and provide a solid foundation to execute its 2021-2025 strategic plan, The Hardwire. Key elements of MIO backThe Rewire included the following:
New operating model with reduced complexity and increased speed – The Company implemented a new operating model to 2002)eliminate duplication and complexity across its global operations resulting in fewer positions across the Company's global operations and annual ongoing savings as discussed further under “Restructuring Plan Costs and Savings”.
Reset global business and focus on high-potential markets – The Company plans to concentrate on approximately 50 markets primarily in North America, Europe and parts of Asia Pacific that represent a high percentage of the Company’s expected volume and growth potential.

Refined motorcycle line-up and high-impact product launches – The Company streamlined its planned product portfolio, changed its model year launch timing and go-to-market practices for maximum impact and success.
OutlookGrowth through Parts & Accessories (P&A) and General Merchandise (GM) – P&A and GM are now organized around dedicated leaders with strategies poised for new growth as the Company invests in new channel strategies and better product assortments.
Protecting value – The Company is operating with a new approach to supply and inventory management, with a focus on a strong independent dealer network to better preserve the value and desirability of Harley-Davidson motorcycles for customers. The Company believes a strong network of profitable dealers is essential to delivering the most desirable Harley-Davidson experience. The Company reduced its global dealer network during 2020 and continues work to optimize its network of independent dealers to strengthen priority markets and provide and improve the customer experience.
The Hardwire(1)
The Hardwire is the Company's 2021-2025 strategic plan guided by its mission and vision, which the Company introduced on February 2, 2021. The plan targets long-term profitable growth through focused efforts that extend and strengthen the brand and drive value for all stakeholders. The Company's ambition is to enhance its position as the most desirable motorcycle brand in the world. Desirability is a motivating force driven by emotion. Refer to Item 1. Business for more details on The Hardwire strategic plan and financial targets.
Guidance(1)
On January 29, 2019February 2, 2021, the Company announced the following expectationsguidance for 2019.

2021. During 2021, the first year of The Company expects the U.S. industry to continue to decline in 2019, but at a more tempered pace than in 2018. The Company expects international retail sales growth during 2019. As a result, in 2019,Hardwire, the Company expects to ship between 217,000 and 222,000 motorcycles to dealers which is down approximately 3% to 5% from 2018.

During 2019, the Company expects retail sales to be positively impacted by:

•Focused investment in its strategy to increase global ridership and strengthen its dealer network,
•Model year 2019 and 2020 motorcycles, and
•Continued expansion of the international dealer network.

However, it expects these positive impacts to be more than offset by strong headwinds, including:

•A weak U.S. industry for new motorcycle sales,
•A shift in U.S. rider preference toward smaller motorcycles, and
•A marketplace crowded with highly competitive promotions, incentives and discounts.

In 2019, the Company will continue to aggressively manage through the ongoing uncertainties brought on by the COVID-19 pandemic and its impact on revenue and its supply in line with demand, and the Company expects year-end U.S. dealer inventory of new motorcycles to be downchain. The Company's guidance for 2021 is as follows:
•Motorcycles segment revenue growth, compared to 2018.2020, between 20% and 25%

The Company expects Motorcycles segment gross margin as a percent of revenue to be lower than 2018 driven by a significant increase in incremental tariffs, lower shipment volumes and unfavorable product mix, partially offset by aggressive cost reductions, including the benefit of $25 million to $30 million of savings from the Company's Manufacturing Optimization plan. Refer to "Restructuring Plan Costs and Savings" below for further information regarding the Manufacturing Optimization Plan.

Incremental tariffs include incremental European Union and China tariffs imposed on the Company's products shipped from the U.S., as well as incremental U.S. tariffs on certain items imported from certain international markets. Incremental tariff costs exclude metals cost resulting from the U.S. steel and aluminum tariffs, although the Company does expect higher metals cost which are included in the 2019 gross margin guidance above.

The Company's plant in Thailand came on-line in the third quarter of 2018. As previously disclosed with the announcement of this project in 2017, the Company intends to utilize the Thailand facility to make more of the Company's products accessible to customers in targeted international markets. The Company intends those markets to include China, and certain Asian and European Union markets. The Company is currently making investments to increase that facility’s capacity to serve those markets.

As previously disclosed, Harley-Davidson expects the impact of incremental tariff costs to be approximately $100 million to $120 million in 2019. While Harley-Davidson’s preference has always been to serve the EU market from its U.S. manufacturing operations, the Company previously disclosed plans to mitigate the impact of the incremental European Union and China tariffs by the end of 2019 by serving those markets with motorcycles from its Thailand operations.

The Company is pursuing regulatory approval in the European Union to that end; however, approval is not guaranteed. As a result, the Company is considering multiple other options to serve the EU market should they be required. These other options to serve the EU market would most likely not mitigate the full impact of the current incremental European Union tariff by the end of 2019.

The Company remains active in support of efforts to eliminate all tariffs imposed on motorcycles delivered from its U.S. manufacturing operations.




The Company expects selling, administrative and engineering expenses for the Motorcycles segment to be lower in 2019 behind aggressive cost management and lower recall costs. For 2019, the Company has reallocated a substantial amount of spending to invest in its More Roads plan to drive future growth.

For 2019, the •Motorcycles segment operating margin as a percent of revenue is expectedof 5% to be between 8.0% and 9.0%. Based on its current plans, the Company expects Motorcycles segment operating income in7%, which includes approximately $115 million of gross annual cost savings resulting from 2020 to improve by approximately $170 to $200restructuring actions
•Approximately $20 million compared to 2019. This expectation assumes that the Company will complete its Manufacturing Optimization Plan and successfully execute its plan to mitigate the impact of incremental tariffs by the end of 2019.restructuring expense

The Company expects •Financial Services operating income in 2019 to be downgrowth, compared to 2018 driven by a higher cost of debt2020, between 10% and higher depreciation associated with its 2018 investment in a new loan management system which went into service in January 2019.15%

•Capital expenditures in 2019 are expected to be $225between $190 and $220 million to $245 million, which includes approximately $20 million to support the Manufacturing Optimization Plan. The Company anticipates it will have the ability to fund all capital expenditures in 2019 with cash flows generated by operations.

22

The Company expects its 2019 full year effective tax rate will be approximately 24% to 25%. This guidance excludes the effect of potential future adjustments, including items associated with any potential new tax legislation or audit settlements.
In the first quarter of 2019, the Company expects to ship between 53,000 and 58,000 motorcycles, which is down approximately 9% to 17% compared to the first quarter of 2018. Motorcycles segment operating margin as a percent of revenue is expected to be down approximately 6 percentage points compared to the first quarter of 2018. The Company expects results in the first quarter of 2019 to be adversely impacted by incremental tariffs, unfavorable product mix, a higher fixed cost per unit on lower production and shipments and unfavorable foreign currency, partially offset by lower restructuring costs.
The 2019 first quarter shipment guidance reflects the impact of a brake recall on the Company's Street motorcycles recorded in the fourth quarter of 2018. The Company expects that limited parts availability for repairing the impacted Street motorcycles will adversely impact retail sales in the first quarter of 2019 by approximately 2,500 motorcycles, primarily in international markets. The Company does not believe that the recall will have a meaningful impact on 2019 full-year retail sales.

Restructuring Plan Costs and Savings(1)

In January 2018,During 2020, the Company commenced a significant, multi-year Manufacturing Optimization Plan anchored by the consolidation of its final assembly plant in Kansas City, Missouri into its plant in York, Pennsylvania by mid-2019. As the operations are consolidated, the Company expects approximately 800 jobs will be eliminated with the closure of Kansas City operations and approximately 450 jobs will be added in York through 2019 (Manufacturing Optimization Plan). Asinitiated certain restructuring activities as part of The Rewire including a workforce reduction, the Manufacturing Optimization Plan, the Company will also closetermination of certain current and future products, facility changes, optimizing its wheelglobal independent dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in Adelaide, Australia resultingIndia. These actions included restructuring expenses related to employee termination costs, contract termination costs and non-current asset adjustments. The workforce reduction resulted in the elimination of approximately 90 jobs.

700 positions globally, including the termination of approximately 500 employees. In November 2018,addition, the Company implemented a workforce reorganization plan (Reorganization Plan). As aIndia action will result in the termination of approximately 70 employees left theemployees. The Company on an involuntary basis.



The following table summarizes the expected costs and savings associatedincurred $130 million of restructuring expense in connection with these restructuring plans.
(in millions)2018 Actual 2019 Estimated 2020 Estimated Total
Manufacturing Optimization Plan       
Cost related to temporary inefficiencies$ 12.9 $10 - $15 n/a $ 23 - $ 28
Restructuring expenses$ 89.5 $40 - $45 n/a $129 - $134
 $102.4 $50 - $60   $152 - $162
% cash70% 70%   70%
Reorganization Plan - restructuring expenses$3.9 $1   $5
% cash100% 100%   100%
        
Annual cash savings  2019 Estimated 2020 Estimated 
Annual
Ongoing
Manufacturing Optimization Plan  $25 - $30 $45 - $50 $65 - $75
Reorganization Plan  $7 $7 $7
The current Manufacturing Optimization Plan cost estimate has been revised down from the most recent estimate by $3 million and $23 million at the low and high ends of the range, respectively. In the first quarter of 2019, the Company expects Manufacturing Optimization Plan costs of approximately $20 million.
actions during 2020. The Company expects to incur total restructuring expenses for the Manufacturing Optimization Planthese actions of approximately $150 million, including approximately $20 million in 2021. The Company's total estimated restructuring expense is down from its previous estimate of $169 million. The Company continues to include the costexpect ongoing gross savings resulting from these restructuring activities of employee termination benefits, accelerated depreciation, and other project implementation costs of $40 million to $41 million, $51 million to $53 million, and $38 million to $40 million, respectively. Restructuring expenses for the Reorganization Plan will consist of the cost of employee termination benefits. The timing of cash payments for restructuring costs may not occur in the same fiscal period that the Company records the expense.approximately $115 million. Refer to Note 3 of the Notes to Consolidated Financial Statementsfinancial statements for additional information concerningregarding the Company's restructuring expenses.

Results of Operations 2020 Compared to 2019
Consolidated Results
(in thousands, except earnings per share)20202019(Decrease)
Increase		% Change
Operating (loss) income from Motorcycles and Related Products$(186,122)$289,620 $(475,742)NM
Operating income from Financial Services195,801 265,988 (70,187)(26.4)
Operating income9,679 555,608 (545,929)(98.3)
Other (expense) income, net(1,848)16,514 (18,362)NM
Investment income7,560 16,371 (8,811)(53.8)
Interest expense31,121 31,078 43 0.1 
(Loss) income before income taxes(15,730)557,415 (573,145)NM
Income tax (benefit) provision(17,028)133,780 (150,808)NM
Net income$1,298 $423,635 $(422,337)(99.7)%
Diluted earnings per share$0.01 $2.68 $(2.67)(99.6)%
The Company expects total capital expendituresreported operating income of $65$9.7 million associated with the Manufacturing Optimization Plan through 2019, including $20in 2020 compared to $555.6 million in 2019. This isThe Motorcycles segment incurred a decrease$186.1 million operating loss in 2020, a decline from the Company's most recent expectationoperating income of $75$289.6 million in capital expenditures.

Results of Operations 2018 Compared to 2017
Consolidated Results
(in thousands, except earnings per share) 2018 2017 
(Decrease)
Increase
 
%
Change
Operating income from Motorcycles and Related Products $422,363
 $606,776
 $(184,413) (30.4)%
Operating income from Financial Services 291,160
 275,305
 15,855
 5.8
Operating income 713,523
 882,081
 (168,558) (19.1)
Other income (expense), net 3,039
 9,182
 (6,143) (66.9)
Investment income 951
 3,580
 (2,629) (73.4)
Interest expense 30,884
 31,004
 (120) (0.4)
Income before provision for income taxes 686,629
 863,839
 (177,210) (20.5)
Provision for income taxes 155,178
 342,080
 (186,902) (54.6)
Net income $531,451
 $521,759
 $9,692
 1.9 %
Diluted earnings per share $3.19
 $3.02
 $0.17
 5.6 %
Consolidated operating income was down 19.1% in 2018 driven by a decrease in operating income from the Motorcycles segment which was down $184.4 million compared to 2017.2019. Operating income forfrom the Financial Services segment increased by $15.9decreased $70.2 million, during 2018 as or 26.4%, compared to 2017. Please refer2019. Refer to the “MotorcyclesMotorcycles and Related Products Segment”Segment and “FinancialFinancial Services Segment”Segment discussions following for a more detailed discussionanalysis of the factors affecting operating income.



results.
Other (expense) income in 20182020 was adversely impacted by higher amortization of actuarial losses following a 2018 first quarter remeasurement of the assets and obligations oflower non-operating income related to the Company's qualified pension plan.defined benefit plans. Investment income wasdecreased in 2020 as compared to 2019 driven by lower due to unfavorable changesincome from investments in the fair value of marketable securities.
The Company's effective income tax rate for 20182020 was 22.6%a 108.3% benefit compared to 39.6%a 24.0% expense for 2017.2019. The lower effectiveCompany recorded an income tax rate was primarilybenefit during 2020 due to the impact of the 2017 Tax Act. The 2017 Tax Act reduced the federal corporatea pre-tax loss and discrete income tax rate beginningbenefits related primarily to favorable tax audit settlements with taxing authorities during the year.
Diluted earnings per share was $0.01 in 2018 from 35%2020 compared to 21%. In addition, because the 2017 Tax Act was enacted$2.68 in 2017, the Company was required to remeasure its net deferred tax assets in 2017. The impact of remeasuring the deferred tax asset balances combined with other adjustments related to the enactment of the 2017 Tax Act resulted in a non-cash income tax charge of $53.1 million in the fourth quarter of 2017.
2019. Diluted earnings per share were $3.19 in 2018, up 5.6% compared to 2017. Diluted earnings per share were positivelyadversely impacted by the 1.9% increasedecrease in net income, and alsobut benefited from lower diluted weighted average shares outstanding. Diluted weighted average shares outstanding decreased from 172.9157.8 million in 20172019 to 166.5153.9 million in 20182020 driven by the Company's discretionary repurchases of common stock. Please referstock during 2019. Refer to "Liquidity and Capital Resources" for additional information concerning the Company's share repurchase activity.
23

Motorcycle Retail Sales and Registration Data
Harley-Davidson Motorcycle Retail Sales(a)
The following table includes retailRetail unit sales of new Harley-Davidson motorcycles:motorcycles were as follows:
20202019Decrease% Change
United States103,650 125,960 (22,310)(17.7)%
Canada6,477 8,946 (2,469)(27.6)
Total North America110,127 134,906 (24,779)(18.4)
Europe/Middle East/Africa (EMEA)36,906 44,086 (7,180)(16.3)
Asia Pacific27,220 29,513 (2,293)(7.8)
Latin America5,995 9,768 (3,773)(38.6)
Total worldwide retail sales180,248 218,273 (38,025)(17.4)%
  2018 2017 
(Decrease)
Increase
 
%
Change
United States 132,868
 147,972
 (15,104) (10.2)%
         
Europe(b)
 41,179
 39,773
 1,406
 3.5
EMEA - Other 5,423
 5,162
 261
 5.1
      Total EMEA 46,602
 44,935
 1,667
 3.7
         
Asia Pacific(c)
 18,429
 21,393
 (2,964) (13.9)
Asia Pacific - Other 10,295
 8,955
 1,340
 15.0
Total Asia Pacific 28,724
 30,348
 (1,624) (5.4)
         
Latin America 10,167
 9,452
 715
 7.6
Canada 9,690
 10,081
 (391) (3.9)
     Total International Retail Sales 95,183
 94,816
 367
 0.4
     Total Worldwide Retail Sales 228,051
 242,788
 (14,737) (6.1)%
(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its independent dealers supply concerning new retail sales, and the Company does not regularly verify the information that its independent dealers supply. This information is subject to revision.
(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning new retail sales, and the Company does not regularly verify the information that its dealers supply. This information is subject to revision.
(b)Includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
(c)Includes Japan, Australia, New Zealand and Korea. Prior period Asia Pacific retail sales have been reclassified to conform to the current year presentation.

Retail sales of new Harley-Davidson motorcyclesDuring 2020, primarily in the U.S. were down 10.2% in 2018. Overall, U.S.first half of the year, retail sales of new Harley-Davidson motorcycles were adversely impacted by the COVID-19 pandemic which resulted in the temporary closure of the Company's manufacturing facilities and the temporary closure of many of its independent dealerships.
Retail sales in the second half of 2020 were adversely impacted by lower retail inventory as the Company continued weak U.S. industry, which was down 8.7% compared to 2017.aggressively manage the supply of its motorcycles into the independent dealer network under its new supply and inventory management approach. The Company's approach to supply and inventory management is focused on profitable and desirable volume aimed at helping drive retail pricing to preserve the value and desirability of Harley-Davidson motorcycles for customers. Under this approach, the Company believes that saleswill continue to aggressively manage the supply of new motorcycles continuedinto the independent dealer network. At the end of 2020, independent dealer retail inventory of new Harley-Davidson motorcycles was down approximately 64% or 24,000 units in the U.S. and approximately 59% worldwide compared to be adverselythe end of 2019.
The Company's decision to reset its annual new model year launch from August to early in the first quarter also impacted by soft used motorcycle prices and a shiftretail sales in rider preferences toward smaller displacement motorcycles.

Prices for used Harley-Davidson2020. Previously, the Company launched its new model year motorcycles in the third quarter with new product available in U.S. remained at near historical low levels compared to new; however, the Company is encouragedmarkets in August, followed by positive momentum in used motorcycle pricing. During 2018, third-party pricing services continued to publish higher retail values year-over-year for used Harley-Davidson motorcycles. Wholesale prices of


used Harley-Davidson motorcycles at auction were also up during most of 2018 before falling slightly below year-ago levels in the fourth quarter. Additionally, for the sixth consecutive quarter, prices of used Harley-Davidson motorcycles in the Company's dealer network were higher in the fourth quarter of 2018 than the prior year quarter.

Retail sales of used Harley-Davidson motorcycles in the U.S. were up through November 2018 compared to the prior year. Additionally, the share of combined new and used motorcycle registrations in the U.S. attributable to Harley-Davidson motorcyclesinternational markets as product was up in 2018 through November and has been up for the last 9 consecutive years. (Source for data regarding used motorcycle sales: IHS Markit Used Registrations for On-Highway and Dual Purpose motorcycles with engines 601+cc in the U.S. from 2008 through November 2018).distributed globally. While the Company does not benefit directlybelieves the initial shift from August has adversely impacted year-over-year retail sales comparisons, it believes an early-year launch better aligns with the seasonality of used motorcycles,retail demand allowing products a full riding season to sell and minimizes aged inventory and floor plan costs that might accumulate during the Company believes used motorcycle sales are an indicator of brand health and provide prospects for future new motorcycle sales.

off season.
The Company's U.S. market share of new 601+cc motorcycles for 20182020 was 49.7%42.1%, down 1.07.0 percentage points compared to 20172019 (Source: Motorcycle Industry Council). The Company's U.S. market share reflects the adverse impact of a highly competitive marketplace and relatively strong growth in segments in which the Company does not currently compete. In the segments in which the Company does compete (Touring and Cruiser), which represent approximately 70% of the 601+cc market, the Company's market share was up 0.8 percentage pointsfell on a full-year basis.

Internationalweaker retail sales of new Harley-Davidson motorcycles were up 0.4% in 2018. Retail sales in emerging markets were up 9.8% partially offset by lower retail sales in developed markets, which declined 2.7% during 2018. In developed markets, retail sales grew in western Europe; however, retail sales in Japan and Australia were down behind contractingperformance relative to the industry, sales and competitive new product introductionsas well as stronger performance in segments outside of the Company's Touring and Cruiser segments. Retail sales in Canada were also
The Company's European market share of new 601+cc motorcycles for 2020 was 7.7%, down 3.9% in 2018.1.4 percentage points compared to 2019 (Source: Management Services Helwig Schmitt GmbH).

24

The Company continued to expand its international dealer network during 2018, opening 56 new dealers during the year. The Company remains confident in and committed to the significant potential that international markets offer to Harley-Davidson. The Company believes it has the brand, products and distribution to drive sustainable growth in international markets.(1)
Motorcycle Registration Data - 601+cc(a)
The following tableIndustry retail registration data for new motorcycles was as follows:
20202019Decrease% Change
United States(b)
241,792 252,842 (11,050)(4.4)%
Europe(c)
411,079 413,254 (2,175)(0.5)%
(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street®500 motorcycles is not included in this table.
(b)United States industry retail motorcycle registration data:data is derived from information provided by Motorcycle Industry Council. This third-party data is subject to revision and update.
  2018 2017 
(Decrease)
Increase
 
%
Change
United States(b)
 263,750
 288,802
 (25,052) (8.7)%
Europe(c)
 397,669
 390,619
 7,050
 1.8 %

(a)
Data includes on-road 601+cc models. On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.
(b)United States industry data is derived from information provided by Motorcycle Industry Council (MIC). This third-party data is subject to revision and update.
(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data includes 601+cc models derived from information provided by Association des Constructeurs Europeens de Motocycles (ACEM), an independent agency. This third-party data is subject to revision and update.



(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Industry data is derived from information provided by Management Services Helwig Schmitt GmbH. Prior year registrations have been revised to exclude Greece and Portugal registrations. This third-party data is subject to revision and update.
Motorcycles and Related Products Segment
Motorcycle Unit Shipments
The following table includes wholesale motorcycle unit shipments for the Motorcycles segment:
  2018 2017 Unit Unit
  Units Mix % Units Mix % 
(Decrease)
Increase
 %
Change
United States 132,433
 57.9% 144,893
 60.0% (12,460) (8.6)%
International 96,232
 42.1% 96,605
 40.0% (373) (0.4)
Harley-Davidson motorcycle units 228,665
 100.0% 241,498
 100.0% (12,833) (5.3)%
Touring motorcycle units 101,942
 44.6% 99,745
 41.3% 2,197
 2.2 %
Cruiser motorcycle units 78,529
 34.3% 87,344
 36.2% (8,815) (10.1)
Sportster® / Street motorcycle units
 48,194
 21.1% 54,409
 22.5% (6,215) (11.4)
Harley-Davidson motorcycle units 228,665
 100.0% 241,498
 100.0% (12,833) (5.3)%
During 2018, wholesale shipments of Harley-Davidson motorcycles were down 5.3% compared to the prior year in line with a 6.1% decrease in dealer retail sales of new Harley-Davidson motorcycles. International shipments as a percentage of total shipments were up in 2018 as compared to 2017. Shipments of Touring motorcycles increased as a percentage of total shipments in 2018 offset by declines in Cruiser and Sportster/Street motorcycles. Dealer inventory of new Harley-Davidson motorcycles in the U.S. at the end of 2018 was down approximately 350 motorcycles compared to the end of 2017.
Segment Results
The following table includes the condensed statements of operations for the Motorcycles segment (in thousands):
  2018 2017 
Increase
(Decrease)
 
%
Change
Revenue(a):
        
Motorcycles $3,882,963
 $3,765,620
 $117,343
 3.1 %
Parts & Accessories 754,663
 800,702
 (46,039) (5.7)
General Merchandise 241,964
 262,776
 (20,812) (7.9)
Licensing 38,676
 39,186
 (510) (1.3)
Other 50,380
 46,743
 3,637
 7.8
Total revenue 4,968,646
 4,915,027
 53,619
 1.1
Cost of goods sold 3,351,796
 3,272,330
 79,466
 2.4
Gross profit 1,616,850
 1,642,697
 (25,847) (1.6)
Selling & administrative expense 914,900
 864,618
 50,282
 5.8
Engineering expense 186,186
 171,303
 14,883
 8.7
Restructuring expense 93,401
 —
 93,401
 —
Operating expense 1,194,487
 1,035,921
 158,566
 15.3
Operating income from Motorcycles $422,363
 $606,776
 $(184,413) (30.4)%

(a)In connection with the adoption of ASU 2014-09, the Company has changed its presentation of disaggregated Motorcycles segment revenue and the prior period has been recast to reflect the new presentation.


The following table includes the estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from 2017 to 2018 (in millions):
  
Net
Revenue
 
Cost of
Goods
Sold
 
Gross
Profit
2017 $4,915
 $3,272
 $1,643
Volume (304) (182) (122)
Price, net of related costs 115
 61
 54
Foreign currency exchange rates and hedging 33
 21
 12
Shipment mix 210
 117
 93
Raw material prices —
 18
 (18)
Manufacturing and other costs —
 45
 (45)
Total 54
 80
 (26)
2018 $4,969
 $3,352
 $1,617
The following factors affected the comparability of net revenue, cost of goods sold and gross profit from 2017 to 2018:
The decrease in volume was due to lower wholesale motorcycle shipments, as well as lower P&A and general merchandise sales. P&A and general merchandise sales were down due in large part to lower motorcycle shipments and lower retail motorcycle sales.
On average, wholesale prices for motorcycles shipped in 2018 were higher than in the prior year resulting in a favorable impact on revenue. The positive impact on revenue was partially offset by increased costs related to the additional content added to motorcycles shipped in 2018 as compared to the prior year.
The favorable revenue impact from foreign currency was partially offset by higher net foreign currency losses due primarily to the remeasurement of foreign-denominated balance sheet accounts, as compared to the prior year.
Shipment mix changes resulted in a positive impact on gross profit resulting from favorable changes in the mix of
motorcycle families, as well as the mix of models within motorcycle families.
Raw material prices were higher primarily due to increased steel and aluminum costs which includes the impacts of U.S. tariffs on steel and aluminum imports.
Manufacturing and other costs were negatively impacted by lower fixed cost absorption due to lower production, higher depreciation, the impact of incremental tariffs and temporary inefficiencies associated with the Manufacturing Optimization Plan. In 2018, the impact of incremental tariffs was $23.7 million.
Operating expenses were up compared to 2017 due to higher recall costs and increased spending on growth initiatives, as well as $93.4 million of restructuring expense related primarily to the Manufacturing Optimization Plan.
Financial Services Segment
Segment Results
The following table includes the condensed statements of operations for the Financial Services segment (in thousands):
  2018 2017 
Increase
(Decrease)
 
%
Change
Interest income $645,985
 $633,113
 $12,872
 2.0 %
Other income 101,108
 97,151
 3,957
 4.1
Securitization and servicing income 1,136
 1,933
 (797) (41.2)
Financial Services revenue 748,229
 732,197
 16,032
 2.2
Interest expense 193,187
 180,193
 12,994
 7.2
Provision for credit losses 106,870
 132,444
 (25,574) (19.3)
Operating expenses 157,012
 144,255
 12,757
 8.8
Financial Services expense 457,069
 456,892
 177
 —
Operating income from Financial Services $291,160
 $275,305
 $15,855
 5.8 %
Interest income was favorable in 2018 primarily due to higher average retail receivables.


Interest expense increased due to a higher cost of funds and higher average outstanding debt.
The provision for credit losses decreased $25.6 million compared to 2017. The retail motorcycle provision decreased $27.1 million driven by a decrease in the retail reserve rate, as a result of lower retail credit losses, compared to an increase in the reserve rate during 2017. This favorability was partially offset by a larger increase in retail receivables compared to 2017. The wholesale provision increased $1.9 million as a result of an increase in the wholesale reserve rate.
Annual losses on the Company's retail motorcycle loans were 1.76% during 2018 compared to 1.90% in 2017. The 30-day delinquency rate for retail motorcycle loans at December 31, 2018 decreased to 4.12% from 4.21% at December 31, 2017.
Operating expenses increased $12.8 million compared to 2017 driven primarily by higher shared services and employee-related expenses.
Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
  2018 2017
Balance, beginning of period $192,471
 $173,343
Provision for credit losses 106,870
 132,444
Charge-offs, net of recoveries (109,456) (113,316)
Balance, end of period $189,885
 $192,471
At December 31, 2018, the allowance for credit losses on finance receivables was $182.1 million for retail receivables and $7.8 million for wholesale receivables. At December 31, 2017, the allowance for credit losses on finance receivables was $186.3 million for retail receivables and $6.2 million for wholesale receivables.
The Company's periodic evaluation of the adequacy of the allowance for credit losses on finance receivables is generally based on the Company's past loan loss experience, known and inherent risks in the portfolio, current economic conditions and the estimated value of any underlying collateral. Please refer to Note 7 of the Notes to Consolidated Financial Statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.
Results of Operations 2017 Compared to 2016
Consolidated Results
(in thousands, except earnings per share) 2017 2016 
(Decrease)
Increase
 
%
Change
Operating income from Motorcycles and Related Products $606,776
 $770,764
 $(163,988) (21.3)%
Operating income from Financial Services 275,305
 275,530
 (225) (0.1)
Operating income 882,081
 1,046,294
 (164,213) (15.7)
Other income (expense), net 9,182
 2,642
 6,540
 247.5
Investment income 3,580
 4,645
 (1,065) (22.9)
Interest expense 31,004
 29,670
 1,334
 4.5
Income before provision for income taxes 863,839
 1,023,911
 (160,072) (15.6)
Provision for income taxes 342,080
 331,747
 10,333
 3.1
Net income $521,759
 $692,164
 $(170,405) (24.6)%
Diluted earnings per share $3.02
 $3.83
 $(0.81) (21.1)%
Consolidated operating income was down 15.7% in 2017 driven by a decrease in operating income from the Motorcycles segment which decreased by $164.0 million compared to 2016. Operating income for the Financial Services segment in 2017 was slightly lower than the prior year, decreasing $0.2 million as compared to 2016. Please refer to the “Motorcycles and Related Products Segment” and “Financial Services Segment” discussions following for a more detailed discussion of the factors affecting operating income.
The effective income tax rate for 2017 was 39.6% compared to 32.4% for 2016. The higher effective income tax rate was primarily due to the impact of the 2017 Tax Act. The 2017 Tax Act reduced the federal corporate income tax rate beginning in 2018 from 35% to 21% and resulted in a remeasurement of net deferred tax assets in the fourth quarter of 2017. The impact of remeasuring the deferred tax asset balances combined with other adjustments related to the enactment of the 2017 Tax Act resulted in a non-cash income tax charge of $53.1 million in the fourth quarter of 2017.


Diluted earnings per share were $3.02 in 2017, down 21.1% compared to 2016. Diluted earnings per share were adversely impacted by the 24.6% decrease in net income, but benefited from lower diluted weighted average shares outstanding. Diluted weighted average shares outstanding decreased from 180.5 million in 2016 to 172.9 million in 2017 driven by the Company's repurchases of common stock.
Motorcycles Retail Sales and Registration Data
Harley-Davidson Motorcycle Retail Sales(a)
The following table includes retail unit sales of Harley-Davidson motorcycles:
  2017 2016 Decrease 
%
Change
United States 147,972
 161,658
 (13,686) (8.5)%
         
Europe(b)
 39,773
 39,942
 (169) (0.4)
EMEA - Other 5,162
 5,896
 (734) (12.4)
      Total EMEA 44,935
 45,838
 (903) (2.0)
         
Asia Pacific(c)
 21,393
 23,245
 (1,852) (8.0)
Asia Pacific - Other 8,955
 9,644
 (689) (7.1)
Total Asia Pacific 30,348
 32,889
 (2,541) (7.7)
         
Latin America 9,452
 9,701
 (249) (2.6)
Canada 10,081
 10,203
 (122) (1.2)
     Total International Retail Sales 94,816
 98,631
 (3,815) (3.9)
     Total Worldwide Retail Sales 242,788
 260,289
 (17,501) (6.7)%

(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning new retail sales and the Company does not regularly verify the information that its dealers supply. This information is subject to revision.
(b)Includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
(c)Includes Japan, Australia, New Zealand and Korea. Prior period Asia Pacific retail sales have been reclassified to conform to the current year presentation

Retail sales of new Harley-Davidson motorcycles in the U.S. were down 8.5% in 2017, adversely impacted by a weak U.S. industry, which was down 7.3% compared to 2016. The Company's U.S. market share of 601+cc motorcycles for 2017 was 50.7%, down 0.5 percentage points compared to 2016 (Source: Motorcycle Industry Council). 
International retail sales of new Harley-Davidson motorcycles were down 3.9% in 2017. In EMEA, retail sales in Europe were down slightly from 2016 while other EMEA markets decreased 12.4% behind softness in emerging markets including Russia, Middle East and South Africa. In Asia Pacific, retail sales were down compared to 2016 on softness in Japan and Australia and lower retail sales in emerging markets compared to 2016. Retail sales in Latin America during 2017 were down on softness in Mexico partially offset by an increase in Brazil. Canada retail sales were down slightly from the prior year.

Motorcycle Registration Data - 601+cc(a)
The following table includes industry retail motorcycle registration data:
  2017 2016 Decrease 
%
Change
United States(b)
 288,802
 311,710
 (22,908) (7.3)%
Europe(c)
 390,619
 391,936
 (1,317) (0.3)%


(a)
Data includes on-road 601+cc models. On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.
(b)United States industry data is derived from information provided by Motorcycle Industry Council (MIC). This third-party data is subject to revision and update.
(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data includes 601+cc models derived from information provided by Association des Constructeurs Europeens de Motocycles (ACEM), an independent agency. This third-party data is subject to revision and update.


Motorcycles and Related Products Segment
Motorcycle Unit Shipments
The following table includes wholesaleWholesale Harley-Davidson motorcycle unit shipments for the Motorcycles segment:were as follows:
 20202019UnitUnit
UnitsMix %UnitsMix %Decrease% Change
Motorcycle Units:
United States79,731 54.9 %124,326 58.1 %(44,595)(35.9)%
International65,515 45.1 %89,613 41.9 %(24,098)(26.9)
145,246 100.0 %213,939 100.0 %(68,693)(32.1)%
Motorcycle Units:
Touring motorcycle units56,067 38.6 %91,018 42.5 %(34,951)(38.4)%
Cruiser motorcycle units(a)
55,229 38.0 %76,052 35.6 %(20,823)(27.4)
Sportster® / Street motorcycle units33,950 23.4 %46,869 21.9 %(12,919)(27.6)
145,246 100.0 %213,939 100.0 %(68,693)(32.1)%
  2017 2016 Unit Unit
  Units Mix % Units Mix % Decrease %
Change
United States 144,893
 60.0% 161,839
 61.7% (16,946) (10.5)%
International 96,605
 40.0% 100,382
 38.3% (3,777) (3.8)
Harley-Davidson motorcycle units 241,498
 100.0% 262,221
 100.0% (20,723) (7.9)%
Touring motorcycle units 99,745
 41.3% 107,410
 41.0% (7,665) (7.1)%
Cruiser motorcycle units 87,344
 36.2% 93,422
 35.6% (6,078) (6.5)
Sportster® / Street motorcycle units
 54,409
 22.5% 61,389
 23.4% (6,980) (11.4)
Harley-Davidson motorcycle units 241,498
 100.0% 262,221
 100.0% (20,723) (7.9)%
(a)Includes Softail®, CVOTM,and LiveWireTM
During 2017,2020, Harley-Davidson motorcycle shipments were down 32.1% from 2019 reflecting the impact of the temporary suspension of the Company's global manufacturing operations and the temporary closure of independent dealers in the first half of 2020 resulting from the COVID-19 pandemic. In addition, the Company's new approach to supply and inventory management and the change in new model year launch timing adversely impacted wholesale shipments of Harley-Davidson motorcycles were down 7.9% compared to the prior year, slightly more than the 6.7% decrease in dealer retail sales2019. The mix of new Harley-Davidson motorcycles. International shipmentsTouring motorcycles shipped during 2020 decreased as a percentage of the total were up slightly in 2017 as compared to 2016. Shipments of Cruiser motorcycles increased as a percentagepercent of total shipments in 2017 behindwhile the launchmix of the new model-year 2018 Softail motorcycles. The Softail motorcycle platform was completely redesigned for model-year 2018Cruiser and merged the former Softail and Dyna platforms. Dealer inventory of new Harley-DavidsonSportster/Street motorcycles in the U.S. at the end of 2017 was down approximately 3,000 motorcyclesincreased compared to the end of 2016.2019.



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Segment Results
The following table includes the condensedCondensed statements of operations for the Motorcycles segment were as follows (in thousands):
20202019(Decrease)
Increase		%
Change
Revenue:
Motorcycles$2,350,407 $3,538,269 $(1,187,862)(33.6)%
Parts & Accessories659,634 713,400 (53,766)(7.5)
General Merchandise186,068 237,566 (51,498)(21.7)
Licensing29,750 35,917 (6,167)(17.2)
Other38,195 47,526 (9,331)(19.6)
3,264,054 4,572,678 (1,308,624)(28.6)
Cost of goods sold2,435,745 3,229,798 (794,053)(24.6)
Gross profit828,309 1,342,880 (514,571)(38.3)
Operating expenses:
Selling & administrative expense697,483 808,415 (110,932)(13.7)
Engineering expense197,838 212,492 (14,654)(6.9)
Restructuring expense119,110 32,353 86,757 268.2 
1,014,431 1,053,260 (38,829)(3.7)
Operating (loss) income$(186,122)$289,620 $(475,742)NM
Operating margin(5.7)%6.3 %(12.0)pts.
  2017 2016 
(Decrease)
Increase
 
%
Change
Revenue(a):
        
Motorcycles $3,765,620
 $4,052,999
 $(287,379) (7.1)%
Parts & Accessories 800,702
 839,097
 (38,395) (4.6)
General Merchandise 262,776
 284,583
 (21,807) (7.7)
Licensing 39,186
 41,590
 (2,404) (5.8)
Other 46,743
 53,107
 (6,364) (12.0)
Total revenue 4,915,027
 5,271,376
 (356,349) (6.8)
Cost of goods sold 3,272,330
 3,425,997
 (153,667) (4.5)
Gross profit 1,642,697
 1,845,379
 (202,682) (11.0)
Selling & administrative expense 864,618
 903,414
 (38,796) (4.3)
Engineering expense 171,303
 171,201
 102
 0.1
Operating expense 1,035,921
 1,074,615
 (38,694) (3.6)
Operating income from Motorcycles $606,776
 $770,764
 $(163,988) (21.3)%
(a)In connection with the adoption of ASU 2014-09, the Company has changed its presentation of disaggregated Motorcycles segment revenue and the prior period has been recast to reflect the new presentation.
The following table includes the estimated impactimpacts of the significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from 20162019 to 20172020 were as follows (in millions):
RevenueCost of Goods SoldGross Profit
 
Net
Revenue
 
Cost of
Goods
Sold
 
Gross
Profit
2016 $5,272
 $3,426
 $1,846
20192019$4,573 $3,230 $1,343 
Volume (435) (264) (171)Volume(1,282)(832)(450)
Price, net of related costs 120
 59
 61
Price, net of related costs55 7 48 
Foreign currency exchange rates and hedging 13
 (3) 16
Foreign currency exchange rates and hedging(11)23 (34)
Shipment mix (55) (18) (37)Shipment mix(71)(7)(64)
Raw material prices —
 17
 (17)Raw material prices— (10)10 
Manufacturing and other costs —
 55
 (55)Manufacturing and other costs— 25 (25)
Total (357) (154) (203)
2017 $4,915
 $3,272
 $1,643
(1,309)(794)(515)
20202020$3,264 $2,436 $828 
The following factors affected the comparability of net revenue, cost of goods sold and gross profit from 20162019 to 2017:2020:
•The decrease in volume was due to lower wholesale motorcycle shipments as well asand lower P&A and general merchandiseGeneral Merchandise sales. P&A and general merchandise sales were down due in large part to lower motorcycle shipments and lower retail motorcycle sales.
On average,•During 2020, revenue benefited from higher wholesale prices for motorcycles shipped in 2017 were higher than in the prior year resulting in a favorable impact on revenue.and lower sales incentives. The positive impact on revenue was partially offset by increased costs related to the additional content added to motorcycles shipped in 20172020 as compared to lastthe prior year.
•Revenue was positivelyadversely impacted by slightly stronger weighted-averageweaker foreign currency exchange rates relative to the U.S. dollar,dollar. In addition, unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements also reduced gross profit in 2020 as compared to lastthe prior year. In addition, cost was favorably
•Changes in the shipment mix between motorcycle families had an adverse impact on gross profit during 2020 as compared to 2019. Additionally, unfavorable mix within P&A contributed to the impact.
•Manufacturing and other costs were adversely impacted by a higher net gain resultingfixed cost per unit on lower production volumes. This unfavorable impact was partially offset by lower incremental tariff costs and the absence of temporary inefficiencies related to the manufacturing restructuring activities in 2019. Incremental tariff costs (incremental European Union (EU) and China tariffs imposed beginning in 2018 on the Company's products shipped from the remeasurement of foreign-denominated balance sheet accounts net of losses incurredU.S. and incremental U.S. tariffs imposed beginning in 2018 on hedging activities, ascertain items imported from China) were $24.5 million in 2020 compared to last year.
Shipment mix changes resulted$97.9 million in a negative impact on gross profit resulting2019. The Company began to wholesale motorcycles sourced from unfavorable changesits Thailand facility in the mixEU during the second quarter of models within motorcycle families as well as changes2020 which reduced the cost of tariffs incurred through the majority of 2020.
26

Operating expenses were lower in P&A product mix.
Raw material prices were higher2020 compared to 2019 due primarily to increased steel and aluminum costs.
Manufacturing costs were negatively impacted by lower fixedemployee related cost absorption due to lower production volumes, higher model-year startup costs and higher depreciation.


Operating expense which consists of selling, administrative and engineering expenses, was down compared to 2016 due primarily to aggressiveon reduced headcount, reduced incentive-based compensation cost management and lower employee costs.discretionary spending as the Company aggressively managed costs, including its efforts to reduce planned non-capital spending as part of its COVID-19 pandemic response and recovery actions. The decrease was partially offset by an increase in restructuring expense. Refer to Note 3 of the Notes to Consolidated financial statements for additional information regarding the Company's restructuring expenses.
Financial Services Segment
Segment Results
The following table includes the condensedCondensed statements of operations for the Financial Services segment were as follows (in thousands):
 2017 2016 
Increase
(Decrease)
 
%
Change
20202019Increase
(Decrease)		% Change
Interest income $633,113
 $628,432
 $4,681
 0.7 %Interest income$682,517 $678,205 $4,312 0.6 %
Other income 97,151
 85,788
 11,363
 13.2
Other income107,806 110,906 (3,100)(2.8)
Securitization and servicing income 1,933
 10,862
 (8,929) (82.2)
Financial Services revenue 732,197
 725,082
 7,115
 1.0
Financial Services revenue790,323 789,111 1,212 0.2 
Financial Services expenses:Financial Services expenses:
Interest expense 180,193
 173,756
 6,437
 3.7
Interest expense246,447 210,438 36,009 17.1 
Provision for credit losses 132,444
 136,617
 (4,173) (3.1)Provision for credit losses181,870 134,536 47,334 35.2 
Operating expense 144,255
 139,179
 5,076
 3.6
Financial Services expense 456,892
 449,552
 7,340
 1.6
Operating income from Financial Services $275,305
 $275,530
 $(225) (0.1)%
Operating expensesOperating expenses155,306 178,149 (22,843)(12.8)
Restructuring expenseRestructuring expense10,899 — 10,899 100.0 
594,522 523,123 71,399 13.6 
Operating incomeOperating income$195,801 $265,988 $(70,187)(26.4)%
Interest income was favorable in 2017 due2020 compared to higher average retail receivables partially offset by lower average wholesale receivables and lower average yields across the portfolios. Other income was favorable due to increased licensing revenue and investment income. Securitization and servicing income was lower primarily due to a $9.3 million gain on the sale of finance receivables recognized as a result of a 2016 off-balance sheet asset-backed securitization. There was no comparable transaction in 2017.
Interest expense increased2019 due to a higher cost of funds,average retail yield, partially offset by lower average outstanding debt.finance receivables. Other income decreased in 2020 compared to 2019 due in part to lower investment income. Interest expense increased due to higher average outstanding debt, partially offset by a lower cost of funds.
The provision for credit losses decreased $4.2increased $47.3 million compared to 2016. The retail motorcycle provision decreased $6.5 million2019 primarily due to unfavorable economic conditions during 2017 as a result of a smaller increase in the retail reserve rate and lower receivables2020, partially offset by higherfavorable 2020 retail credit losses. Creditloss performance. The provision for credit losses were higherwas up significantly as a result of unfavorable performance across the retail motorcycle portfolio. The wholesale provision increased $1.0 million due to a smaller decrease in the wholesale reserve rate compared to 2016.
Annual losses2019 driven by the impact of the COVID-19 pandemic on the U.S. economy and the Company’s outlook on future economic conditions. The Company believes that there is significant uncertainty surrounding future economic outcomes. As such, the Company considered various third-party economic forecast scenarios and applied a probability-weighting to those economic forecast scenarios. At the end of 2020, the Company's retail motorcycle loans were 1.90% during 2017 comparedoutlook on economic conditions included a heavy emphasis on pessimistic economic trend assumptions as the COVID-19 pandemic continued to 1.83%restrain the U.S. economy. The Company will continue to monitor economic trends and conditions. The Company's expectations surrounding its economic forecasts may change in 2016. future periods as additional information becomes available.
The 30-day delinquency rate for retail motorcycle loans at December 31, 20172020 decreased to 4.21%3.18% from 4.25%4.39% at December 31, 2016.2019. The improved delinquency rate was primarily driven by a high volume of short-term COVID-19 pandemic related extensions during the second quarter of 2020 and into the first part of the third quarter of 2020 on eligible retail loans to help customers get through financial difficulties associated with the pandemic. Through the remainder of 2020, the volume of payment extensions on eligible retail loans declined but has not yet returned to pre-COVID-19 pandemic levels. The Company continues to grant payment extensions to customers in accordance with its policies. Annual losses on the Company's retail motorcycle loans were 1.38% during 2020 compared to 2.00% in 2019. The favorable retail credit loss performance was due to lower delinquencies driven by the COVID-19 pandemic related loan payment extensions earlier in the year as well as improved used motorcycle values at auction due to a limited supply of new and used motorcycles.
The allowance for credit losses at December 31, 2020 was determined in accordance with Accounting Standards Update (ASU) No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), a new accounting standard the Company adopted on January 1, 2020 that requires recognition of full lifetime expected credit losses upon initial recognition of a financial instrument, replacing the prior, incurred loss methodology. The Company adopted the new accounting standard using a modified retrospective approach. As a result, prior period results were not restated.
Operating expenses decreased $22.8 million compared to 2019 as the Company aggressively managed costs, including its efforts to reduce planned non-capital spending as part of its COVID-19 pandemic response and recovery actions.
27

Additionally, the Financial Services segment incurred restructuring expense of $10.9 million in 2020. Refer to Note 3 of the Notes to Consolidated financial statements for additional information regarding the Company's restructuring expenses.
Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
20202019
Balance, beginning of period$198,581 $189,885 
Cumulative effect of change in accounting(a)
100,604 — 
Provision for credit losses181,870 134,536 
Charge-offs, net of recoveries(90,119)(125,840)
Balance, end of period$390,936 $198,581 
  2017 2016
Balance, beginning of period $173,343
 $147,178
Provision for credit losses 132,444
 136,617
Charge-offs, net of recoveries (113,316) (107,161)
Other (a)
 —
 (3,291)
Balance, end of period $192,471
 $173,343

(a)Related to the sale of finance receivables during 2016 with a principal balance of $301.8 million through an off-balance sheet asset-backed securitization transaction (see Note 12 of the Notes to Consolidated Financial Statements for additional information).

(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the allowance for loan loss through retained earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolios at date of adoption.
At December 31, 2017,2020, the allowance for credit losses on finance receivables was $186.3$371.7 million for retail receivables and $6.2$19.2 million for wholesale receivables. At December 31, 2016,2019, the allowance for credit losses on finance receivables was $166.8$188.5 million for retail receivables and $6.5$10.1 million for wholesale receivables.
The Company's periodic evaluationRefer to Note 7 of the adequacy ofNotes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables is generally based onreceivables.
Results of Operations 2019 Compared to 2018
Refer to Item 7. Management's Discussion and Analysisof Financial Condition and Results of Operations of the Company's past loan loss experience, knownAnnual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 19, 2020 for a detailed discussion of the results of operations for 2019 compared to 2018 and inherent risks in the portfolio, current economic conditionsliquidity and the estimated value of any underlying collateral.

capital resources for 2019 compared to 2018.


Other Matters
New Accounting Standards Not Yet Adopted
Refer to Note 1 Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statementsfinancial statements for a discussion of new accounting standards that will become effective for the Company in 20192021 and 2020.2022.
Critical Accounting Estimates
The Company’s financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Management believes that the following are some of the more critical judgment areas in the application of accounting policies that currently affect the Company’s financial condition and results of operations. Management has discussed the development and selection of these critical accounting estimates with the Audit and Finance Committee of the Company's Board of Directors.
Allowance for Credit Losses on Retail Finance Receivables – On January 1, 2020, the Company adopted ASU 2016-13, which requires an entity to recognize expected lifetime losses on finance receivables upon origination. The allowance for uncollectible accounts is maintained at a level management believes is adequate to cover thecredit losses of principal in the existingon retail finance receivables portfolio.as of December 31, 2020 represents the Company’s estimate of lifetime losses for its retail finance receivables. Prior to the adoption of ASU 2016-13, the Company maintained an allowance for credit losses on retail finance receivables based on the Company’s estimate of probable losses inherent in the retail finance receivable portfolio as of the balance sheet date.
The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. For periods after January 1, 2020, the Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the expected life of the retail portfolio. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience for a three-year period using a mean-reversion process. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors. For periods prior to January 1, 2020, the Company performed a periodic and
28

systematic collective evaluation of the adequacy of the retail allowance.allowance for credit losses. The Company utilizesutilized loss forecast models which considerconsidered a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates and current economic conditions including items such as unemployment rates.conditions.
Refer to Note 7 of the Notes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.
Product Warranty and Recalls – Estimated warranty costs are accruedrecorded at the time of sale and are based on a combination of historical claim cost data and other known factors that may affect future warranty claims. The estimated costs associated with voluntary recalls are accrued inrecorded when the period that management approvesliability is both probable and commits to the recall.estimable. The accrued cost of a recall is based on an estimate of the cost to repair each affected motorcycle and the number of motorcycles expected to be repaired based on historical data concerning the percentage of affected customers that take advantage of recall offers. In the case of both warranty and recall costs, as actual experience becomes available it is used to update the accruals.
The factors affecting actual warranty and recall costs can be volatile. As a result, actual warranty claims experience and recall costs may differ from estimates, which could lead to material changes in the Company’s accrued warranty and recall costs. The Company’s warranty and recall liabilities are discussed further in Note 114 of the Notes to Consolidated Financial Statements.financial statements.
Pensions and Other Postretirement Healthcare Benefits – The Company has a defined benefit pension plan and postretirement healthcare benefit plans, which cover certain eligible employees and retirees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees, which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993.employees.
U.S. GAAPGenerally Accepted Accounting Principles (GAAP) requires that companies recognize in their statement of financial positionconsolidated balance sheets a liability for defined benefit pension and postretirement plans that are underfunded or an asset for defined benefit pension and postretirement benefit plans that are overfunded.
Pension, SERPA and postretirement healthcare obligations and costs are calculated through actuarial valuations. The valuation of benefit obligations and net periodic benefit costs relies on key assumptions including discount rates, mortality, long-term expected return on plan assets, future compensation and healthcare cost trend rates.
The Company determines its discount rate assumptions by referencing high-quality long-term bond rates that are matched to the duration of its own benefit obligations. Based on this analysis, the Company increaseddecreased the weighted-average discount rate for pension and SERPA obligations from 3.71%3.49% as of December 31, 20172019 to 4.38%2.62% as of December 31, 2018.2020. The Company increaseddecreased the weighted-average discount rate for postretirement healthcare obligations from 3.52%3.26% as of December 31, 2019 to 4.23%.2.11% as of December 31, 2020. The Company determines its healthcare trend assumption for the postretirement healthcare obligation by considering factors such as estimated healthcare inflation, the utilization of healthcare benefits and changes in the health of plan participants. Based on the Company’s assessment of this data as of December 31, 2018,2020, the Company set its healthcare cost trend rate at 6.75%7.00% as of December 31, 2018.2020. The Company expects the healthcare cost trend rate to reach its ultimate rate of 5.00% by 2026.2029.(1) These assumption changes were reflected immediately in the benefit obligation and will be amortized into net periodic benefit costs over future periods.


Plan assets are measured at fair value and are subject to market volatility. In estimating the expected return on plan assets, the Company considers the historical returns on plan assets, adjusted to reflect the current view of the long-term investment market.
29

Changes in the funded status of defined benefit pension and postretirement benefit plans resulting from the difference between assumptions and actual results are initially recognized in other comprehensive income (loss) and amortized to expense over future periods. The following information is providedSensitivity to illustratechanges in major assumptions used in the sensitivity of pension and postretirement healthcare obligations and costs to changes in these major assumptionswas as follows (in thousands):
Amounts based
on current
assumptions		Impact of a 1%
decrease in the
discount rate		Impact of a 1%
increase in the
healthcare
cost trend rate		Impact of a 1%
decrease in the
expected return on assets
2020 Net periodic benefit cost:
Pension and SERPA$33,016 $31,108 n/a$20,164 
Postretirement healthcare$5,393 $(843)$435 $1,985 
2020 Benefit obligations:
Pension and SERPA$2,390,435 $393,880 n/an/a
Postretirement healthcare$315,245 $28,651 $8,295 n/a
  
Amounts based
on current
assumptions
 
Impact of a 1%
decrease in the
discount rate
 
Impact of a 1%
decrease in the
expected
return on assets
 
Impact of a 1%
increase in the
healthcare
cost trend rate
2018 Net periodic benefit cost        
Pension and SERPA $32,817
 $28,330
 $20,322
 n/a
Postretirement healthcare $3,664
 $1,196
 $1,955
 $1,556
2018 Benefit obligations        
Pension and SERPA $1,984,708
 $319,213
 n/a
 n/a
Postretirement healthcare $286,574
 $23,298
 n/a
 $8,613
The amounts based on current assumptions above exclude the impact of settlements, curtailments and special early retirement benefits. This information should not be viewed as predictive of future amounts. The analysis of the impact of a 1% change in the table above does not take into account the cost related to special termination benefits. The calculationcalculations of pension, SERPA and postretirement healthcare obligations and costs isare based on many factors in addition to those discussed here. This information should be considered in combination with the information provided in Note 1415 of the Notes to Consolidated Financial Statements.financial statements.
Income Taxes – The Company accounts for income taxes in accordance with ASCAccounting Standards Codification Topic 740, Income Taxes (Topic 740). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reviews its deferred income tax asset valuation allowances on a quarterly basis or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred income tax asset is considered, along with any positive or negative evidence including tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.
The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. These tax laws and regulations are complex and significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related deferred tax assets and liabilities.
In the ordinary course of the Company’s business, there are transactions and calculations where the ultimate tax determination is uncertain. Accruals for unrecognized tax benefits are provided for in accordance with the requirements of Topic 740. An unrecognized tax benefit represents the difference between the recognition of benefits related to items for income tax reporting purposes and financial reporting purposes. The unrecognized tax benefit is included within otherOther long-term liabilities in on the consolidatedConsolidated balance sheets.sheets. The Company has a liability for interest and penalties on exposure items, if applicable, which is recorded as a component of the overall income tax provision. The Company is regularly audited by tax authorities as a normal course of business. Although the outcome of tax audits is always uncertain, the Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments.assessments(1). Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.
Contractual Obligations
A summary of the Company’s expected payments for significant contractual obligations as of December 31, 2018 is as follows (in thousands):
  2019 2020-2021 2022-2023 Thereafter Total
Principal payments on debt $2,717,597
 $3,133,704
 $1,018,393
 $750,000
 $7,619,694
Interest payments on debt 182,532
 226,407
 109,026
 336,750
 854,715
Operating lease payments 20,416
 29,897
 15,675
 7,988
 73,976
  $2,920,545
 $3,390,008
 $1,143,094
 $1,094,738
 $8,548,385
Interest for floating rate instruments assumes December 31, 2018 rates remain constant.


As of December 31, 2018, the Company generally had no significant purchase obligations, other than those created in the ordinary course of business. Purchase orders issued for inventory and supplies used in product manufacturing generally do not become firm commitments until 90 days priorRefer to expected delivery and can be modified to a certain extent until 30 days prior to expected delivery.
The Company has long-term obligations related to its pension, SERPA and postretirement healthcare plans at December 31, 2018. The Company’s retirement plan obligations and expected future contributions and payments related to these plans are provided in Note 14 of the Notes to Consolidated Financial Statements.
As described in Note 4 of the Notes to Consolidated Financial Statements,financial statements for further discussion regarding the Company has unrecognized tax benefits of $61.4 million and accrued interest and penalties of $27.7 million as of December 31, 2018. However, the Company cannot make a reasonably reliable estimate of the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.Company's income taxes.
Commitments and Contingencies
The Company is subject to lawsuits and other claims related to environmental, product and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter.
Environmental Protection Agency Notice:
In December 2009, the Company received formal, written requests for information from the United States Environmental Protection Agency (EPA) regarding: (i) certificates of conformity for motorcycle emissions and related designations and labels, (ii) aftermarket parts, and (iii) warranty claims on emissions related components. The Company promptly submitted written responses Refer to the EPA’s inquiry and has engaged in information exchanges and discussions with the EPA. In August 2016, the Company entered into a consent decree with the EPA regarding these issues, and the consent decree was subsequently revised in July 2017 (the Settlement). In the Settlement, the Company agreed to, among other things, pay a fine, and not sell tuning products unless they are approved by the EPA or California Air Resources Board. In December 2017, the EPA filed the Settlement with the U.S. District Court for the District of Columbia for the purpose of obtaining court approval of the Settlement. Three amicus briefs opposing portions of the Settlement were filed with the court by the deadline of January 31, 2018. On March 1, 2018, the Company and the EPA each filed separate response briefs. The Company is awaiting the court's decision on whether or not to finalize the Settlement. The Company has an accrual associated with this matter which is included in accrued liabilities in the consolidated balance sheets, and as a result, if it is finalized, the Settlement would not have a material adverse effect on the Company's financial condition or results of operations. The Settlement is not final until it is approved by the court, and if it is not approved by the court, the Company cannot reasonably estimate the impact of any remedies the EPA might seek beyond the Company's current reserve for this matter.
York Environmental Matters:
The Company is involved with government agencies and groups of potentially responsible parties related to a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. The Company has been working with the Pennsylvania Department of Environmental Protection (PADEP) since 1986 and with the U.S. Environmental Protection Agency (EPA) in undertaking environmental investigation and remediation activities, including a site-wide remedial investigation/feasibility study (RI/FS).
In January 1995, the Company entered into a settlement agreement (the Agreement) with the Navy, and the parties amended the Agreement in 2013 to address ordnance and explosive waste. The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of costs associated with environmental investigation and remediation activities at the York facility (Response Costs). The trust administers the payment of the Response Costs incurred at the York facility as covered by the Agreement.
The Company has an accrual for its estimate of its share of the future Response Costs at the York facility which is included in other long-term liabilities in the consolidated balance sheets. While the work on the RI/FS is now complete and the final remedy was proposed in late 2018, it has not yet been approved, and given the uncertainty that exists concerning the nature and scope of additional environmental remediation that may ultimately be required under the approved final remedy, the Company is unable to make a reasonable estimate of those additional costs, if any, that may result.


The estimate of the Company's future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date, and the estimated costs to complete the necessary investigation and remediation activities.
Product Liability Matters:
The Company is involved in product liability suits related to the operation of its business. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and that product liability suits will not have a material adverse effect on the Company’s consolidated financial statements.(1)
Off-Balance Sheet Arrangements
The Company participates in asset-backed financing both through asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. In the Company's asset-backed financing programs, the Company transfers retail motorcycle finance receivables to special purpose entities (SPE), which are considered Variable Interest Entities (VIE) under U.S. GAAP. Each SPE then converts those assets into cash, through the issuance of debt. The Company retains servicing rights for all of the retail motorcycle finance receivables transferred to SPEs as part of an asset-backed financing.
The SPEs are separate legal entities that assume the risks and rewards of ownership of the retail motorcycle finance receivables they hold. The assets of the VIEs are not available to pay other obligations or claims of the Company’s creditors. The Company’s economic exposure related to the VIEs is generally limited to restricted cash reserve accounts, retained interests and ordinary representations and warranties and related covenants. The VIEs have a limited life and generally terminate upon final distribution of amounts owed to investors.
The accounting treatment for asset-backed financings depends on the terms of the related transaction and the Company’s continuing involvement with the VIE. Most of the Company’s asset-backed financings do not meet the criteria to be treated as a sale for accounting purposes because, in addition to retaining servicing rights, the Company retains a financial interest in the VIE in the form of a debt security. These transactions are treated as secured borrowings. As secured borrowings, the retail motorcycle finance receivables remain on the balance sheet with a corresponding obligation reflected as debt.
During the second quarter of 2016, the Company sold finance receivables with a principal balance of $301.8 million into a securitization VIE. The transaction met the criteria to be treated as a sale for accounting purposes and resulted in an off-balance sheet arrangement because the Company did not retain any financial interest in the VIE beyond servicing rights and ordinary representations and warranties and related covenants. Upon sale, the retail motorcycle finance receivables were removed from the Company’s balance sheet and a gain of $9.3 million was recognized in Financial Services revenue. For more information, see Note 1216 of the Notes to Consolidated Financial Statements.financial statements for a discussion of the Company's commitments and contingencies.
30

Liquidity and Capital Resources as of December 31, 2018
OverThe Company's response to the long-term,COVID-19 pandemic included actions to preserve cash and secure additional liquidity. During 2020, the Company expects thatdelivered on its business model will continuepreviously disclosed plans to generatereduce planned capital and non-capital spending to preserve approximately $250 million of cash that will allow itin 2020 (excludes the impact of cash restructuring charges). In addition, the Company suspended all discretionary share repurchases and reduced its cash dividend to invest$.02 per share in the business, fund future growth opportunitiessecond, third and return value to shareholders.(1) Thefourth quarters of 2020. Going forward, the Company believes the Motorcycles segment operations will continue to be primarily funded through cash flows generated by operations.(1) The Company’sCompany expects the Financial Services segment operations willto continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and asset-backed securitizations.deposits.(1)


Through The Hardwire, the Company expects its business model to generate cash that will allow it to invest in the business and brand, fund The Hardwire initiatives, and return value to shareholders.(1) The Company's cash allocation priorities are first to fund growth through The Hardwire initiatives, then to reward shareholders through dividends. The Company's Board of Directors approved a 2021 first quarter dividend of $.15 per share. At this time, significant discretionary share repurchases are not planned as the Company prioritizes cash for these top two priorities.(1)
The Company’s strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. The following table summarizes the Company’s cash and cash equivalents and availability under its credit and conduit facilities at December 31, 2020 were as follows (in thousands):
  December 31,
2018
Cash and cash equivalents $1,203,766
Current marketable securities 10,007
Total cash and cash equivalents and marketable securities 1,213,773
   
Credit facilities 434,190
Asset-backed U.S. commercial paper conduit facilities (a)
 600,000
Asset-backed Canadian commercial paper conduit facility (a)
 5,443
Total availability under credit and conduit facilities 1,039,633
Total $2,253,406

Cash and cash equivalents$3,257,203 
(a)
Availability under credit and conduit facilities:
Credit facilities750,726 
Includes facilities expiring in the next twelve months which the Company expects to renew prior to expiration.(1)Asset-backed U.S. commercial paper conduit facility(a)
600,000 
Asset-backed Canadian commercial paper conduit facility(a)
55,980 
$4,663,909 
(a)Includes facilities expiring in the next 12 months which the Company expects to renew prior to expiration.(1)
To access the debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or withdraw the Company’s ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings as of December 31, 2020 were as follows:
Short-TermLong-TermOutlook
Moody’sP3Baa3Stable
Standard & Poor’sA2BBBNegative
FitchF2A-Negative
The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The Financial Services operations could be negatively affected by higher costs of funding and the increased difficulty of raising, or potential inabilityunsuccessful efforts to raise, funding in the short-term and long-term capital markets.(1) These negative consequences could in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital, reduced funds available through its Financial Services operations to provide loans to independent dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.
31

Cash Flow Activity
The following table summarizes the cashCash flow activity of continuing operationsactivities for the years ended December 31, 2018, 2017 and 2016were as follows (in thousands):
20202019
Net cash provided by operating activities$1,177,890 $868,272 
Net cash used by investing activities(66,783)(508,126)
Net cash provided (used) by financing activities1,373,983 (712,223)
Effect of exchange rate changes on cash, cash equivalents and restricted cash18,712 (2,305)
Net increase (decrease) in cash, cash equivalents and restricted cash$2,503,802 $(354,382)
  2018 2017 2016
Net cash provided by operating activities $1,205,921
 $1,005,061
 $1,174,339
Net cash used by investing activities (662,269) (562,468) (392,731)
Net cash used by financing activities (14,763) (550,261) (777,885)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (15,351) 26,747
 (9,443)
Net increase (decrease) in cash, cash equivalents and restricted cash $513,538
 $(80,921) $(5,720)

Operating Activities
The increase in operating cash flow in 20182020 compared to 20172019 was primarily due to favorable changes in working capital, led by a decline in accounts receivable and inventory levels as well as favorable cash flows from decreased wholesale financing activity due to lower cash outflows for retirement plans. There were no voluntary or required qualified pension plan or postretirement healthcare plan contributions in 2018. In 2017, the Company voluntarily contributed $25.0 million to its qualified pension plan and $15.0 million to its postretirement healthcare plans. loan originations.
The Company expectscontinues to expect that no qualified pensionit will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments at December 31, 2020 relate to leases, retirement plan contributions will be requiredobligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in 2019.(1) The Company also expects that 2019 postretirement healthcare plan benefits and benefits due underNote 10 of the SERPA will be paid by the Company or funded with plan assets.(1)Notes to Consolidated financial statements. The Company’s expected future contributions and benefit payments related to theseits defined benefit retirement plans are provideddiscussed further in Note 1415 of the Notes to Consolidated Financial Statements.(1)financial statements. As described in Note 4 of the Notes to Consolidated financial statements, the Company has a liability for unrecognized tax benefits of $50.6 million and related accrued interest and penalties of $25.5 million as of December 31, 2020. The Company cannot reasonably estimate the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.
The decrease in operating cash flow in 2017 compared to 2016 was due primarily to lower net income, unfavorable changes in working capital and higher retirement plan contributions. These negative impacts were partially offset by lower net cash outflows for wholesale lending.
Investing Activities


The Company’s most significant investing activities consist primarily of capital expenditures net changes inand retail finance receivablesreceivable originations and short-term investment activity.collections. Capital expenditures were $213.5$131.1 million, $206.3 and $181.4 million during 2020 and $256.32019, respectively. The Company's 2021 plan includes estimated capital expenditures between $190 to $220 million, during 2018, 2017 and 2016, respectively. all of which the Company expects to fund with net cash flow generated by operations.(1)
Net cash outflows for finance receivables in 2018,2020, which consisted primarily of retail finance receivables, were $63.5 million higher than 2017 primarily as a result of an increase in retail motorcycle loan originations during 2018. Conversely, 2017 net cash outflows for finance receivables were $125.8$390.4 million lower than 2016in 2019 primarily due to lower retail motorcycle loan originations during 2017.
Cash (outflow) / inflow from purchases and maturities of marketable securities were $(10.0) million, $6.9 million and $40.0 million in 2018, 2017 and 2016, respectively.
During 2016, the2020. The Company completed a sale offunds its finance receivables net lending activity through an off-balance sheet asset-backed securitization. The proceeds from the saleissuance of finance receivables, which positively impacted cash flow, were $312.6 million. There were no comparable transactionsdebt, discussed in 2018 or 2017."Financing Activities" below.
Financing Activities
The Company’s financing activities consist primarily of dividend payments, share repurchases and debt activity.activities.
The Company paid dividends of $1.48$0.44 per share totaling $245.8$68.1 million during 2018, $1.462020 and $1.50 per share totaling $251.9$237.2 million during 2017 and $1.40 per share totaling $252.3 million during 2016.2019.
Cash outflows fromfor share repurchases were $390.6 million, $465.3$8.0 million and $465.3$296.5 million for 2018, 20172020 and 2016,2019, respectively. Share repurchases during 2018, 2017 and 2016 included 9.4 million, 8.8 million and 9.9 million sharesIn the first quarter of common stock, respectively, related to2020, the Company suspended discretionary share repurchases; as a result, there were no discretionary share repurchases and sharesin 2020. Discretionary share repurchases during the year ended December 31, 2019 were $286.7 million or 8.2 million shares. Share repurchases of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock awards.units were $8.0 million or 0.3 million shares and $9.8 million or 0.3 million shares during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2018,2020, there were 16.418.2 million shares remaining on a board-approved share repurchase authorizations.authorization.
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Financing cash flows related to debt activityand deposit activities resulted in net cash inflows / inflows/(outflows) of $618.1 million, $155.5 million$1.45 billion and $(78.3)$(182.1) million for 2018, 20172020 and 2016,2019, respectively. The Company’s total outstanding debt and deposits consisted of the following as of December 31, 2018, 2017 and 2016 (in thousands):
20202019
Outstanding debt:
Unsecured commercial paper$1,014,274 $571,995 
Asset-backed Canadian commercial paper conduit facility116,678 114,693 
Asset-backed U.S. commercial paper conduit facilities402,205 490,427 
Asset-backed securitization debt, net1,791,956 764,392 
Medium-term notes, net4,917,714 4,760,127 
Senior notes, net743,977 743,296 
$8,986,804 $7,444,930 
Deposits$79,965 $— 
  2018 2017 2016
Unsecured commercial paper $1,135,810
 $1,273,482
 $1,055,708
Asset-backed Canadian commercial paper conduit facility 155,951
 174,779
 149,338
Asset-backed U.S. commercial paper conduit facilities 582,717
 279,457
 —
Medium-term notes, net 4,887,007
 4,165,706
 4,064,940
Senior unsecured notes, net 742,624
 741,961
 741,306
Asset-backed securitization debt, net 95,167
 352,624
 796,275
Total debt $7,599,276
 $6,988,009
 $6,807,567
Refer to Note 11 of the Notes to Consolidated financial statements for a summary of future principal payments on debt obligations.
To access the debt capital markets,Deposits –During 2020, HDFS began offering brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. At December 31, 2020, the Company relies on credit rating agencies to assignhad $80.0 million, net of fees, of short-term interest-bearing brokered certificates of deposit outstanding. Each separate brokered certificate of deposit is issued under a master certificate and, long-term credit ratings. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or withdrawas such, all outstanding brokered certificates of deposit are considered below the Company’s ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings as of December 31, 2018 were as follows:Federal Deposit Insurance Corporation (FDIC) insurance coverage limits.
Short-TermLong-TermOutlook
Moody’sP2A3Stable
Standard & Poor’sA2BBB+Negative
FitchF1AStable
Credit Facilities – In April 2018,2020, the Company entered into a $780.0$707.5 million five-year credit facility to replace the $675.0$765.0 million five-year credit facility that was due to mature in April 2019 and also terminated the $100.0 million 364-day credit facility that would have matured at the end of April 2018.2021. The new five-year credit facility matures in April 2025. The Company also amended its $780.0 million five-year credit facility to $707.5 million with no change to the maturity date of April 2023. The Company also hashad a $765.0$195.0 million five-year364-day credit facility which matureswas due to mature in May 2020. In April 2021.2020, the Company extended the maturity date of this credit facility to August 2020; however, this facility was terminated on May 18, 2020. At the time of termination, there were no outstanding borrowings under this 364-day credit facility. On June 1, 2020, the Company entered into a new $350.0 million 364-day credit facility, and on June 4, 2020, the Company borrowed $150.0 million under this facility. On December 9, 2020, the Company amended this facility to allow for the early repayment of the $150.0 million borrowing, which was repaid in full on this date, along with the related interest. The two five-year credit facilities (together, the Global Credit Facilities), as well as the $350.0 million 364-day credit facility, bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities and the $350.0 million 364-day credit facility also require the Company to pay a fee based on the average


daily unused portion of the aggregate commitments under the Global Credit Facilities.commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program. In May 2018, the Company renewed its $25.0 million 364-day credit facility that was due to mature that month. The $25.0 million credit facility bears interest at variable interest rates, and the Company pays a fee based on the unused portion of the $25.0 million commitment. This credit facility matures in May 2019.
Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.55$1.42 billion as of December 31, 20182020 supported by the Global Credit Facilities, as discussed above.Facilities. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured commercial paper or through other means, such as borrowing under the Global Credit Facilities or the $350.0 million 364-day credit facility, borrowing under its asset-backed U.S. commercial paper conduit facilities or through the use of operating cash flow and cash on hand.(1)
33

Medium-Term Notes – The Company has the following unsecured medium-term notes (collectively, the Notes) issued and outstanding at December 31, 20182020 (in thousands):
Principal AmountRateIssue DateMaturity Date
$600,0002.85%January 2016January 2021
$450,000LIBOR + 0.94%November 2018March 2021
$350,0003.55%May 2018May 2021
$550,0004.05%February 2019February 2022
$400,0002.55%June 2017June 2022
$350,0003.35%February 2018February 2023
   $797,206(a)
4.94%May 2020May 2023
   $735,882(b)
3.14%November 2019November 2024
$700,0003.35%June 2020June 2025
Principal Amount Rate Issue Date Maturity Date
$600,000 2.25% January 2016 January 2019
$150,000 
Floating-rate(a)
 March 2017 March 2019
$600,000 2.40% September 2014 September 2019
$600,000 2.15% February 2015 February 2020
$450,000 
Floating-rate(b)
 May 2018 May 2020
$350,000 2.40% March 2017 June 2020
$600,000 2.85% January 2016 January 2021
$450,000 
Floating-rate(c)
 November 2018 March 2021
$350,000 3.55% May 2018 May 2021
$400,000 2.55% June 2017 June 2022
$350,000 3.35% February 2018 February 2023
(a)Euro denominated €650.0 million par value remeasured to U.S. dollar at December 31, 2020

(b)Euro denominated €600.0 million par value remeasured to U.S. dollar at December 31, 2020
(a)Floating interest rate based on LIBOR plus 35 bps.
(b)Floating interest rate based on LIBOR plus 50 bps. The Company utilized an interest rate swap designated as a cash flow hedge to convert this from a floating rate basis to a fixed rate basis. Refer to Note 10 of the Notes to the Consolidated Financial Statements for further details.
(c)Floating interest rate based on LIBOR plus 94 bps. The Company utilized an interest rate swap designated as a cash flow hedge to convert this from a floating rate basis to a fixed rate basis. Refer to Note 10 of the Notes to the Consolidated Financial Statements for further details.
The fixed-rate NotesU.S. dollar-denominated medium-term notes provide for semi-annual interest payments, the fixed-rate foreign currency-denominated medium-term notes provide for annual interest payments, and the floating-rate Notesmedium-term notes provide for quarterly interest payments. Principal on the Notesmedium-term notes is due at maturity. Unamortized discountdiscounts and debt issuance costs on the Notesmedium-term notes reduced the outstanding balance by $13.0$15.4 million and $11.8$12.8 million at December 31, 20182020 and 2017,2019, respectively.
Senior Unsecured Notes – In July 2015, the Company issued $750.0 million of unsecured senior unsecured notes in an underwritten offering. The senior unsecured notes provide for semi-annual interest payments and principal due at maturity. $450.0 million of the senior unsecured notes mature in July 2025 and have an interest rate of 3.50%, and $300.0 million of the senior unsecured notes mature in July 2045 and have an interest rate of 4.625%. The Company used the proceeds from the debt to repurchase shares of its common stock in 2015.
On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – The Company has a revolving facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase from the Company eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this facility provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$220.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 54 years. Unless earlier terminated


or extended by mutual agreement between the Company and the lenders, as of December 31, 2018,2020, the Canadian Conduit has an expiration date of June 28, 2019.25, 2021.
The following table includes quarterly transfersIn 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit andfor proceeds of $61.6 million. In 2019, the respectiveCompany transferred $28.2 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds (in thousands):of $23.4 million.
 2018 2017
 Transfers Proceeds Transfers Proceeds
First quarter$7,600
 $6,200
 $6,300
 $5,500
Second quarter38,900
 32,200
 14,200
 12,400
Third quarter—
 —
 —
 —
Fourth quarter39,000
 32,200
 84,900
 69,100
 $85,500
 $70,600
 $105,400
 $87,000
On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – TheUntil November 25, 2020, the Company hashad two separate agreements with third-party bank-sponsored asset-backed U.S. commercial paper conduits, under which ita $300.0 million revolving facility agreement and a $600.0 million revolving facility agreement (together, the Former U.S. Conduit Facilities). On November 25, 2020, the Company amended each revolving facility agreement by consolidating the two agreements into one $900.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits.Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party bank-sponsored asset-backed U.S. commercial paper conduits. On November 30, 2018,In addition to the Company renewed its existing $600.0$900.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits. Also on that date, the Company amended its existing $300.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits, increasing the aggregate commitment, to $600.0 million. The aggregate commitment under thisthe agreement will be reduced monthly as collections onallows for additional borrowings, at the related finance receivables are appliedlender’s discretion, of up to the outstanding principal until the outstanding principal balance is less than or equal to $300.0 million, at which point the aggregate commitment will equal $300.0 million. Availability under the $900.0 million revolving facilities (together, thefacility (the U.S. Conduit Facilities)Facility) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the relevant SPE as collateral.
The following table includes quarterly transfers
34

In 2020, the Company transferred $195.3 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $163.6 million of debt under the Former U.S. Conduit andFacilities. In 2019, the respective proceeds (in thousands):
 2018 2017
 Transfers Proceeds Transfers Proceeds
First quarter$32,900
 $29,300
 $333,400
 $300,000
Second quarter59,100
 53,300
 28,200
 24,000
Third quarter—
 —
 34,100
 29,600
Fourth quarter400,200
 356,800
 34,000
 29,700
 $492,200
 $439,400
 $429,700
 $383,300
Company transferred $174.4 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $154.6 million of debt under the Former U.S. Conduit Facilities.
The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates or LIBOR toif funded by a conduit lender through the extent the advance isissuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, plus, inthe terms of the interest are based on LIBOR. In each case,of these cases, a program fee is assessed based on the outstanding principal. The U.S. Conduit FacilitiesFacility also provideprovides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt will beis reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facilities,Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 54 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of December 31, 2020, the U.S. Conduit Facilities haveFacility has an expiration date of November 29, 2019.19, 2021.
Asset-Backed Securitization VIEs – For all of its asset-backed securitization transactions, the Company transfers U.S. retail motorcycle finance receivables to separate VIEs, which in turn issue secured notes with various maturities and interest rates to investors. All of the notes held by the VIEs are secured by future collections of the purchased U.S. retail motorcycle finance receivables. The U.S. retail motorcycle finance receivables included in the asset-backed securitization transactions are not available to pay other obligations or claims of the Company's creditors until the associated debt and other obligations are satisfied. Restricted cash balances held by the VIEs are used only to support the asset-backed securitizations.

The accounting treatment for asset-backed securitizations depends on the terms of the related transaction and the Company’s continuing involvement with the VIE. Most of the Company’sThe Company's current outstanding asset-backed securitizations do not meet the criteria


to be accounted for as a sale because, in addition to retaining servicing rights, the Company retains a financial interest in the VIE in the form of a debt security. These transactions are treated as secured borrowings. As secured borrowings, the retail motorcycle finance receivables remain on the balance sheet with a corresponding obligation reflected as debt. There is no amortization schedule for the secured notes; however, the debt is reduced monthly as available collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes’ contractual livesnotes have various contractual maturities during 2022.ranging from 2022 to 2028.
There were no onIn 2020, the Company transferred $2.42 billion of U.S. retail motorcycle finance receivables to four separate SPEs which, in turn, issued $2.08 billion, or off-balance$2.06 billion net of discounts and issuance costs, of secured notes through four separate on-balance-sheet asset-backed securitization transactions. In 2019, the Company transferred $1.12 billion of U.S. retail motorcycle finance receivables to two separate SPEs which, in turn, issued $1.03 billion, or $1.02 billion net of discount and issuance costs, of secured notes through two separate on-balance sheet asset-backed securitization transactions during 2018 or 2017.transactions.
Support Agreement - – The Company has a support agreement with HDFS whereby, if required, the Company agrees to provide HDFS with financial support to maintain HDFS’ fixed-charge coverage at 1.25 and minimum net worth of $40.0 million. Support may be provided at the Company’s option as capital contributions or loans. Accordingly, certain debt covenants may restrict the Company’s ability to withdraw funds from HDFS outside the normal course of business. No amount has ever been provided to HDFS under the support agreement.
Operating and Financial Covenants – HDFS and the Company are subject to various operating and financial covenants related to the credit facilities and various operating covenants under the Notesmedium-term and senior notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below.
The operating covenants limit the Company’s and HDFS’ ability to:
•Assume or incur certain liens;
•Participate in certain mergers or consolidations; and
•Purchase or hold margin stock.
35

Under the current financial covenants of the Global Credit Facilities, the ratio of HDFS'HDFS’ consolidated debt, excluding secured debt, to HDFS’ consolidated allowance for credit losses on finance receivables plus HDFS' consolidated shareholders' equity, excluding accumulated other comprehensive income (loss)loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of HDFS and its subsidiaries, and the Company's consolidated shareholders’ equity excludes accumulated other comprehensive income (loss))excluding AOCL), cannot exceed 0.7 to 1.0 as of the end of any fiscal quarter. No financial covenants are required under the Notesmedium-term and senior notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.
At December 31, 2018, 20172020 and 2016,2019, HDFS and the Company remained in compliance with all of the then existing covenants.
Cautionary Statements
The Company intends that certain matters discussed in this report are "forward-looking statements"“forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company "believes", "anticipates", "expects", "plans", “strategy”, “future”, “may”, “goals”, or "estimates"“believes,” “anticipates,” “expects,” “plans,” “may,” “will,” “estimates,” “targets,” “intend” or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this release.report. Certain of such risks and uncertainties are described below. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this releasereport are only made as of the date of this release,report, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
The Company's abilityImportant factors that could affect future results and cause those results to meetdiffer materially from those expressed in the targetsforward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and expectations noted above depends upon, among other factors,severity of the pandemic across the globe and the pace of recovery following the pandemic and (ii) the Company's ability to (i)to: (a) execute its business plans and strategies, including the elements of the More RoadsThe Hardwire, successfully execute its remodeled approach to Harley-Davidson strategy for growth that the Company disclosed on July 30, 2018,supply and inventory management, and strengthen its existing business while enabling growth, (ii) manage the impact that new or adjusted tariffs may have on the cost of raw materials and components and our ability to sell product internationally, (iii) execute its strategy of growing ridership, globally, (iv) effectively execute the Company's manufacturing optimization plan within expected costs and timing and successfully carry out its global manufacturing and assembly operations, (v)allowing for desirable growth; (b) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests, (vi) negotiateincluding successfully implementing a distributor model in fifteen international markets; (c) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (d) successfully implement a strategic alliance relationship with a local partner in Asia, (vii)carry out its global manufacturing and assembly operations; (e) develop and introduce products, services and experiences on a timely basis that the market accepts, that enable the Company to generate desired sales levels and that provide the desired financial returns, (viii)including successfully implementing and executing plans to strengthen and grow its leadership position in Touring, large Cruiser and Trike, and growing its complementary businesses; (f) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors, (ix) realize expectations concerning market demand for electric models, which may depend in part on the building of necessary infrastructure, (x)competitors; (g) prevent, detect, and remediate any issues with its motorcycles or any issues


associated with associatedthe manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing, (xi)timing; (h) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xii)disasters; (i) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (xiii)motorcycles; (j) realize expectations concerning market demand for electric models, which will depend in part on the building of necessary infrastructure; (k) successfully manage and reduce other costs to offset costs ofthroughout the More Roads to Harley-Davidson plan and redirect capital without adversely affecting its existing business, (xiv) balance production volumes for its new motorcycles with consumer demand, (xv) manage risks that arise through expanding international manufacturing, operations and sales, (xvi)business; (l) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (xvii) continue to manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness, (xviii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xix)environment; (m) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand, (xx)demand; (n) develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (o) develop and maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (p) manage and predict the impact that new or adjusted tariffs may have on the Company's ability to sell products internationally, and the cost of raw materials and components; (q) successfully maintain a manner in which to sell motorcycles in the European Union, China, and the Company's Association of Southeast Asian Nations (ASEAN) countries that does not subject its motorcycles to incremental tariffs; (r) manage its Thailand corporate and manufacturing operation in a manner that allows the Company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets; (s) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (t) retain and attract talented employees, (xxi)and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (u) prevent a cybersecurity breach involving
36

consumer, employee, dealer, supplier, or companyCompany data and respond to evolving regulatory requirements regarding data security, (xxii)security; (v) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (xxiii)portfolio; (w) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the Company's business, (xxiv)Company’s business; (x) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, (xxv)motorcycles; (y) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, (xxvi)facilities; (z) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, (xxvii)operations; (aa) manage its exposure to product liability claims and commercial or contractual disputes, (xxviii) successfully accessdisputes; (bb) continue to manage the capital and/or credit markets on terms (including interest rates)relationships and agreements that are acceptable to the Company and withinhas with its expectations, and (xxix) lower priceslabor unions to help drive long-term competitiveness; (cc) accurately predict the margins of its motorcyclesMotorcycles and Related Products segment in certain marketslight of, among other things, tariffs, the cost associated with product development initiatives and the Company's complex global supply chain; and (dd) successfully develop and launch the pre-owned motorcycle program, Harley-Davidson Certified.
The Company’s operations, demand for its products, and its liquidity could be adversely impacted by manufacturing motorcycles in the Company’s Thailand facility.
In addition, the Company could experience delays or disruptions in its operations as a result of work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, or other factors. Further, actual foreign currency exchange rates may vary from underlying assumptions. Other factors are described under the caption "Risk Factors" in Item 1A1A. Risk Factors of this report. Many of these risk factors are impacted by the current changing capital, credit and retail markets and the Company's ability to manage through inconsistent economic conditions.

The Company'sCompany’s ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company'sCompany’s independent dealers to sell its motorcycles and related products and services to retail customers. The Company depends on the capability and financial capacity of its independent dealers to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company. In addition, the Company'sCompany’s independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions, the impact of the COVID-19 pandemic, or other factors.

In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The Company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior and HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers, as well as actions that the Company has taken and could take that impact motorcycle values.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in foreign currency exchange rates, commodity prices and interest rates. To reduce such risks, the Company selectively uses derivative financial instruments. All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes. Sensitivity analysis is used to manage and monitor foreign currency exchange rate and interest rate risk.risks. Further disclosure relating to the fair value of the Company's derivative financial instruments is included in Note 9 of the Notes to Consolidated financial statements.
Motorcycles and Related Products Segment
The Company sells its motorcycles and related products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, the Company’s earningsMotorcycles segment operating results are affected by fluctuations in the value of the U.S. dollar relative to foreign currency.currencies. The Company’s most significant foreign currency exchange rate risk resulting from the sale of motorcycles and related products relates to the Euro, the Australian dollar, the Japanese yen, the Brazilian real, the Canadian dollar, the British poundMexican peso, Chinese yuan, Indian rupee, Singapore dollar, Thai baht and the Mexican peso.Pound sterling. The Company utilizes foreign currency contracts to mitigate the effect of certain currencies' fluctuations on earnings.Motorcycles segment operating results. The foreign currency contracts are entered into with banks and allow the Company to exchange a specified amount of foreign currency for U.S. dollarscurrencies at a future date, based on a fixed exchange rate. At December 31, 20182020 and 2017,2019, the notional U.S. dollar value of outstanding Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar and Mexican peso foreign currency contracts was $443.0$779.4 million and $675.7$654.5 million, respectively. The Company estimates that a uniform 10% weakening in the value of the U.S. dollar relative to the currencies


underlying these contracts would result in a decrease in the fair value of the contracts of approximately $39.9$80.2 million and $67.2$65.5 million as of December 31, 20182020 and 2017,2019, respectively. Further disclosure relating to the fair value of derivative financial instruments is included in Note 10 of the Notes to Consolidated Financial Statements.

The Company's earnings are affected by changes in the prices ofCompany purchases commodities usedfor use in the production of motorcycles. As a result, Motorcycles segment operating income is affected by changes in commodity prices. The Company uses derivative financial instruments on a limited basis to hedge the prices of certain commodities. At December 31, 2018,2020, the notional value of these instruments was $6.1$7.5 million and theirthe fair value was a net asset of $0.8 million. As of December 31, 2019, the notional value of these instruments was $8.9 million and the fair value was a net liability of $0.5 million. As of December 31, 2017, the notional value of these instruments was $5.4 million and their fair value was a net asset of $0.3$0.1 million. The potential decrease in fair value of these contracts from a 10% adverse change in the underlying commodity prices would not be significant.

37

HDFS’ earnings areFinancial Services Segment
The Company has interest rate sensitive financial instruments including finance receivables, debt and interest rate derivative financial instruments. As a result, Financial Services operating income is affected by changes in interest rates. HDFS’ interest-rate sensitive financial instruments include finance receivables, debt and interest rate derivatives. HDFSThe Company utilizes interest rate swaps and caps to reduce the impact of fluctuations in interest rates on its debt.floating-rate medium-term notes and its asset-backed securitization transactions, respectively. As of December 31, 2018,2020, HDFS had interest rate swaps outstanding with a notional value of $450.0 million and interest rate caps outstanding with a notional value of $978.1 million. As of December 31, 2019, HDFS had interest rate swaps outstanding with a notional value of $900.0 million and interest rate caps with a notional value of $376.0 million. As of December 31, 2020, HDFS estimates that a 10% decrease in interest rates would not result in a material change to the fair value of the interest rate swap and cap agreements. As of December 31, 2019, HDFS estimated that a 10% decrease in interest rates would result in a $8.3 million decrease in the fair value of the agreements. There were no interest rate swaps outstanding asswap and cap agreements of December 31, 2017.$10.2 million.

HDFS has also has short-term commercial paper and debt issued through the commercial paper conduit facilities that is subject to changes in interest rates. HDFSrates which it does not hedge. The Company estimates that a one-percentage point increase in the interest rate on commercial paper and debt issued through the commercial paper conduit facilities would increase Financial Services interest expense in 20192021 by approximately $13.2 million.$15.5 million. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change in interest rates, HDFSthe Company may take actions to mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis does not account for these impacts.

The Company has foreign denominated medium-term notes. As a result, Financial Services operating income is affected by fluctuations in the value of the U.S. dollar relative to foreign currencies and interest rates. At December 31, 2020, this exposure related to the Euro. The Company utilizes cross-currency swaps to mitigate the effect of the foreign currency exchange rate and interest rate fluctuations related to foreign denominated debt. At December 31, 2020 and 2019, the Company has cross-currency swaps outstanding with a notional value of $1.4 billion and $660.8 million, respectively. The Company estimates that a 10% adverse change in the underlying foreign currency exchange rate and interest rate would result in a $170.6 million and $76.2 million decrease in the fair value of the swap agreements as of December 31, 2020 and 2019, respectively. The amount as of December 31, 2019 reflects a revision to the amount included in the Company’s 2019 Annual Report on Form 10-K.

38







Item 8. Consolidated Financial Statements and Supplementary Data
Page
4840
5044
5145
5246
5448
5549
5650
Supplementary data
1. Summary of Significant Accounting Policies
50
Quarterly financial data (unaudited)2. Revenue
11053
3. Restructuring Activities
54
4. Income Taxes
56
5. Capital Stock and Earnings Per Share
59
6. Additional Balance Sheet and Cash Flow Information
59
7. Finance Receivables
61
8. Goodwill and Intangible Assets
67
9. Derivative Financial Instruments and Hedging Activities
68
10. Leases
71
11. Debt
72
12. Asset-Backed Financing
74
13. Fair Value
78
14. Product Warranty and Recall Campaigns
80
15. Employee Benefit Plans and Other Postretirement Benefits
80
16. Commitments and Contingencies
87
17. Share-Based Awards
87
18. Accumulated Other Comprehensive Loss
89
19. Reportable Segments and Geographic Information
90
20. Supplemental Consolidating Data
93
21. Subsequent Event
96



39


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Shareholders and Board of Directors of Harley-Davidson, Inc.


Opinion on Internal Control over Financial Reporting

We have audited Harley-Davidson, Inc.’s internal control over financial reporting as of December 31, 2018,2020, based on criteria established in Internal Control -– Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(the COSO criteria). In our opinion, Harley-Davidson, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 20182020 and 2017, and2019, the related consolidated statements of income,operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2020, and the related notes and financial statement schedule listed in the Index at item 15(a) and our report dated February 28, 201923, 2021 expressed an unqualified opinion thereon.


Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definitions and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




/s/ Ernst & Young LLP
Milwaukee, Wisconsin
February 28, 201923, 2021







40



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Shareholders and Board of Directors of Harley-Davidson, Inc.


Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Harley-Davidson, Inc. (the Company) as of December 31, 20182020 and 2017, and2019, the related consolidated statements of income,operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,2020, and the related notes and financial statement schedule listed in the Index at item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Harley-Davidson, Inc. at December 31, 20182020 and 2017,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018,2020, based on criteria established in Internal Control -– Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework),and our report dated February 28, 201923, 2021 expressed an unqualified opinion thereon.


Adoption of ASU 2016-13
As discussed in Note 1 of the consolidated financial statements, the Company changed its method of accounting for credit losses in 2020 due to the adoption of Accounting Standards Update (ASU) No. 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and the related amendments. See below for discussion of our related critical audit matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includeincluded examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

41


Allowance for Credit Losses - Retail Finance Receivables
Description of the Matter
The Company’s retail receivable portfolio totaled $6.3 billion as of December 31, 2020, and the associated allowance for credit losses (ACL) was $371.7 million. As discussed above and in Notes 1 and 7 to the consolidated financial statements, effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments, which requires the Company to recognize expected lifetime losses on finance receivables held at amortized cost, upon origination. Upon adoption, the Company increased its ACL by $100.6 million and reduced retained earnings net, of deferred taxes, by $78.2 million through a cumulative-effect adjustment. The Company utilizes a vintage-based loss forecast methodology to measure the expected retail finance receivables credit losses. Economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions. To establish the economic forecasts, management considers various third-party economic forecast scenarios and applies a probability-weighting to those economic forecast scenarios. For periods beyond the Company’s incorporated economic forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.
Auditing management’s estimate of the ACL for retail finance receivables was especially challenging due to the complexity of management’s retail receivables loss forecasting models and subjective management assumptions applied in determining the probability-weighting of its economic forecasts.


How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the ACL process. These procedures included testing controls over management’s review of key assumptions such as the economic forecasts, the development and operation of the ACL models, and the completeness and accuracy of key inputs and assumptions used in the ACL models.
To test the ACL, our audit procedures included, among others, evaluating the Company’s loss forecasting models, the economic forecasts prepared by management, and the underlying data used in the models. We involved our internal specialists in evaluating the model methodology and model performance and tested key modeling assumptions. We evaluated management’s judgments in probability-weighting different third-party economic forecast scenarios and compared management’s economic forecasts to other available information for contrary or corroborative evidence. Additionally, we tested the accuracy of data utilized within the models and re-performed the model calculations for a sample of loans. In addition, we reviewed the Company’s historical loss statistics, peer information, and subsequent events and considered whether this information corroborates or contradicts management’s measurement of the ACL.

42

Restructuring activities
Description of the Matter
The Company recorded $130.0 million of restructuring expenses during the year ended December 31, 2020. As discussed in Note 3 to the consolidated financial statements, restructuring activities included a workforce reduction, the termination of certain products, facility changes, optimizing the global independent dealer network, exiting certain international markets, and discontinuing the sales and manufacturing operations in India. These actions resulted in restructuring expenses that included employee termination costs, contract termination costs and non-current asset adjustments. The Company’s liability for accrued restructuring expenses was $23.9 million as of December 31, 2020.
Auditing the Company’s restructuring expenses was complex due to the comprehensive scope of the different actions taken which required management to assess the timing of recognition of the costs associated with these actions. In addition, determining the classification and disclosure of restructuring expenses in the consolidated financial statement required the Company to maintain detailed record-keeping of the various restructuring activities.

How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the restructuring process. These procedures included testing controls over authorization of the significant restructuring actions, management’s review and assessment of the accounting treatment and timing of recognition for significant actions, and the Company’s review of the presentation and disclosure of restructuring activities.
To test the restructuring costs and year-end restructuring liability, our audit procedures included, among others, gaining an understanding of approved restructuring actions and evaluating the accounting treatment and timing of recognition for significant actions. In addition, we tested the Company’s computation of restructuring expenses and year-end liability, reviewed a sample of contracts and settlement agreements, and tested cash payments made related to the restructuring actions. We also tested the presentation and disclosure of the restructuring expenses in the consolidated financial statements.

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1982
Milwaukee, Wisconsin
February 28, 201923, 2021

43



HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
Years ended December 31, 2018, 20172020, 2019 and 20162018
(In thousands, except per share amounts)
 
 2018 2017 2016202020192018
Revenue:      Revenue:
Motorcycles and Related Products $4,968,646
 $4,915,027
 $5,271,376
Motorcycles and Related Products$3,264,054 $4,572,678 $4,968,646 
Financial Services 748,229
 732,197
 725,082
Financial Services790,323 789,111 748,229 
Total revenue 5,716,875
 5,647,224
 5,996,458
4,054,377 5,361,789 5,716,875 
Costs and expenses:      Costs and expenses:
Motorcycles and Related Products cost of goods sold 3,351,796
 3,272,330
 3,425,997
Motorcycles and Related Products cost of goods sold2,435,745 3,229,798 3,351,796 
Financial Services interest expense 193,187
 180,193
 173,756
Financial Services interest expense246,447 210,438 193,187 
Financial Services provision for credit losses 106,870
 132,444
 136,617
Financial Services provision for credit losses181,870 134,536 106,870 
Selling, administrative and engineering expense 1,258,098
 1,180,176
 1,213,794
Selling, administrative and engineering expense1,050,627 1,199,056 1,258,098 
Restructuring expense 93,401
 —
 —
Restructuring expense130,009 32,353 93,401 
Total costs and expenses 5,003,352
 4,765,143
 4,950,164
4,044,698 4,806,181 5,003,352 
Operating income 713,523
 882,081
 1,046,294
Operating income9,679 555,608 713,523 
Other income (expense), net 3,039
 9,182
 2,642
Other (expense) income, netOther (expense) income, net(1,848)16,514 3,039 
Investment income 951
 3,580
 4,645
Investment income7,560 16,371 951 
Interest expense 30,884
 31,004
 29,670
Interest expense31,121 31,078 30,884 
Income before provision for income taxes 686,629
 863,839
 1,023,911
Provision for income taxes 155,178
 342,080
 331,747
(Loss) income before income taxes(Loss) income before income taxes(15,730)557,415 686,629 
Income tax (benefit) provisionIncome tax (benefit) provision(17,028)133,780 155,178 
Net income $531,451
 $521,759
 $692,164
Net income$1,298 $423,635 $531,451 
Earnings per common share:      
Earnings per share:Earnings per share:
Basic $3.21
 $3.03
 $3.85
Basic$0.01 $2.70 $3.21 
Diluted $3.19
 $3.02
 $3.83
Diluted$0.01 $2.68 $3.19 
Cash dividends per common share $1.48
 $1.46
 $1.40
Cash dividends per shareCash dividends per share$0.44 $1.50 $1.48 
The accompanying notes are an integral part ofto the consolidated financial statements.

44



HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2018, 20172020, 2019 and 20162018
(In thousands)


 2018 2017 2016202020192018
Net income $531,451
 $521,759
 $692,164
Net income$1,298 $423,635 $531,451 
Other comprehensive (loss) income, net of tax:      
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (25,010) 46,280
 (9,288)Foreign currency translation adjustments33,224 8,795 (25,010)
Derivative financial instruments 20,009
 (29,778) 6,638
Derivative financial instruments(31,530)(16,371)20,009 
Marketable securities —
 1,194
 (100)
Pension and postretirement benefit plans (16,286) 47,636
 52,574
Pension and postretirement benefit plans51,838 100,311 (16,286)
Total other comprehensive (loss) income, net of tax (21,287) 65,332
 49,824
53,532 92,735 (21,287)
Comprehensive income $510,164
 $587,091
 $741,988
Comprehensive income$54,830 $516,370 $510,164 
The accompanying notes are an integral part ofto the consolidated financial statements.

45


HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 20182020 and 20172019
(In thousands, except share amounts)thousands)
20202019
ASSETS
Current assets:
Cash and cash equivalents$3,257,203 $833,868 
Accounts receivable, net143,082 259,334 
Finance receivables, net of allowance of $72,632 and $43,0061,509,539 2,272,522 
Inventories, net523,497 603,571 
Restricted cash131,642 64,554 
Other current assets280,470 168,974 
5,845,433 4,202,823 
Finance receivables, net of allowance of $318,304 and $155,5754,933,469 5,101,844 
Property, plant and equipment, net743,784 847,382 
Pension and postretirement assets95,711 56,014 
Goodwill65,976 64,160 
Deferred income taxes158,538 101,204 
Lease assets45,203 61,618 
Other long-term assets122,487 93,114 
$12,010,601 $10,528,159 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$290,904 $294,380 
Accrued liabilities557,214 582,288 
Deposits79,965 0 
Short-term debt1,014,274 571,995 
Current portion of long-term debt, net2,039,597 1,748,109 
3,981,954 3,196,772 
Long-term debt, net5,932,933 5,124,826 
Lease liabilities30,115 44,447 
Pension and postretirement liabilities114,206 128,651 
Deferred income taxes8,607 8,135 
Other long-term liabilities220,001 221,329 
Commitments and contingencies (Note 16)00
Shareholders’ equity:
Preferred stock, NaN issued0 0 
Common stock (Note 5)1,685 1,828 
Additional paid-in-capital1,507,706 1,491,004 
Retained earnings1,284,823 2,193,997 
Accumulated other comprehensive loss(483,417)(536,949)
Treasury stock, at cost (Note 5)(588,012)(1,345,881)
1,722,785 1,803,999 
$12,010,601 $10,528,159 

46
  2018 2017
ASSETS    
Current assets:    
Cash and cash equivalents $1,203,766
 $687,521
Marketable securities 10,007
 —
Accounts receivable, net 306,474
 329,986
Finance receivables, net 2,214,424
 2,105,662
Inventories 556,128
 538,202
Restricted cash 49,275
 47,518
Other current assets 144,368
 175,853
Total current assets 4,484,442
 3,884,742
Finance receivables, net 5,007,507
 4,859,424
Property, plant and equipment, net 904,132
 967,781
Prepaid pension costs —
 19,816
Goodwill 55,048
 55,947
Deferred income taxes 141,464
 109,073
Other long-term assets 73,071
 75,889
  $10,665,664
 $9,972,672
LIABILITIES AND SHAREHOLDERS’ EQUITY    
Current liabilities:    
Accounts payable $284,861
 $227,597
Accrued liabilities 601,130
 529,822
Short-term debt 1,135,810
 1,273,482
Current portion of long-term debt, net 1,575,799
 1,127,269
Total current liabilities 3,597,600
 3,158,170
Long-term debt, net 4,887,667
 4,587,258
Pension liability 107,776
 54,606
Postretirement healthcare liability 94,453
 118,753
Other long-term liabilities 204,219
 209,608
Commitments and contingencies (Note 15) 

 

Shareholders’ equity:    
Preferred stock, none issued —
 —
Common stock (181,931,225 and 181,286,547 shares issued, respectively) 1,819
 1,813
Additional paid-in-capital 1,459,620
 1,422,808
Retained earnings 2,007,583
 1,607,570
Accumulated other comprehensive loss (629,684) (500,049)
Treasury stock (22,273,278 and 13,195,731 shares, respectively), at cost (1,065,389) (687,865)
Total shareholders’ equity 1,773,949
 1,844,277
  $10,665,664
 $9,972,672




HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS (continued)
December 31, 20182020 and 20172019
(In thousands, except share amounts)thousands)
 2018 201720202019
Balances held by consolidated variable interest entities (Note 12)    Balances held by consolidated variable interest entities (Note 12)
Current finance receivables, net $175,043
 $194,813
Finance receivables, net - currentFinance receivables, net - current$530,882 $291,444 
Other assets $1,563
 $2,148
Other assets$3,753 $2,420 
Non-current finance receivables, net $591,839
 $521,940
Finance receivables, net - non-currentFinance receivables, net - non-current$1,889,472 $1,027,179 
Restricted cash - current and non-current $47,203
 $48,706
Restricted cash - current and non-current$142,892 $63,812 
Current portion of long-term debt, net $189,693
 $209,247
Current portion of long-term debt, net$608,987 $317,607 
Long-term debt, net $488,191
 $422,834
Long-term debt, net$1,585,174 $937,212 
The accompanying notes are an integral part ofto the consolidated financial statements.




47

HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2018, 20172020, 2019 and 20162018
(In thousands)
 
 2018 2017 2016202020192018
Net cash provided by operating activities (Note 6) $1,205,921
 $1,005,061
 $1,174,339
Net cash provided by operating activities (Note 6)$1,177,890 $868,272 $1,205,921 
Cash flows from investing activities:      Cash flows from investing activities:
Capital expenditures (213,516) (206,294) (256,263)Capital expenditures(131,050)(181,440)(213,516)
Origination of finance receivables (3,752,817) (3,591,948) (3,664,495)Origination of finance receivables(3,497,486)(3,847,322)(3,752,817)
Collections on finance receivables 3,325,669
 3,228,311
 3,175,031
Collections on finance receivables3,540,289 3,499,717 3,325,669 
Proceeds from finance receivables sold —
 —
 312,571
Purchases of marketable securities (10,007) —
 —
Purchases of marketable securities0 0 (10,007)
Sales and redemptions of marketable securities —
 6,916
 40,014
Sales and redemptions of marketable securities0 10,007 0 
Other (11,598) 547
 411
Acquisition of businessAcquisition of business0 (7,000)0 
Other investing activitiesOther investing activities21,464 17,912 (11,598)
Net cash used by investing activities (662,269) (562,468) (392,731)Net cash used by investing activities(66,783)(508,126)(662,269)
Cash flows from financing activities:      Cash flows from financing activities:
Proceeds from issuance of medium-term notes 1,591,828
 893,668
 1,193,396
Proceeds from issuance of medium-term notes1,396,602 1,203,236 1,591,828 
Repayments of medium-term notes (877,488) (800,000) (451,336)Repayments of medium-term notes(1,400,000)(1,350,000)(877,488)
Proceeds from securitization debtProceeds from securitization debt2,064,450 1,021,453 0 
Repayments of securitization debt (257,869) (444,671) (665,400)Repayments of securitization debt(1,041,751)(353,251)(257,869)
Borrowings of asset-backed commercial paper 509,742
 469,932
 62,396
Borrowings of asset-backed commercial paper225,187 177,950 509,742 
Repayments of asset-backed commercial paper (212,729) (176,227) (71,500)Repayments of asset-backed commercial paper(318,828)(318,006)(212,729)
Net (decrease) increase in credit facilities and unsecured commercial paper (135,356) 212,809
 (145,812)
Net increase (decrease) in unsecured commercial paperNet increase (decrease) in unsecured commercial paper444,380 (563,453)(135,356)
DepositsDeposits79,947 0 0 
Dividends paid (245,810) (251,862) (252,321)Dividends paid(68,087)(237,221)(245,810)
Purchase of common stock for treasury (390,606) (465,263) (465,341)
Excess tax benefits from share-based payments —
 —
 2,251
Issuance of common stock under employee stock option plans 3,525
 11,353
 15,782
Net cash used by financing activities (14,763) (550,261) (777,885)
Repurchase of common stockRepurchase of common stock(8,006)(296,520)(390,606)
Issuance of common stock under share-based plansIssuance of common stock under share-based plans89 3,589 3,525 
Net cash provided (used) by financing activitiesNet cash provided (used) by financing activities1,373,983 (712,223)(14,763)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (15,351) 26,747
 (9,443)Effect of exchange rate changes on cash, cash equivalents and restricted cash18,712 (2,305)(15,351)
Net increase (decrease) in cash, cash equivalents and restricted cash $513,538
 $(80,921) $(5,720)Net increase (decrease) in cash, cash equivalents and restricted cash$2,503,802 $(354,382)$513,538 
Cash, cash equivalents and restricted cash:      Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash—beginning of period $746,210
 $827,131
 $832,851
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period$905,366 $1,259,748 $746,210 
Net increase (decrease) in cash, cash equivalents and restricted cash 513,538
 (80,921) (5,720)Net increase (decrease) in cash, cash equivalents and restricted cash2,503,802 (354,382)513,538 
Cash, cash equivalents and restricted cash—end of period $1,259,748
 $746,210
 $827,131
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period$3,409,168 $905,366 $1,259,748 
      
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheet:
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents $1,203,766
 $687,521
 $759,984
Cash and cash equivalents$3,257,203 $833,868 $1,203,766 
Restricted cash 49,275
 47,518
 52,574
Restricted cash131,642 64,554 49,275 
Restricted cash included in other long-term assets 6,707
 11,171
 14,573
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows $1,259,748
 $746,210
 $827,131
Restricted cash included in Other long-term assetsRestricted cash included in Other long-term assets20,323 6,944 6,707 
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flowsCash, cash equivalents and restricted cash per the Consolidated statements of cash flows$3,409,168 $905,366 $1,259,748 
The accompanying notes are an integral part ofto the consolidated financial statements.

48


HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years ended December 31, 2018, 20172020, 2019 and 20162018
(In thousands, except share amounts)
  Common Stock 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Balance
 Total
  
Issued
Shares
 Balance 
Balance December 31, 2015 344,855,704
 $3,449
 $1,328,561
 $8,961,985
 $(615,205) $(7,839,136) $1,839,654
Net income —
 —
 —
 692,164
 —
 —
 692,164
Total other comprehensive income, net of tax (Note 18) —
 —
 —
 —
 49,824
 —
 49,824
Dividends —
 —
 —
 (252,321) —
 —
 (252,321)
Repurchase of common stock —
 —
 —
 —
 —
 (465,341) (465,341)
Share-based compensation and 401(k) match made with Treasury shares —
 —
 36,956
 —
 —
 2,870
 39,826
Issuance of nonvested stock 272,479
 2
 (2) —
 —
 —
 —
Exercise of stock options 466,871
 5
 15,777
 —
 —
 —
 15,782
Tax benefit of equity awards —
 —
 570
 —
 —
 —
 570
Retirement of treasury stock (165,000,000) (1,650) —
 (8,064,155) —
 8,065,805
 —
Balance December 31, 2016 180,595,054
 $1,806
 $1,381,862
 $1,337,673
 $(565,381) $(235,802) $1,920,158
Net income —
 —
 —
 521,759
 —
 —
 521,759
Total other comprehensive income, net of tax (Note 18) —
 —
 —
 —
 65,332
 —
 65,332
Dividends —
 —
 —
 (251,862) —
 —
 (251,862)
Repurchase of common stock —
 —
 —
 —
 —
 (465,263) (465,263)
Share-based compensation and 401(k) match made with Treasury shares —
 —
 29,600
 —
 —
 13,200
 42,800
Issuance of nonvested stock 408,950
 4
 (4) —
 —
 —
 —
Exercise of stock options 282,543
 3
 11,350
 —
 —
 —
 11,353
Balance December 31, 2017 181,286,547
 $1,813
 $1,422,808
 $1,607,570
 $(500,049) $(687,865) $1,844,277
Net income —
 —
 —
 531,451
 —
 —
 531,451
Total other comprehensive loss, net of tax (Note 18) —
 —
 —
 —
 (21,287) —
 (21,287)
Dividends —
 —
 —
 (245,810) —
 —
 (245,810)
Repurchase of common stock —
 —
 —
 —
 —
 (390,606) (390,606)
Share-based compensation and 401(k) match made with Treasury shares —
 —
 33,293
 —
 —
 13,082
 46,375
Issuance of nonvested stock 485,005
 4
 (4) —
 —
 —
 —
Exercise of stock options 159,673
 2
 3,523
 —
 —
 —
 3,525
Cumulative effect of change in accounting (Note 1) —
 —
 —
 6,024
 —
 —
 6,024
Reclassification of certain tax effects (Note 1) —
 —
 —
 108,348
 (108,348) —
 —
Balance December 31, 2018 181,931,225
 $1,819

$1,459,620
 $2,007,583
 $(629,684) $(1,065,389) $1,773,949
 Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Treasury StockTotal
 Issued
Shares		Balance
Balance, December 31, 2017181,286,547 $1,813 $1,422,808 $1,607,570 $(500,049)$(687,865)$1,844,277 
Net income— — — 531,451 — — 531,451 
Other comprehensive loss, net of tax (Note 18)— — — — (21,287)— (21,287)
Dividends ($1.48 per share)— — — (245,810)— — (245,810)
Repurchase of common stock— — — — — (390,606)(390,606)
Share-based compensation644,678 6 36,812 — — 13,082 49,900 
Cumulative effect of change in accounting— — — 6,024 — — 6,024 
Reclassification of certain tax effects— — — 108,348 (108,348)— 0 
Balance, December 31, 2018181,931,225 1,819 1,459,620 2,007,583 (629,684)(1,065,389)1,773,949 
Net income— — — 423,635 — — 423,635 
Other comprehensive income, net of tax (Note 18)— — — — 92,735 — 92,735 
Dividends ($1.50 per share)— — — (237,221)— — (237,221)
Repurchase of common stock— — — — — (296,520)(296,520)
Share-based compensation885,311 9 31,384 — — 16,028 47,421 
Balance, December 31, 2019182,816,536 1,828 1,491,004 2,193,997 (536,949)(1,345,881)1,803,999 
Net income— — — 1,298 — — 1,298 
Other comprehensive income, net of tax (Note 18)— — — — 53,532 — 53,532 
Dividends ($0.44 per share)— — — (68,087)— — (68,087)
Repurchase of common stock— — — — — (8,006)(8,006)
Share-based compensation686,990 7 16,702 — — 1,569 18,278 
Retirement of treasury stock(15,000,000)(150)— (764,156)— 764,306 0 
Cumulative effect of change in accounting— — — (78,229)— — (78,229)
Balance, December 31, 2020168,503,526 $1,685 $1,507,706 $1,284,823 $(483,417)$(588,012)$1,722,785 
 
The accompanying notes are an integral part ofto the consolidated financial statements.




49

HARLEY-DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation – The consolidated financial statements include the accounts of Harley-Davidson, Inc. and its subsidiaries, all of which are wholly-owned subsidiaries (the Company), including the accounts of the groupsgroup of companies doing businessreferred to as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). In addition, certain variable interest entities (VIEs) related to secured financing are consolidated as the Company is the primary beneficiary. All intercompany accounts and material intercompany transactions arehave been eliminated.
All of the Company’s subsidiaries are wholly ownedThe Company operates in 2 reportable segments: Motorcycles and are included in the consolidated financial statements. Related Products (Motorcycles) and Financial Services.
Substantially all of the Company’s international subsidiaries use their respective local currency as their functional currency. Assets and liabilities of international subsidiaries have been translated at period-end exchange rates, and revenues and expenses have been translated using average exchange rates for the period. Monetary assets and liabilities denominated in a currency that is different from an entity's functional currency are remeasured from the transactional currency to the entity's functional currency on a monthly basis. The effect of this remeasurement is reported in Motorcycles and Related Products cost of goods sold. The pre-tax aggregate transaction gain/(loss) gain forresulting from foreign currency remeasurements was $(19.9)$3.8 million, $15.0$18.0 million, and $(15.1)$(19.9) million for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively.
The Company operates in two reportable segments: Motorcycles and Related Products (Motorcycles) and Financial Services.
Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires the Company's management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
During the first quarter of 2020, the outbreak of a novel strain of coronavirus (COVID-19) spread throughout the world, and it was recognized as a pandemic in March 2020. The COVID-19 pandemic has restricted the level of economic activity in the U.S. and around the world and the full extent of its impact is not yet known. The Company's financial results for the period ending December 31, 2020 reflect the impact of the COVID-19 pandemic, the most significant of which relates to the allowance for credit losses as discussed in Note 7.
Cash and Cash Equivalents – The Company considers all highly liquid investments with a maturity of three months90 days or less when purchased to be cash equivalents.
Marketable Securities – The Company’s marketable securities consisted of the following at December 31 (in thousands):
  2018 2017
Certificate of deposit $10,007
 $—
Mutual funds 44,243
 48,006
Total marketable securities $54,250
 $48,006
The Company’s certificates of deposit are carried at fair value with any unrealized gains or losses reported in other comprehensive income. The mutual fund investments are held by the Company to fund certain deferred compensation obligations. The mutual fund investments are carried at fair value with gains and losses recorded in net income and are included in other long-term assets in the consolidated balance sheets.
Accounts Receivable, Netnet – The Company’s motorcycles and related products are sold to independent dealers outside the U.S. and Canada generally on open account and the resulting receivables are included in accountsAccounts receivable, innet on the Company’s consolidatedConsolidated balance sheets.sheets. The allowance for doubtful accounts deducted from total accounts receivable was $4.0$3.7 million and $4.1$4.9 million as of December 31, 20182020 and 2017,2019, respectively. The Company’s evaluation of the allowance for doubtful accounts includes a review to identify non-performing accounts which are evaluated individually. The remaining accounts receivable balances are evaluated in the aggregate based on an aging analysis. The allowance for doubtful accounts is based on factors including past loss experience, the value of collateral, and if applicable, reasonable and supportable economic forecasts. Accounts receivable are written down once management determines that the specific customer does not have the ability to repay the balance in full. The Company’s sales of motorcycles and related products in the U.S. and Canada are financed through HDFS by the purchasing independent dealers through HDFS and the related receivables are included in financeFinance receivables, net on the Consolidated balance sheets.
Inventories, net – Substantially all inventories located in the consolidated balance sheets.
Finance Receivables, Net – Finance receivables include both retailU.S. are valued using the last-in, first-out (LIFO) method. Other inventories totaling $221.9 million and wholesale finance receivables, net, including amounts held by consolidated VIEs. Finance receivables$326.5 million at December 31, 2020 and 2019, respectively, are recorded in the financial statements at amortized cost net of an allowance for credit losses. The provision for credit losses on finance receivables is charged to earnings in amounts sufficient to maintain the allowance for credit losses at a level that is adequate to cover estimated losses of principal inherent in the existing portfolio. Portions of the allowance for credit losses are specified to cover estimated losses on finance receivables specifically identified for impairment. The unspecified portion of the allowance covers estimated losses on finance receivables which are collectively reviewed for impairment. Finance receivables are considered impaired when management determines it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement.
The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a periodic and systematic collective evaluation of the adequacy of the retail allowance for credit losses. The


Company utilizes loss forecast models which consider a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates and current economic conditions including items such as unemployment rates. Retail finance receivables are not evaluated individually for impairment prior to charge-off and therefore are not reported as impaired loans.
The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s wholesale allowance evaluation is first based on a loan-by-loan review. A specific allowance for credit losses is established for wholesale finance receivables determined to be individually impaired when management concludes that the borrower will not be able to make full payment of contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive discountedvalued at the loan’s original interest ratelower of cost or net realizable value using the fair value of the collateral, if the loan is collateral-dependent. Finance receivables in the wholesale portfolio that are not individually evaluated for impairment are segregated, based on similar risk characteristics, according to the Company’s internal risk rating system and collectively evaluated for impairment. The related allowance is based on factors such as the Company’s past loan loss experience, the specific borrower’s financial performance as well as ability to repay, current economic conditions and the value of the underlying collateral.first-in, first-out (FIFO) method.
Impaired finance receivables also include loans that have been modified in troubled debt restructurings as a concession to borrowers experiencing financial difficulty. Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize the economic loss, the Company may modify certain impaired finance receivables in troubled debt restructurings. Total restructured finance receivables are not significant.
Repossessed Inventory – Repossessed inventory representing recovered collateral on impaired finance receivables is recorded at the lower of cost or net realizable value.value through a fair value remeasurement. In the period during which the collateral is repossessed, the related finance receivable is adjusted to the fair value of the collateral through a chargechange to the allowance for credit losses and reclassified to repossessed inventory. Repossessed inventory, is included in otherOther current assets and was $20.2 million and $19.6 million at December 31, 2018 and 2017, respectively.
Asset-Backed Financing – The Company participates in asset-backed financing both through asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. In the Company's asset-backed financing programs, the Company transfers retail motorcycle finance receivables to special purpose entities (SPE), which are considered VIEs under U.S. GAAP. Each SPE then converts those assets into cash, through the issuance of debt. The Company retains servicing rights for all of the retail motorcycle finance receivables transferred to SPEs as part of an asset-backed financing. The accounting treatment for asset-backed financings depends on the terms of the related transaction and the Company’s continuing involvement with the VIE.Consolidated balance sheets.
In transactions where the Company has power over the significant activities of the VIE and has an obligation to absorb losses or the right to receive benefits from the VIE that are potentially significant to the VIE, the Company is the primary beneficiary of the VIE and consolidates the VIE within its consolidated financial statements. On a consolidated basis, the asset-backed financing is treated as a secured borrowing in this type of transaction and is referred to as an on-balance sheet asset-backed financing.
50

In transactions where the Company is not the primary beneficiary of the VIE, the Company must determine whether it can achieve a sale for accounting purposes under ASC Topic 860, "Transfers and Servicing." To achieve a sale for accounting purposes, the assets being transferred must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond the Company’s control. If the Company does not meet all these criteria for sale accounting, then the transaction is accounted for as a secured borrowing and is referred to as an on-balance sheet asset-backed financing.
If the Company meets all three of the sale criteria above, the transaction is recorded as a sale for accounting purposes and is referred to as an off-balance sheet asset-backed financing. Upon sale, the retail motorcycle finance receivables are removed from the Company’s balance sheet and a gain or loss is recognized for the difference between the cash proceeds received, the assets derecognized, and the liabilities recognized as part of the transaction. The gain or loss on sale is included in Financial Services revenue in the consolidated statements of income.
The Company is not required, and does not currently intend, to provide any additional financial support to the on or off-balance sheet VIEs associated with these transactions. Investors and creditors in these transactions only have recourse to the assets held by the VIEs.
Inventories – Substantially all inventories located in the United States are valued using the last-in, first-out (LIFO) method. Other inventories totaling $247.6 million and $234.9 million at December 31, 2018 and 2017, respectively, are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method.


Property, Plant and Equipment, net – Property, plant and equipment is recorded at cost.cost, net of accumulated depreciation and amortization. Depreciation is determined onusing the straight-line basismethod over the estimated useful lives of the assets. The followingestimated useful lives are used to depreciate the various classesof each class of property, plant and equipment:equipment generally consist of 30 years for buildings, – 30 years;7 years for building equipment and land improvements, – 7 years;3 to 10 years for machinery and equipment, – and 3 to 10 years; furniture and fixtures – 5 years; and software – 3 to 7 years. years for software. Accelerated methods of depreciation are used for income tax purposes.

Goodwill – Goodwill represents the excess of acquisition cost over the fair value of the net assets purchased. Goodwill is tested for impairment, based on financial data related to the reporting unit to which it has been assigned, at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The impairment test involves comparing the estimated fair value of the reporting unit associated with the goodwill to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, goodwill must be adjustedis considered impaired and an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value, limited to its implied fair value.the total goodwill allocated to the reporting unit. During 20182020 and 2017,2019, the Company performed a quantitative test ontested its goodwill balances for impairment and no adjustments were recorded to goodwill as a result of those reviews.
Long-lived Assets – The Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset for assets to be held and used. The Company also reviews the useful life of its long-lived assets when events and circumstances indicate that the actual useful life may be shorter than originally estimated. In the event that the actual useful life is deemed to be shorter than the original useful life, depreciation is adjusted prospectively so that the remaining book value is depreciated over the revised useful life. Refer to Note 3 Restructuring Expenses.for additional details surrounding the Company's restructuring activities impacting long-lived assets.
Asset groups classified as held for sale are measured at the lower of carrying amount or fair value less cost to sell, and a loss is recognized for any initial adjustment required to reduce the carrying amount to the fair value less cost to sell in the period the held for sale criteria are met. The fair value less cost to sell must be assessed each reporting period that the asset group remains classified as held for sale. Gains or losses not previously recognized resulting from the sale of an asset group will be recognized on the date of sale.
Product Warranty and Recall – The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except for Japan, where the Company provides a standard three-year limited warranty on all new motorcycles sold. In addition, the Company offers a one-year warranty for Parts & Accessories (P&A). The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company accrues for future warranty claims using an estimated cost based primarily on historical Company claim information. Additionally, the Company has from time-to-time initiated certain voluntary recall campaigns. The Company accrues for the estimated cost associated with voluntary recalls in the period that management approves and commits to the recall.
Changes in the Company’s warranty and recall liability were as follows (in thousands):
  2018 2017 2016
Balance, beginning of period $94,200
 $79,482
 $74,217
Warranties issued during the period 53,367
 57,834
 60,215
Settlements made during the period (79,300) (82,554) (99,298)
Recalls and changes to pre-existing warranty liabilities 63,473
 39,438
 44,348
Balance, end of period $131,740
 $94,200
 $79,482
The liability associated with recalls was $73.3 million, $35.3 million and $13.6 million at December 31, 2018, 2017 and 2016, respectively.
Derivative Financial Instruments – The Company is exposed to certain risks such as foreign currency exchange rate risk, interest rate risk and commodity price risk. To reduce its exposure to such risks, the Company selectively uses derivative financial instruments. All derivative transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes.
All derivative instruments are recognized on the balance sheet at fair value (see Note 13). In accordance with ASC Topic 815, “Derivatives and Hedging,” the accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings. For derivative instruments that are designated as cash flow hedges, the effective portion of gains and losses that result from changes in the fair value of derivative instruments is initially recorded in other comprehensive income (OCI) and subsequently reclassified into earnings when the hedged item affects income. The Company assesses, at both


the inception of each hedge and on an on-going basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Any ineffective portion is immediately recognized in earnings. No component of a hedging derivative instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative instruments that do not qualify for hedge accounting are recorded at fair value and any changes in fair value are recorded in current period earnings. Refer to Note 10 for a detailed description of the Company’s derivative instruments.
Research and Development Expenses – Expenditures for research activities relating to product development and improvementimprovements are charged against income as incurred and included within selling,Selling, administrative and engineering expense in on the consolidatedConsolidated statements of income.operations. Research and development expenses were $202.4 million, $216.5 million and $191.6 million $175.2 millionfor 2020, 2019 and $172.3 million for 2018,, 2017 and 2016, respectively.
Advertising Costs – The Company expenses the production cost of advertising the first time the advertising takes place.place within Selling, administrative and engineering expense. Advertising costs relate to the Company’s efforts to promote its products and brands through the use of media.media and other means. During 2018, 20172020, 2019 and 2016,2018, the Company incurred $134.6 million, $171.4 million and $144.3 million$135.5 million and $137.4 million in advertising costs, respectively.
Shipping and Handling Costs – The Company classifies shipping and handling costs as a component of Motorcycles and Related Products cost of goods sold.sold.
Share-Based Award Compensation Costs – The Company recognizes the cost of its share-based awards in its consolidated statements of income. The cost of each share-based equity award is based on the grant date fair value and the cost of each share-based cash-settled award is based on the settlement date fair value. Share-based award expense is recognized on a straight-line basis over the service or performance periods of the awards. The expense recognized reflects the number of awards that are ultimately expected to vest based on the service and, if applicable, performance requirements of each award. Total share-based award compensation expense recognized by the Company during 2018, 2017 and 2016 was $35.5 million, $32.5 million and $32.3 million, respectively, or $27.2 million, $20.5 million and $20.4 million net of taxes, respectively.
Income Tax Expense – The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.
New Accounting Standards
Accounting Standards Recently Adopted
In May 2014,July 2016, the FASBFinancial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09 Revenue from Contracts with Customers2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2014-09)2016-13). ASU 2014-09 is a comprehensive new revenue recognition model that requires2016-13 changes how a company to recognize revenue to depictrecognizes expected credit losses on financial instruments carried at amortized cost basis, by requiring recognition of the transferfull lifetime expected credit losses upon initial recognition of goods or services to customers in an amount that reflects the consideration to whichfinancial instrument. ASU 2016-13 replaced the company expects to be entitled in exchange for those goods or services.incurred loss methodology. The Company adopted ASU 2014-092016-13 on January 1, 2018. The Company applied the standard to all contracts2020 using thea modified retrospective method. As such,approach for financial instruments measured at amortized cost.
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On January 1, 2020, the Company recognizedremeasured the allowance for credit losses on financial instruments under the new accounting standard. The difference was recorded as a cumulative effect adjustment to Retained earnings, net of income taxes. The initial adoption of ASU 2016-13 did not impact the Company’s Consolidated statements of operations. The effect of adopting ASU 2016-13 on the Company’s Consolidated balance sheets was as follows (in thousands):
December 31, 2019Effect of AdoptionJanuary 1, 2020
ASSETS
Finance receivables(a)
$7,572,947 $0 $7,572,947 
Allowance for credit losses on finance receivables(a)
$(198,581)$(100,604)$(299,185)
Deferred income taxes$101,204 $22,484 $123,688 
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities$582,288 $109 $582,397 
Retained earnings$2,193,997 $(78,229)$2,115,768 
(a)Reported as Finance receivables, net on the Consolidated balance sheets, allocated between current and non-current
Financial Statement Comparability to Prior Periods – Beginning in 2020, under ASU 2016-13, the Company recognizes full lifetime expected credit losses upon initial recognition of the adoption as an adjustment toassociated financial instrument carried at amortized cost basis. Under ASU 2016-13, changes in the opening balanceallowance for credit losses and the impact on the provision for credit losses will be affected by the size and composition of retained earnings. The comparative information hasthe Company's finance receivables portfolios, economic conditions, reasonable and supportable forecasts, and other appropriate factors at each reporting period. Prior periods have not been adjusted.
The majority of the Company’s Motorcyclesrestated and Related Products revenue will continue to be recognized when products are shipped to customers. For a limited number of vehicle sales where revenue was previously deferred due to a guaranteed resale value, the Company will now recognize revenue when those vehicles are shippedreported in accordance with ASU 2014-09. The Company recordedthe previously applicable U.S. GAAP, which generally required that a net increasecredit loss be incurred before it was recognized.As such, prior periods will not be comparable to the opening balance of retained earnings of $6.0 million, net of income taxes, as of January 1, 2018 as a result of adopting ASU 2014-09. The Company also adjusted other assets and accrued liabilities associated with these vehicle sales in connection with its adoption of ASU 2014-09.
The majority of the Financial Services segment’s revenues relate to loan and servicing activities which are outside the scope of this guidance. Financial Services revenues that fall under the scope of ASU 2014-09 continue to be recognized at the point of sale, or over the estimated life of the contract, as appropriate.


The following tables illustrate the impact of adoption of ASU 2014-09current period. Additional information on the consolidated statement of income and the consolidated balance sheet (in thousands):

Consolidated Statement of Income
  Twelve months ended December 31, 2018
  As Reported Without Adoption of ASC 606 Effect of Change
Revenue:      
Motorcycles and Related Products $4,968,646
 $4,969,948
 $(1,302)
Costs and expenses:      
Motorcycles and Related Products cost of goods sold $3,351,796
 $3,348,779
 $3,017
Operating income $713,523
 $717,842
 $(4,319)
Income before provision for income taxes $686,629
 $690,948
 $(4,319)
Provision for income taxes $155,178
 $156,225
 $(1,047)
Net income $531,451
 $534,723
 $(3,272)

Consolidated Balance Sheet
 December 31, 2018
 As Reported Without Adoption of ASC 606 Effect of Change
ASSETS     
Other current assets$144,368
 $163,841
 $(19,473)
Deferred income taxes$141,464
 $143,312
 $(1,848)
      
LIABILITIES AND SHAREHOLDERS' EQUITY     
Accrued liabilities$601,130
 $625,203
 $(24,073)
Retained earnings$2,007,583
 $2,004,831
 $2,752

Company’s finance receivables is discussed further in Note 7.
In MarchJanuary 2017, the FASB issued ASU No. 2017-07 Compensation2017-04 Intangibles - Retirement BenefitsGoodwill and Other (Topic 715)350): ImprovingSimplifying the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit CostTest for Goodwill Impairment (ASU 2017-07)2017-04). ASU 2017-07 amends ASC 715, Compensation - Retirement Benefits2017-04 simplified the subsequent measurement of goodwill by requiring employerseliminating the requirement to presentcalculate the service cost componentimplied fair value of net periodic benefit cost ingoodwill. Rather, the goodwill impairment is calculated by comparing the fair value of a reporting unit to its carrying value, and an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value, limited to the total goodwill allocated to the reporting unit. All reporting units apply the same income statement line item as other employee compensation costs arising from services rendered duringimpairment test under the period. Other components of the net periodic benefit cost will be presented separately from the line item that includes the service cost and outside of any subtotal of operating income. The guidance also limits the components that are eligible for capitalization in assets.new standard. The Company adopted ASU 2017-07 retrospectively2017-04 on January 1, 2018. As a result, the non-service cost components of net periodic benefit cost have been presented in Other income (expense), net and the prior period has been recast to reflect the new presentation. The Company elected the practical expedient allowing the use of previously disclosed benefit components as the basis for the retrospective application. Net periodic benefit credit (cost) previously recorded in Motorcycles and Related Products cost of goods sold and Selling, administrative and engineering expense of $10.6 million and $(1.4) million, respectively, for the twelve months ended December 31, 2017, and $6.2 million and $(3.6) million, respectively, for the twelve months ended December 31, 2016 has been reclassified to Other income (expense), net.

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018 on a retrospective basis. As a result, the change in restricted cash has been excluded from financing activities and included in the change in cash, cash equivalents and restricted cash and the prior period has been recast to reflect the new presentation.


In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). ASU 2016-01 enhances the existing financial instruments reporting model by modifying fair value measurement tools, simplifying impairment assessments for certain equity instruments and modifying overall presentation and disclosure requirements. The ASU was subsequently amended by ASU No. 2018-03, ASU No. 2018-04 and ASU No. 2018-09. The Company adopted ASU 2016-01 on January 1, 20182020 on a prospective basis. The adoption of ASU 2016-012017-04 did not have a material impact on its financial statements.
In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 addresses eight specific cash flow items with the objective of reducing diversity in practice regarding how certain cash receipts and cash payments are presented in the statement of cash flows. The Company adopted ASU 2016-15 on January 1, 2018 on a retrospective basis. The adoption of ASU 2016-15 did not have a material impact on its financial statements.
In October 2016, the FASB issued ASU No. 2016-16 Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16). ASU 2016-16 states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The Company adopted ASU 2016-16 on January 1, 2018 using a modified retrospective approach. The adoption of ASU 2016-16 did not have a material impact on its financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). Under existing U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded as a component of income tax expense in the period in which the law was enacted. When deferred tax balances related to items originally recorded in accumulated other comprehensive income are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act. The amendments in this ASU also require certain disclosures about stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption in any period is permitted. The Company adopted ASU 2018-02 in December 2018 resulting in the reclassification of $108.3 million in stranded tax effects from accumulated other comprehensive loss to retained earnings. These reclassified stranded tax effects relate to the change in the U.S. federal corporate income tax rateeffect on the gross deferred tax amounts. The Company has elected the portfolio approach to release stranded income tax effects in AOCI.

Company's consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-14)2018-13). The amendments in ASU 2018-142018-13 amended ASC 820 to eliminate, modify, the annualand add certain disclosure requirements for defined benefit pension and other postretirement benefit plans. The FASB modified, added, and deleted specific disclosures in an effort to improve usefulness to financial statement users and reduce unnecessary costs for companies.fair value measurements. The amendments are effective for fiscal years ending after December 15,were required to be applied retrospectively, with the exception of a few disclosure additions, which were to be applied on a prospective basis. The Company adopted ASC 2018-13 on January 1, 2020. EarlyThe adoption of ASU 2018-13 did not have a material impact on the Company's disclosures.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) (ASU 2018-15). The new guidance requires a customer in a cloud computing arrangement that is permitted.a service contract to follow the existing internal-use software guidance to determine which implementation costs to capitalize as assets or expense as incurred. The Company adopted ASU 2018-14 in December 2018.2018-15 on January 1, 2020 on a prospective basis. The adoption of ASU 2018-15 did not have a material impact on the Company's consolidated financial statements.
Accounting Standards Not Yet Adopted
In February 2016,December 2019, the FASB issued ASU No. 2016-02 Leases (Topic 842)2019-12, Simplifying the Accounting for Income Taxes (ASU 2016-02)2019-12). ASU 2016-02 amends the existing lease accounting model by requiring a lessee to recognize the rights and obligations resulting fromThe new guidance eliminates certain leases as assets and liabilities on the balance sheet. ASU 2016-02 also requires a company to disclose key information about their leasing arrangements. The Company is required to adopt ASU 2016-02 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 using a modified retrospective approach. Pursuant to ASU 2018-11, Leases (Topic 842): Targeted Improvements, the Company plans to apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance sheet in the period of adoption. The Company has elected the practical expedients upon transition that allow entities not to reassess lease identification, classification and initial direct costs for leases that existed prior to adoption. The adoption of ASU 2016-02 will result in the initial recognition of right of use assets and lease liabilitiesexceptions related to the Company's leasing arrangements totaling approximately $60 million.
In July 2016,approach for intraperiod tax allocation, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 changes how to recognize expected credit losses on financial assets. The standard requires a more timelymethodology for calculating income taxes in an interim period and the recognition of credit losses on loans and other financial assets anddeferred tax liabilities for outside basis differences. The new guidance also provides additional transparency about credit risk. The current credit loss standard generally requires that a loss actually be incurred before it is recognized, while the new standard will require recognition of full lifetime expected losses upon initial recognitionsimplifies aspects of the financial instrument.accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Companyguidance is required to adopt ASU 2016-13 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019 on a modified retrospective basis. Early adoption is permittedeffective for fiscal years beginning after December 15, 2018. An entity should apply the standard by recording a cumulative


effect adjustment to retained earnings upon adoption. Adoption of this standard will impact how the Company recognizes credit losses on its financial instruments. The Company is currently evaluating the impact of adoption of ASU 2016-13 but anticipates the adoption of ASU 2016-13 will result in an increase in the annual provision for credit losses and the related allowance for credit losses.

In January 2017, the FASB issued ASU No. 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating the requirement to calculate the implied fair value of goodwill. Rather, the goodwill impairment is calculated by comparing the fair value of a reporting unit to its carrying value, and an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value, limited to the total goodwill allocated to the reporting unit. All reporting units apply the same impairment test under the new standard. The Company is required to adopt ASU 2017-04 for its annual and any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests.

In August 2017, the FASB issued ASU No. 2017-12 Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). ASU 2017-12 amends ASC 815, Derivatives and Hedging to improve the financial reporting of hedging relationships and to simplify the application of the hedge accounting guidance. The ASU makes various updates to the hedge accounting model, including changing the recognition and presentation of changes in the fair value of the hedging instrument and amending disclosure requirements, among other things. The Company is required to adopt ASU 2017-12 for fiscal years beginning after December 15, 2018,2020 and for interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance ofpermitted. The Company does not expect the ASU. For cash flow and net investment hedges existing at the date of adoption, the Company must apply a cumulative effect adjustment as of the beginning of the fiscal year in which the standard is adopted. The amendments related to presentation and disclosure are required prospectively. The adoption of ASU 2017-12 will not2019-12 to have a material impact on the Company'sits consolidated financial statements.

52
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). ASU 2018-13 amends ASC 820 to eliminate, modify, and add certain disclosure requirements for fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. Early adoption is permitted in any period, either for the whole standard or only the provisions that eliminate or modify requirements. The amendments are required to be applied retrospectively, with the exception of a few disclosure additions, which are to be applied on a prospective basis. The Company is currently evaluating the impact of adopting ASU 2018-13, but does not believe that it will have a significant impact on its disclosures.


In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) (ASU 2018-15). The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the existing internal-use software guidance to determine which implementation costs to capitalize as assets or expense as incurred. The guidance is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2018-15.
2. Revenue

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue.















The following table includesDisaggregated revenue disaggregated by major source was as follows for the years ended December 31, (in thousands):
  Twelve months ended
  December 31, 2018
Motorcycles and Related Products:  
Motorcycles $3,882,963
Parts & Accessories 754,663
General Merchandise 241,964
Licensing 38,676
Other 50,380
Revenue from Motorcycles and Related Products 4,968,646
Financial Services:  
Interest income 645,985
Securitization and servicing fee income 1,136
Other income 101,108
Revenue from Financial Services 748,229
Total revenue $5,716,875

The following is a description of principal activities from which the Company generates its revenue, by reportable segment.

20202019
Motorcycles and Related Products:
Motorcycles$2,350,407 $3,538,269 
Parts & Accessories659,634 713,400 
General Merchandise186,068 237,566 
Licensing29,750 35,917 
Other38,195 47,526 
3,264,054 4,572,678 
Financial Services:
Interest income682,517 678,205 
Other107,806 110,906 
790,323 789,111 
$4,054,377 $5,361,789 
Motorcycles and Related Products

Motorcycles, Parts & Accessories, and General Merchandise - Sales– Revenues from the sale of motorcycles, partsParts & accessories,Accessories (P&A), and general merchandiseGeneral Merchandise are recorded when control is transferred to wholesale customers (independent dealers). Thisthe customer, generally takes place upon shipmentat the time of the products.shipment. The sale of products to independent dealers outside the U.S. and Canada is generally on open account with terms that generally approximate 30-120 days and the resulting receivables are included in accountsAccounts receivable, innet on the consolidatedConsolidated balance sheets.sheets. The sale of products to independent dealers in the U.S. and Canada is financed by the purchasing dealers through HDFS and the related receivables are included in finance Finance receivables, innet on the consolidatedConsolidated balance sheets.

sheets.
The Company offers sales incentive programs to independent dealers and retail customers designed to promote the sale of motorcycles, parts & accessories,P&A, and general merchandise.General Merchandise. The Company estimates its variable consideration related to motorcycles and related products sold under its sales incentive programs using the expected value method. Further, theThe Company accounts for consideration payable to a customer as part of its sales incentives as a reduction of revenue, which is accrued at the later of the date the related sale is recorded or the date the incentive program is both approved and communicated.

The Company offers to its dealers the right to return eligible parts & accessoriesP&A and general merchandise.General Merchandise. When the Company offers a right to return, it estimates returns based on an analysis of historical trends and records revenue on the initial sale only in the amount that it expects to be entitled. The remaining consideration is deferred in a refund liability account. The refund liability is remeasured for changes in the estimate at each reporting date with a corresponding adjustment to revenue.     

Variable consideration related to sales incentives and rights to return is adjusted at the earliest of when the amount of consideration the Company expects to receive changes or the consideration becomes fixed. Adjustments for variable consideration related to previously recognized sales decreased revenue by an immaterial amountwere not material during 2018.
2020 and 2019.
Shipping and handling costs associated with freight after control of a product has transferred to a customer are accounted for as fulfillment costs. The Company accrues for the shipping and handling in the same period that the related revenue is recognized.

The Company offers standard, limited warranties on its motorcycles and parts & accessories.P&A. These warranties provide assurance that the product will function as expected and are not separate performance obligations. The Company accounts for estimated warranty costs as a liability when control of the product transfers to the customer.

53



Licensing -– The Company licenses the Harley-Davidson name “Harley-Davidson” and other trademarks owned by the Company and collects royalties from its customers (licensees).licensees. The trademark licenses are considered symbolic intellectual property, which grant the customerlicensees a right to access the Company’s intellectual property. The Company satisfies its performance obligation over the license period, as the Company fulfills its promise to grant the customerlicensees rights to use and benefit from the intellectual property as well as maintain the intellectual property.

Payment is typically due within thirty days of the end of each quarter for the royalties earned in that quarter. Revenue, in the form of sales-based royalties, is recognized when the customers’licensees’ subsequent sales occur. The Company applies the practical expedient in ASC 606-10-55-18Topic 606, Revenue from Contracts with Customers, to recognize licensing revenues in the amount that the Company has the right to invoice because the royalties due each period correspond directly with the value of the Company’s performance to date. Revenue will be recognized over the remaining contract terms which range up to 62 years.

Other Revenue -– Other Revenuerevenue consists primarily of revenue from Harley Ownership GroupOwners Group® (H.O.G.) membership sales, motorcycle rental commissions, dealer software sales, museum admissions and events, and other miscellaneous products and services.

Financial Services

Interest income -Income – Interest income on finance receivables is recorded as earned and is based on the average outstanding daily balance for wholesale and retail receivables. Accrued and uncollected interest is classified with finance receivables.Finance receivables, net. Certain loan origination costs related to finance receivables, including payments made to dealers for certain retail loans, are deferred and recorded within financeFinance receivables, net and amortized over the estimated life of the contract.

Securitization and servicing fee income - Securitization and servicing fee income consists of revenue from servicing and ancillary fees associated with HDFS' off-balance sheet asset-backed securitization transaction. Refer to Note 12 of the Notes to Consolidated Financial Statements for further discussion regarding asset-backed financing.

Other income -Income – Other income consists primarily of insurance and licensing revenues. HDFS works with certain unaffiliated insurance companies to offer motorcycle insurance and protection products through most Harley-Davidson independent dealers in the U.S. and Canada. HDFS also works with third-party financial institutions that issue credit cards or offer other financial products bearing the Harley-Davidson brand in the U.SU.S. and internationally. For many of these contracts, the Company grants temporary rights to use the licensed trademarks owned by the Company and collects royalties from its customers in connection with sales of their products. The trademark licenses are considered symbolic intellectual property, which grant the customer a right to access the intellectual property. The Company satisfies its performance obligation over the license period, as it fulfills its promise to grant the customer rights to use and benefit from the intellectual property as well as maintain the intellectual property. Royalty and profit sharing amounts are received either quarterly or per annum, based upon the contract. Revenue, in the form of sales-based royalties, is recognized when the customers’ subsequent sales occur. Revenue will be recognized over the remaining contract terms which range up to 5 years. The Company is the primary obligor for certain other insurance related contracts and, as a result, revenue is recognized over the life of the contract as the Company fulfills its performance obligation.

Contract Liabilities

DeferredThe Company maintains certain deferred revenue relatesbalances related to payments received at contract inception in advance of the Company’s performance under the contract and generally relates to the sale of H.O.G. memberships and extended service plan contracts. Deferred revenue is recognized as revenue as the Company performs under the contract. On January 1, 2018, $23.4 millionDeferred revenue, included in Accrued liabilities and Other long-term liabilities on the Consolidated balance sheets, was as follows as of December 31, (in thousands):
20202019
Balance, beginning of period$29,745 $29,055 
Balance, end of period36,614 29,745 
Previously deferred revenue recognized as revenue in 2020 and 2019 was included in Accrued liabilities $19.7 million and Other long-term liabilities in the consolidated balance sheet. $19.6$26.3 million, of previously deferred revenue was recognized in 2018. At December 31, 2018, the unearned revenue balance was $29.1 million.respectively. The Company expects to recognize approximately $15.3$15.4 million of the remaining unearned revenue in 20192021 and $13.8$21.2 million thereafter.

3. Restructuring ExpensesActivities
Expenses associated with the Company's restructuring activities are included in Restructuring expense on the Consolidated statements of operations.
2020 Restructuring Activities – In January2020, the Company initiated restructuring activities including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global independent dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. The workforce reduction resulted in the termination of approximately 500 employees. In addition, the India action will result in the termination of approximately 70 employees.
54

Restructuring expenses incurred related to the 2020 restructuring activities were $130.0 million, including $119.1 million in the Motorcycles segment and $10.9 million in the Financial Services segment. The Company expects remaining restructuring expenses related to the 2020 restructuring activities to be approximately $20 million, which is expected to be recognized in 2021 when the actions are completed. The total estimated restructuring activities of approximately $150 million includes approximately $139 million and $11 million expected to be in incurred in the Motorcycles and Financial Services segments, respectively. Total expected restructuring expenses under the 2020 restructuring activities include approximately $30 million related to employee termination benefits, $90 million related to contract termination and other costs and $30 million related to non-current asset adjustments, including accelerated depreciation and other adjustments to the carrying value of non-current assets.
Changes in accrued restructuring expenses for the 2020 restructuring activities, which are included in Accrued liabilities on the Consolidated balance sheets, were as follows as of December 31, (in thousands):
2020
Employee Termination BenefitsContract Terminations
& Other		Non-Current Asset AdjustmentsTotal
Balance, beginning of period$0 $0 $0 $0 
Restructuring expense28,913 70,894 30,202 130,009 
Utilized – cash
(21,494)(54,773)0 (76,267)
Utilized – non cash
0 0 (30,202)(30,202)
Foreign currency changes305 75 0 380 
Balance, end of period$7,724 $16,196 

$0 $23,920 
2018 Restructuring Activities – In 2018, the Company initiated a plan to further improve its manufacturing operations and cost structure by commencing a multi-year manufacturing optimization plan which includes the consolidation of its motorcycle assembly plant in Kansas City, Missouri, into its plant in York, Pennsylvania, and the closure of its wheel operations in Adelaide, Australia (Manufacturing Optimization Plan). AsThe consolidation of operations resulted in the U.S. operations are consolidated, the Company expectselimination of approximately 800 jobs will be eliminated withat the closure of Kansas City operationsfacility and the addition of approximately 450 jobs will be added inat the York facility through 2019. ApproximatelyThe Adelaide facility closure resulted in the elimination of approximately 90 jobs will be eliminated in Adelaide.


The Company expects to incur restructuring and other consolidation costs of $152 million to $162 million injobs. Through December 31, 2019 the Motorcycles segment related to the Manufacturing Optimization Plan through 2019,incurred cumulative restructuring expenses of which approximately 70% will be cash charges. The current Manufacturing Optimization Plan cost estimate has been revised down from the prior estimate by $3$122.2 million and $23 million at the low and high ends of the range, respectively.
The current estimate includes $129 million to $134 million of restructuring expense and $23 million to $28 million ofother costs related to temporary inefficiencies.inefficiencies of $23.2 million under the Manufacturing Optimization Plan. The Company expects restructuring expenses to include the cost of employee termination benefits, accelerated depreciation, and other project implementation costs of $40 million to $41 million, $51 million to $53 million, and $38 million to $40 million, respectively.Manufacturing Optimization Plan was completed in 2019.
In November 2018, the Company implementedinitiated a reorganization of its workforce (Reorganization Plan)., which was completed in 2019. As a result, approximately 70 employees left the Company on an involuntary basis. The Company incurred
Restructuring expenses for the 2018 Restructuring Activities were limited to the Motorcycles segment and were recorded during 2019 and 2018. Changes in accrued restructuring expenses of $3.9 million related to this actionfor the 2018 restructuring activities, which are included in Accrued liabilities on the Consolidated balance sheets during 2018.
Restructuring expense related to these plans is recorded as a separate line item in the consolidated statement of income2019 and the accrued restructuring liability is recorded in accrued liabilities in the consolidated balance sheet. The Company expects these plans to be completed by mid-2019. Changes in the accrued restructuring liability2018 were as follows (in thousands):. The changes in accrued restructuring expenses during 2020 related to the 2018 restructuring activities were immaterial.
 2019
Manufacturing Optimization PlanReorganization Plan
 Employee Termination BenefitsAccelerated DepreciationOtherTotalEmployee Termination BenefitsTotal
Balance, beginning of period$24,958 $0 $79 $25,037 $3,461 $28,498 
Restructuring expense15 14,684 17,971 32,670 (317)32,353 
Utilized - cash(24,102)0 (16,950)(41,052)(3,118)(44,170)
Utilized - non cash0 (14,684)(1,094)(15,778)0 (15,778)
Foreign currency changes(6)0 (4)(10)(26)(36)
Balance, end of period$865 $0 $2 $867 $0 $867 
55

Twelve months ended December 31, 20182018
Manufacturing Optimization Plan Reorganization Plan  Manufacturing Optimization PlanReorganization Plan
Employee Termination Benefits Accelerated Depreciation Other Total Employee Termination Benefits TotalEmployee Termination BenefitsAccelerated DepreciationOtherTotalEmployee Termination BenefitsTotal
Balance, beginning of period$—
 $—
 $—
 $—
 $—
 $—
Balance, beginning of period$0 $0 $0 $0 $0 $0 
Restructuring expense38,666
 34,654
 16,182
 89,502
 3,899
 93,401
Restructuring expense38,666 34,654 16,182 89,502 3,899 93,401 
Utilized - cash(13,060) —
 (16,095) (29,155) (444) (29,599)Utilized - cash(13,060)0 (16,095)(29,155)(444)(29,599)
Utilized - non cash—
 (34,654) —
 (34,654) —
 (34,654)Utilized - non cash0 (34,654)0 (34,654)0 (34,654)
Foreign currency changes(648) —
 (8) (656) 6
 (650)Foreign currency changes(648)0 (8)(656)6 (650)
Balance, end of period$24,958
 $—
 $79
 $25,037
 $3,461
 $28,498
Balance, end of period$24,958 $0 $79 $25,037 $3,461 $28,498 
During 2018, theThe Company incurred $12.9 million of incrementalMotorcycles and Related Products cost of goods sold due to temporary inefficiencies related toresulting from implementing the Manufacturing Optimization Plan.Plan during 2019 and 2018 of $10.3 million and $12.9 million, respectively.

4. Income Taxes

Income tax (benefit) provision for the years ended December 31, consists of the following (in thousands):
During 2017,
202020192018
Current:
Federal$4,877 $82,484 $136,202 
State2,614 6,421 23,134 
Foreign19,560 23,328 29,823 
27,051 112,233 189,159 
Deferred:
Federal(30,779)18,760 (23,181)
State(11,579)402 (6,787)
Foreign(1,721)2,385 (4,013)
(44,079)21,547 (33,981)
$(17,028)$133,780 $155,178 
The components of (Loss) income before income taxes for the Company recordedyears ended December 31, were as follows (in thousands):
202020192018
Domestic$(81,522)$465,798 $593,099 
Foreign65,792 91,617 93,530 
$(15,730)$557,415 $686,629 
56

Income tax (benefit) provision differs from the amount that would be provided by applying the statutory U.S. corporate income tax expense of $53.1 million in connection withrate for the enactment ofyears ended December 31, due to the "Tax Cuts and Jobs Act" (2017 Tax Act), all of which the Company regarded as provisional under SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of thefollowing items (in thousands):
202020192018
(Benefit) provision at statutory rate$(3,303)$117,057 $144,192 
State taxes, net of federal benefit822 14,165 18,086 
Foreign rate differential60 1,665 2,712 
Foreign derived intangible income0 (3,108)(8,400)
Research and development credit(8,442)(8,200)(7,400)
Unrecognized tax benefits including interest and penalties(8,567)289 (4,121)
Valuation allowance adjustments9,675 8,070 908 
State credits(13,106)(4,704)0 
Deferred tax balance remeasurement for rate change0 0 (8,098)
Territorial tax0 0 9,556 
Global intangible low-taxed income1,480 1,113 2,437 
Adjustments for previously accrued taxes(4,951)(1,755)(7,196)
Rate differential on intercompany transfers0 0 6,013 
Executive compensation limitation2,543 2,620 3,171 
Other foreign inclusions4,415 4,202 1,787 
Other2,346 2,366 1,531 
Income tax (benefit) provision$(17,028)$133,780 $155,178 
The 2017 Tax Cuts and Jobs Act (SAB 118). The Company's provisional income tax expense included the remeasurement of deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, a one-time transition tax related to undistributed earnings of certain foreign subsidiaries that were not previously taxed, the write-off of foreign tax credit deferred tax assets related to withholding tax on foreign dividend payments, state tax estimates related to the conformity of federal tax law changes and other smaller items. The Company completed its accounting for all of the initial income tax effects of the 2017 Tax Act during 2018 which resulted in a reduction to income tax expense during 2018 of $1.5 million.

The 2017 Tax Act also subjects U.S. shareholders to current tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries for which a company can elect to either recognize deferred taxes or to provide tax expense in the year incurred. The Company has elected to account for GILTI in the year the tax is incurred.



Provision for income taxes for the years ended December 31 consists of the following (in thousands):
  2018 2017 2016
Current:      
Federal $136,202
 $245,189
 $284,489
State 23,134
 24,898
 28,406
Foreign 29,823
 21,138
 19,017
  189,159
 291,225
 331,912
Deferred:      
Federal (23,181) 47,046
 (4,250)
State (6,787) 2,688
 7,038
Foreign (4,013) 1,121
 (2,953)
  (33,981) 50,855
 (165)
Total $155,178
 $342,080
 $331,747
The components of income before income taxes for the years ended December 31 were as follows (in thousands):
  2018 2017 2016
Domestic $593,099
 $788,878
 $954,138
Foreign 93,530
 74,961
 69,773
Total $686,629
 $863,839
 $1,023,911
The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate due to the following items for the years ended December 31:
  2018 2017 2016
Provision at statutory rate 21.0 % 35.0 % 35.0 %
State taxes, net of federal benefit 2.6
 1.9
 1.8
Foreign rate differential 0.4
 (0.8) (0.6)
Domestic manufacturing deduction —
 (2.2) (2.1)
Foreign derived intangible income (1.2) —
 —
Research and development credit (1.1) (0.7) (0.4)
Unrecognized tax benefits including interest and penalties (0.6) 2.3
 (1.3)
Valuation allowance adjustments 0.1
 (0.1) 0.1
Deferred tax balance remeasurement for rate change (1.2) 5.5
 —
Territorial tax 1.4
 (0.1) —
Global intangible low-taxed income 0.4
 —
 —
Adjustments for previously accrued taxes (1.0) (1.2) 0.2
Rate differential on intercompany transfers 0.9
 —
 —
Executive compensation limitation 0.5
 —
 —
Other 0.4
 —
 (0.3)
Provision for income taxes 22.6 % 39.6 % 32.4 %


The principal components of the Company’s deferred income tax assets and liabilities as of December 31, include the following (in thousands):
  2018 2017
Deferred tax assets:    
Accruals not yet tax deductible $108,284
 $92,158
Pension and postretirement benefit plan obligations 48,347
 37,357
Stock compensation 13,295
 12,669
Net operating loss carryforward 34,842
 33,171
Valuation allowance (21,868) (21,561)
Other, net 43,870
 52,422
  226,770
 206,216
Deferred tax liabilities:    
Depreciation, tax in excess of book (79,326) (88,989)
Other (5,980) (8,154)
  (85,306) (97,143)
Total $141,464
 $109,073
20202019
Deferred income tax assets:
Accruals not yet tax deductible$142,100 $95,746 
Pension and postretirement healthcare plan obligations6,499 17,685 
Stock compensation9,619 11,867 
Net operating loss and credit carryforwards55,857 45,279 
Valuation allowance(38,072)(29,024)
Other78,051 64,833 
254,054 206,386 
Deferred income tax liabilities:
Depreciation, tax in excess of book(74,579)(83,477)
Other(29,544)(29,840)
(104,123)(113,317)
$149,931 $93,069 
The Company reviews its deferred income tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred income tax asset is considered, along with any positive or negative evidence including tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.
At December 31, 2018, the Company had approximately $270.4 million of
57

The Company's gross state operating loss carryforwards expiring in 2031. At were as follows at December 31, 2018, the(in thousands):
Year of Expiration2020
2031$252,142 
203349 
20342,455 
20357,800 
20383,992 
203911,710 
204029,836 
Indefinite9,449 
$317,433 
The Company also had Wisconsin research and development credit carryforwards of $11.4$33.8 million at December 31, 2020, expiring in 2024-2028. The2024-2035.
At December 31, 2020, the Company had a deferred tax asset of $25.9$45.9 million as of December 31, 2018 for the benefit of these lossesrelated to its state operating loss and credits. A valuation allowance of $2.9 million was established against theWisconsin research and development credit carryforwards and a deferred tax asset which is a decrease of $1.6$10.0 million from the prior year.related to foreign net operating losses.
The Company hadCompany's valuation allowance was $38.1 million at December 31, 2020 and included $17.7 million related to state operating loss and Wisconsin research and development credit carryforwards, $6.5 million related to foreign net operating losses (NOL) totaling $8.9and $13.9 million as of December 31, 2018. It had a valuation allowance of $18.9 million against both the NOLs andrelated to other deferred tax assets of $10.0 million.assets. The increase in the valuation allowance onfrom prior year included $8.0 million related to state operating loss and Wisconsin research and development credit carryforwards and $1.0 million related to foreign net operating losses increased by $1.8 million, reflecting movement related to realizability assessment on additional earnings and loss, as well as movements related to foreign currency rates.losses.
The Company recognizes interest and penalties related to unrecognized tax benefits in theIncome tax (benefit) provision for income taxes.. Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):
20202019
Unrecognized tax benefits, beginning of period$60,112 $61,411 
Increase in unrecognized tax benefits for tax positions taken in a prior period1,649 1,067 
Decrease in unrecognized tax benefits for tax positions taken in a prior period(12,560)(5,608)
Increase in unrecognized tax benefits for tax positions taken in the current period3,092 4,576 
Statute lapses0 (325)
Settlements with taxing authorities(1,696)(1,009)
Unrecognized tax benefits, end of period$50,597 $60,112 
  2018 2017
Unrecognized tax benefits, beginning of period $72,230
 $55,539
Increase in unrecognized tax benefits for tax positions taken in a prior period 940
 9,513
Decrease in unrecognized tax benefits for tax positions taken in a prior period (9,783) (3,749)
Increase in unrecognized tax benefits for tax positions taken in the current period 3,355
 13,779
Settlements with taxing authorities (5,331) (2,852)
Unrecognized tax benefits, end of period $61,411
 $72,230
The amount of unrecognized tax benefits as of December 31, 20182020 and 2019 that, if recognized, would affect the effective tax rate was $53.7 million.$43.8 million and $53.1 million, respectively.
The total gross amount of benefit related to interest and penalties associated with unrecognized tax benefits recognized during 2020, 2019 and 2018 in the Company’s consolidated statementConsolidated statements of incomeoperations was $2.1 million, $0.1 million and $3.2 million.million, respectively.
The total gross amount of interest and penalties associated with unrecognized tax benefits recognized at December 31, 20182020 and 2019 in the Company’s consolidatedConsolidated balance sheetsheets was $27.7 million.


$25.5 million and $27.6 million, respectively.
The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2019.2021. However, the Company is under regular audit by tax authorities. The Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.
The Company or one of its subsidiaries files income tax returns in the U.S. federal and Wisconsin state jurisdictions and various other state and foreign jurisdictions. The Company is no longer subject to income tax examinations for Wisconsin state income taxes before 20142016 or for U.S. federal income taxes before 2014.2017.
58

5. Capital Stock and Earnings Per Share
Capital Stock – The Company is currently under audit for U.S. federal incomeauthorized to issue 2,000,000 shares of preferred stock of $1.00 par value, NaN of which is outstanding. The Company's common stock has a par value of $0.01 per share. During 2020, the Company retired 15.0 million shares of its treasury stock. Share information regarding the Company's common stock at December 31, was as follows:
20202019
Common stock shares:
Authorized800,000,000 800,000,000 
Issued168,503,526 182,816,536 
Outstanding152,930,740 152,468,442 
Treasury stock shares15,572,786 30,348,094 
There were no discretionary share repurchases during the year ended December 31, 2020. Discretionary share repurchases during the years ended December 31, 2019 and 2018 were $286.7 million or 8.2 million shares and $382.0 million or 9.2 million shares, respectively. Share repurchases of common stock that employees surrendered to satisfy withholding taxes forin connection with the vesting of restricted stock units (RSUs) were $8.0 million or 0.3 million shares, $9.8 million or 0.3 million shares, and $8.6 million or 0.2 million shares during the years 2015ended December 31, 2020, 2019 and 2016.2018, respectively, discussed further in Note 17.
The Company paid cash dividends of $0.44, $1.50, and $1.48 per share during the years ended December 31, 2020, 2019, and 2018, respectively.
5.    Earnings Per Share
– The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the years ended December 31, was as follows (in thousands except per share amounts):
202020192018
Net income$1,298 $423,635 $531,451 
Basic weighted-average shares outstanding153,186 157,054 165,672 
Effect of dilutive securities – employee stock compensation plan722 750 832 
Diluted weighted-average shares outstanding153,908 157,804 166,504 
Earnings per share:
Basic$0.01 $2.70 $3.21 
Diluted$0.01 $2.68 $3.19 
  2018 2017 2016
Numerator:
      
Income used in computing basic and diluted earnings per share $531,451
 $521,759
 $692,164
Denominator:
      
Denominator for basic earnings per share - weighted-average common shares 165,672
 171,995
 179,676
Effect of dilutive securities – employee stock compensation plan 832
 937
 859
Denominator for diluted earnings per share - adjusted weighted-average shares outstanding 166,504
 172,932
 180,535
Earnings per common share:      
Basic $3.21
 $3.03
 $3.85
Diluted $3.19
 $3.02
 $3.83
Options to purchase 1.1 million, 0.8 million and 1.4 million weighted-average sharesShares of common stock outstanding during 2018, 2017 and 2016, respectively,related to share-based compensation that were not included in the Company’s computationeffect of dilutive securities because the exercise price was greater than the market price and therefore the effect would have been anti-dilutive.anti-dilutive include 1.4 million, 1.1 million and 1.1 million shares during 2020, 2019 and 2018, respectively.
The Company has a share-based compensation plan under which employees may be granted share-based awards, including restricted stock units (RSUs). Non-forfeitable dividend equivalents are paid on unvested RSUs. As such, RSUs are considered participating securities under the two-class method of calculating earnings per share as described in ASC Topic 260, “Earnings per Share.” The two-class method of calculating earnings per share did not have a material impact on the Company’s earnings per share calculation as of December 31, 2018, 2017 and 2016.
6. Additional Balance Sheet and Cash Flow Information
TheInvestments inmarketable securitiesconsisted of the following information represents additional detail for selected line items included in the consolidated balance sheets at December 31, and the statements of cash flows for the years ended December 31.
Balance Sheet Information:
Inventories, net (in thousands):
20202019
Mutual funds$52,061 $52,575 
Mutual funds, included in Other long-term assets on the Consolidated balance sheets, are carried at fair value with gains and losses recorded in income. Mutual funds are held to support certain deferred compensation obligations.
59

  2018 2017
Raw materials and work in process $177,110
 $161,664
Motorcycle finished goods 301,630
 289,530
Parts & accessories and general merchandise 136,027
 139,363
Inventory at lower of FIFO cost or net realizable value 614,767
 590,557
Excess of FIFO over LIFO cost (58,639) (52,355)
Total inventories, net $556,128
 $538,202
Inventories, net consisted of the following as of December 31, (in thousands):
20202019
Raw materials and work in process$211,979 $235,433 
Motorcycle finished goods281,132 280,306 
Parts & Accessories and General Merchandise84,469 144,258 
Inventory at lower of FIFO cost or net realizable value577,580 659,997 
Excess of FIFO over LIFO cost(54,083)(56,426)
$523,497 $603,571 
Inventory obsolescence reserves deducted from FIFO cost were $39.0$72.0 million and $38.7$49.3 million as of December 31, 20182020 and 2017,2019, respectively.


Property, plant and equipment, at costnet consisted of the following as of December 31, (in thousands):
20202019
Land and related improvements$69,518 $75,798 
Buildings and related improvements428,171 507,178 
Machinery and equipment1,577,337 1,609,582 
Software759,675 750,978 
Construction in progress188,823 148,805 
3,023,524 3,092,341 
Accumulated depreciation(2,279,740)(2,244,959)
$743,784 $847,382 
  2018 2017
Land and related improvements $73,025
 $70,256
Buildings and related improvements 483,965
 464,454
Machinery and equipment 1,740,405
 1,890,126
Software 733,180
 660,090
Construction in progress 205,786
 200,396
  3,236,361
 3,285,322
Accumulated depreciation (2,332,229) (2,317,541)
Total property, plant and equipment, net $904,132
 $967,781
Software, net of accumulated amortization, included in Property, plant and equipment, net, was $100.7 million and $138.9 million as of December 31, 2020 and 2019, respectively.
Accrued liabilities consisted of the following as of December 31, (in thousands):
20202019
Payroll, employee benefits and related expenses$107,511 $113,621 
Sales incentive programs52,820 73,354 
Warranty and recalls44,415 57,068 
Accrued interest65,590 49,213 
Tax-related accruals24,238 29,871 
Leases17,081 19,013 
Fair value of derivative financial instruments25,521 13,934 
Restructuring23,920 867 
Other196,118 225,347 
$557,214 $582,288 
Deposits –During 2020, HDFS began offering brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. At December 31, 2020, the Company had $80.0 million, net of fees, of short-term interest-bearing brokered certificates of deposit outstanding. Each separate brokered certificate of deposit is issued under a master certificate and, as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.
  2018 2017
Payroll, employee benefits and related expenses $125,056
 $124,093
Restructuring reserves 28,498
 —
Warranty and recalls 103,074
 75,089
Sales incentive programs 57,525
 48,309
Tax-related accruals 43,083
 25,944
Fair value of derivative financial instruments 5,316
 21,308
Accrued interest 47,977
 40,347
Other 190,601
 194,732
Total accrued liabilities $601,130
 $529,822
60





Operating Cash Flow Information:
– The reconciliation of netNet income to netNet cash provided by operating activities of continuing operations is for the years ended December 31, was as follows (in thousands):
 2018 2017 2016202020192018
Cash flows from operating activities:      Cash flows from operating activities:
Net income $531,451
 $521,759
 $692,164
Net income$1,298 $423,635 $531,451 
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization of intangibles 264,863
 222,188
 209,555
Adjustments to reconcile Net income to Net cash provided by operating activities:Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortizationDepreciation and amortization185,715 232,537 264,863 
Amortization of deferred loan origination costs 81,315
 82,911
 86,681
Amortization of deferred loan origination costs71,142 76,326 81,315 
Amortization of financing origination fees 8,367
 8,045
 9,252
Amortization of financing origination fees14,435 9,823 8,367 
Provision for long-term employee benefits 36,481
 29,900
 38,273
Provision for long-term employee benefits40,833 13,344 36,481 
Employee benefit plan contributions and payments (10,544) (63,277) (55,809)Employee benefit plan contributions and payments(20,722)(13,256)(10,544)
Stock compensation expense 35,539
 32,491
 32,336
Stock compensation expense23,494 33,733 35,539 
Net change in wholesale finance receivables related to sales (56,538) 35,172
 (3,233)Net change in wholesale finance receivables related to sales531,701 (5,822)(56,538)
Provision for credit losses 106,870
 132,444
 136,617
Provision for credit losses181,870 134,536 106,870 
Gain on off-balance sheet asset-backed securitization —
 —
 (9,269)
Loss on debt extinguishment —
 —
 118
Deferred income taxes (33,981) 50,855
 (165)Deferred income taxes(44,079)21,547 (33,981)
Other, net 37,554
 8,559
 (6,907)Other, net13,826 298 37,554 
Changes in current assets and liabilities:      Changes in current assets and liabilities:
Accounts receivable, net 9,143
 (18,149) (45,934)Accounts receivable, net127,657 44,902 9,143 
Finance receivables – accrued interest and other 773
 (1,313) (1,489)Finance receivables – accrued interest and other7,418 (11,119)773 
Inventories (31,059) (20,584) 85,072
Inventories, netInventories, net80,858 (47,576)(31,059)
Accounts payable and accrued liabilities 196,192
 10,128
 38,237
Accounts payable and accrued liabilities(43,087)(18,462)196,192 
Derivative instruments 473
 1,866
 (3,413)
Derivative financial instrumentsDerivative financial instruments(3,481)1,936 473 
Other 29,022
 (27,934) (27,747)Other9,012 (28,110)29,022 
Total adjustments 674,470
 483,302
 482,175
1,176,592 444,637 674,470 
Net cash provided by operating activities $1,205,921
 $1,005,061
 $1,174,339
Net cash provided by operating activities$1,177,890 $868,272 $1,205,921 
Cash paid during the periodyears ended December 31, for interest and income taxes was as follows (in thousands):
202020192018
Interest$245,961 $229,678 $207,484 
Income taxes$30,675 $149,828 $149,436 
  2018 2017 2016
Interest $207,484
 $204,866
 $185,804
Income taxes $149,436
 $300,113
 $356,553
Interest paid represents interest payments of HDFS (included in Financial Services interest expense) and interest payments of the Company, (includedincluded in Financial Services interest expense)expense and Interest expense on the Consolidated statements of operations.


7. Finance Receivables
Finance receivables net at December 31 for the past five years were as follows (in thousands):
  2018 2017 2016 2015 2014
Wholesale          
United States $1,007,956
 $939,621
 $961,150
 $965,379
 $903,380
Canada 75,659
 77,336
 65,440
 58,481
 48,941
Total wholesale 1,083,615
 1,016,957
 1,026,590
 1,023,860
 952,321
Retail          
United States 6,103,378
 5,901,002
 5,769,410
 5,803,071
 5,398,006
Canada 224,823
 239,598
 212,801
 188,400
 209,918
Total retail 6,328,201
 6,140,600
 5,982,211
 5,991,471
 5,607,924
  7,411,816
 7,157,557
 7,008,801
 7,015,331
 6,560,245
Allowance for credit losses (189,885) (192,471) (173,343) (147,178) (127,364)
Total finance receivables, net $7,221,931
 $6,965,086
 $6,835,458
 $6,868,153
 $6,432,881
 The Company offersinclude both retail and wholesale financing to the Company’s independent dealers. Wholesale loans to dealersfinance receivables, including amounts held by consolidated VIEs. Finance receivables are generally secured by financed inventory or property and are originatedrecorded in the U.S. and Canada. Wholesale finance receivables are related primarily to motorcycles and related parts and accessories sales.financial statements at amortized cost net of an allowance for credit losses.
The Company provides retail financial services to customers of the Company’sits independent dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to independent dealer sales of motorcycles to the dealers’retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts. As of December 31, 20182020 and 2017,2019, approximately 11% of gross outstanding retail finance receivables were originated in Texas; there were no other states that accounted for more than 10% of gross outstanding retail finance receivables.
The Company offers wholesale financing to its independent dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles and related parts and accessories to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.
61

Finance receivables, net at December 31, were as follows (in thousands):
20202019201820172016
Retail finance receivables:
United States$6,128,269 $6,180,236 $6,103,378 $5,901,002 $5,769,410 
Canada215,926 236,192 224,823 239,598 212,801 
6,344,195 6,416,428 6,328,201 6,140,600 5,982,211 
Wholesale finance receivables:
United States459,495 1,067,880 1,007,956 939,621 961,150 
Canada30,254 88,639 75,659 77,336 65,440 
489,749 1,156,519 1,083,615 1,016,957 1,026,590 
6,833,944 7,572,947 7,411,816 7,157,557 7,008,801 
Allowance for credit losses(390,936)(198,581)(189,885)(192,471)(173,343)
$6,443,008 $7,374,366 $7,221,931 $6,965,086 $6,835,458 
Approved but unfunded retail finance loans totaled $134.9 million and $160.4 million at December 31, 2020 and 2019, respectively. Unused lines of credit extended to the Company's wholesale finance customers totaled $1.21$1.64 billion and $1.27$1.14 billion at December 31, 20182020 and 2017, respectively. Approved but unfunded retail finance loans totaled $154.8 million and $166.3 million at December 31, 2018 and 2017,2019, respectively.
Wholesale finance receivables are generally contractually due within one year. On As of December 31, 2018,2020, contractual maturities of total finance receivables were as follows (in thousands):
United StatesCanadaTotal
2021$1,505,981 $76,190 $1,582,171 
20221,194,078 49,038 1,243,116 
20231,340,552 53,037 1,393,589 
20241,465,470 57,515 1,522,985 
20251,001,327 10,400 1,011,727 
Thereafter80,356 0 80,356 
$6,587,764 $246,180 $6,833,944 
On January 1, 2020, the Company adopted ASU 2016-13, which requires an entity to recognize expected lifetime losses on finance receivables upon origination. The allowance for credit losses as of December 31, 2020 represents the Company’s estimate of lifetime losses for its finance receivables. Prior to the adoption of ASU 2016-13, the Company maintained an allowance for credit losses based on the Company’s estimate of probable losses inherent in its finance receivables as of the balance sheet date.
Under ASU 2016-13, the Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for loan losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio. Prior to the adoption of ASU 2016-13, the Company’s investment in finance receivables included the same components as the amortized cost under the new accounting guidance.
The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. For periods after January 1, 2020, the Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors. For periods prior to January 1, 2020, the Company performed a periodic and systematic collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilized
62

  United States Canada Total
2019 $2,132,189
 $122,684
 $2,254,873
2020 1,209,886
 49,746
 1,259,632
2021 1,289,673
 53,916
 1,343,589
2022 1,418,813
 58,437
 1,477,250
2023 1,051,626
 15,699
 1,067,325
Thereafter 9,147
 —
 9,147
Total $7,111,334
 $300,482
 $7,411,816
loss forecast models which considered a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates, and current economic conditions.
The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. For periods after January 1, 2020, the related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past loan loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries. For periods prior to January 1, 2020, the related allowance for credit losses was based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past loan loss experience, current economic conditions, and the value of the underlying collateral.
The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. As part of the January 1, 2020 adoption of ASU 2016-13, the Company expected to be operating in a negative economic environment throughout 2020, and the Company had incorporated the potential for a recession in 2020 into its economic forecast. However, as a result of the COVID-19 pandemic, the Company’s outlook on future economic conditions worsened throughout the year and significant uncertainty surrounding future economic outcomes remains. As such, the Company’s economic outlook at the end of 2020 included a heavy emphasis on pessimistic economic trend assumptions as the COVID-19 pandemic continues to restrain the U.S. economy. Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance balance. These factors include motorcycle recovery value considerations, delinquency adjustments and specific problem loan trends.
Due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and management’s expectations surrounding the economic forecasts. The Company will continue to monitor future economic trends and conditions. Expectations surrounding the Company's economic forecasts may change in future periods as additional information becomes available.
The allowance for credit losses on finance receivables is comprised of individual components relating to wholesale and retail finance receivables. Changes in the allowance for credit losses on finance receivables by portfolio for the year ended December 31, were as follows (in thousands): 
 2020
RetailWholesaleTotal
Balance, beginning of period$188,501 $10,080 $198,581 
Cumulative effect of change in accounting(a)
95,558 5,046 100,604 
Provision for credit losses175,225 6,645 181,870 
Charge-offs(137,371)(2,573)(139,944)
Recoveries49,825 0 49,825 
Balance, end of period$371,738 $19,198 $390,936 

 2019
RetailWholesaleTotal
Balance, beginning of period$182,098 $7,787 $189,885 
Provision for credit losses132,243 2,293 134,536 
Charge-offs(173,358)0 (173,358)
Recoveries47,518 0 47,518 
Balance, end of period$188,501 $10,080 $198,581 

63

 2018 2018
Retail Wholesale TotalRetailWholesaleTotal
Balance, beginning of period $186,254
 $6,217
 $192,471
Balance, beginning of period$186,254 $6,217 $192,471 
Provision for credit losses 105,292
 1,578
 106,870
Provision for credit losses105,292 1,578 106,870 
Charge-offs (154,433) (8) (154,441)Charge-offs(154,433)(8)(154,441)
Recoveries 44,985
 —
 44,985
Recoveries44,985 0 44,985 
Balance, end of period $182,098
 $7,787
 $189,885
Balance, end of period$182,098 $7,787 $189,885 


  2017
Retail Wholesale Total
Balance, beginning of period $166,810
 $6,533
 $173,343
Provision for credit losses 132,760
 (316) 132,444
Charge-offs (160,972) —
 (160,972)
Recoveries 47,656
 —
 47,656
Balance, end of period $186,254
 $6,217
 $192,471
  2016
Retail Wholesale Total
Balance, beginning of period $139,320
 $7,858
 $147,178
Provision for credit losses 137,942
 (1,325) 136,617
Charge-offs (148,566) —
 (148,566)
Recoveries 41,405
 —
 41,405
Other (a)
 (3,291) —
 (3,291)
Balance, end of period $166,810
 $6,533
 $173,343

(a)Related to(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the sale of finance receivables during the second quarter of 2016 with a principal balance of $301.8 million through an off-balance sheet asset-backed securitization transaction (see Note 12 for additional information).

There were no finance receivables individually evaluated for impairment on December 31, 2018 or 2017. The allowance for loan loss through Retained earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses and finance receivables by portfolio, collectively evaluated for impairment, at December 31 was as follows (in thousands):
  2018
  Retail Wholesale Total
Allowance for credit losses, ending balance:      
Individually evaluated for impairment $—
 $—
 $—
Collectively evaluated for impairment 182,098
 7,787
 189,885
Total allowance for credit losses $182,098
 $7,787
 $189,885
Finance receivables, ending balance:      
Individually evaluated for impairment $—
 $—
 $—
Collectively evaluated for impairment 6,328,201
 1,083,615
 7,411,816
Total finance receivables $6,328,201
 $1,083,615
 $7,411,816
  2017
  Retail Wholesale Total
Allowance for credit losses, ending balance:      
Individually evaluated for impairment $—
 $—
 $—
Collectively evaluated for impairment 186,254
 6,217
 192,471
Total allowance for credit losses $186,254
 $6,217
 $192,471
Finance receivables, ending balance:      
Individually evaluated for impairment $—
 $—
 $—
Collectively evaluated for impairment 6,140,600
 1,016,957
 7,157,557
Total finance receivables $6,140,600
 $1,016,957
 $7,157,557
Finance receivables are considered impaired when management determines it is probable thaton the Company will be unable to collect all amounts due according to the loan agreement. As retail finance receivables are collectively and not individually reviewed for impairment, this portfolio does not have specifically impaired finance receivables. At December 31, 2018 and 2017, there were no wholesale finance receivables that were on non-accrual status or individually deemed to be impaired under ASC Topic 310, “Receivables.”


An analysis of the aging of past due finance receivables at December 31 was as follows (in thousands):
  2018
  Current 
31-60 Days
Past Due
 
61-90 Days
Past Due
 
Greater than
90 Days
Past Due
 
Total
Past Due
 
Total
Finance
Receivables
Retail $6,100,186
 $136,945
 $49,825
 $41,245
 $228,015
 $6,328,201
Wholesale 1,081,729
 522
 273
 1,091
 1,886
 1,083,615
Total $7,181,915
 $137,467
 $50,098
 $42,336
 $229,901
 $7,411,816
  2017
  Current 
31-60 Days
Past Due
 
61-90 Days
Past Due
 
Greater than
90 Days
Past Due
 
Total
Past Due
 
Total
Finance
Receivables
Retail $5,913,473
 $139,629
 $47,539
 $39,959
 $227,127
 $6,140,600
Wholesale 1,016,000
 595
 245
 117
 957
 1,016,957
Total $6,929,473
 $140,224
 $47,784
 $40,076
 $228,084
 $7,157,557
The recorded investment of retail and wholesale finance receivables, excluding non-accrual status finance receivables, that were contractually past due 90 days or more at December 31 for the past five years was as follows (in thousands):
  2018 2017 2016 2015 2014
United States $41,285
 $39,051
 $39,399
 $31,677
 $27,800
Canada 1,051
 1,025
 1,326
 1,192
 1,118
Total $42,336
 $40,076
 $40,725
 $32,869
 $28,918
A significant part of managing the Company's finance receivable portfolios includes the assessmentat date of credit risk associated with each borrower. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit risk indicators for each portfolio.adoption.
The Company manages retail credit risk through its credit approval policyprocess and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. RetailFor the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.
As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the two portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.
The amortized cost of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator, at December 31, 2020, was as follows (in thousands):
202020192018201720162015 & PriorTotal
U.S. Retail:
Super prime$822,631 $575,977 $355,529 $165,436 $71,360 $29,181 $2,020,114 
Prime1,133,637 794,058 508,713 293,358 156,688 77,046 2,963,500 
Sub-prime435,875 295,403 177,598 111,163 72,556 52,060 1,144,655 
2,392,143 1,665,438 1,041,840 569,957 300,604 158,287 6,128,269 
Canadian Retail:
Super prime53,465 48,692 28,581 13,818 5,018 2,011 151,585 
Prime18,568 14,257 10,269 6,727 3,198 2,025 55,044 
Sub-prime3,172 2,498 1,560 1,095 607 365 9,297 
75,205 65,447 40,410 21,640 8,823 4,401 215,926 
$2,467,348 $1,730,885 $1,082,250 $591,597 $309,427 $162,688 $6,344,195 
Prior to the adoption of ASU 2016-13, retail loans with a FICO score of 640 or above at origination arewere generally considered prime, and loans with a FICO score below 640 are were generally considered sub-prime. These credit quality indicators arewere determined at the time of loan origination and arewere not updated subsequent to the loan origination date.
The recorded investment ofin retail finance receivables, by credit quality indicator at December 31, was as follows (in thousands):
2019
Prime$5,278,093 
Sub-prime1,138,335 
$6,416,428 
64
  2018 2017
Prime $5,183,754
 $4,966,193
Sub-prime 1,144,447
 1,174,407
Total $6,328,201
 $6,140,600

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon management’sthe Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated on a quarterly basis.

The amortized cost of wholesale financial receivables, by vintage and credit quality indicator, was as follows as of December 31, 2020 (in thousands):

202020192018201720162015 & PriorTotal
Non-Performing$0 $0 $0 $0 $0 $0 $0 
Doubtful0 0 0 0 0 0 0 
Substandard0 0 0 0 0 0 0 
Special Mention658 365 31 0 0 0 1,054 
Medium Risk1,925 242 0 0 0 0 2,167 
Low Risk388,568 71,441 13,412 7,887 2,297 2,923 486,528 
$391,151 $72,048 $13,443 $7,887 $2,297 $2,923 $489,749 
Dealer risk rating categories prior to the adoption of ASU 2016-13 were consistent with the current risk rating categories with the exception of the Non-Performing category for dealers identified as those in which foreclosure is probable, which was established in connection with the January 1, 2020 adoption. The recorded investment ofin wholesale finance receivables, by internal credit quality indicator at December 31, was as follows (in thousands):
2019
Doubtful$11,664 
Substandard6,122 
Special Mention16,125 
Medium Risk16,800 
Low Risk1,105,808 
$1,156,519 
  2018 2017
Doubtful $2,210
 $688
Substandard 9,660
 3,837
Special Mention 10,299
 26,866
Medium Risk 25,802
 9,917
Low Risk 1,035,644
 975,649
Total $1,083,615
 $1,016,957
8.    Leases
Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. The Company operates certain administrative, manufacturing, warehousereverses accrued interest related to charged-off accounts against interest income when the account is charged-off. The Company reversed $19.1 million of accrued interest against interest income during the year ended December 31, 2020. All retail finance receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under ASU 2016-13 to exclude accrued interest from its allowance for credit losses. Accordingly, as of December 31, 2020 and testing facilities and equipment under lease arrangements that are2019, all retail finance receivables were accounted for as operating leases. Total rental expense was $22.8 million, $15.1interest-earning receivables, of which $33.1 million and $14.4$48.0 million, respectively, were 90 days or more past due.
65

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against interest income. As the Company follows a non-accrual policy for 2018, 2017 and 2016, respectively.
Future minimum operating lease payments at interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio. The Company reversed $0.4 million of accrued interest related to the charge-off of Non-Performing dealer loans during the year ended December 31, 20182020. There were no dealers on non-accrual status at December 31, 2020. The recorded investment of non-accrual status wholesale finance receivables at December 31, 2019 was $5.0 million, and of this, $2.6 million were 90 days or more past due.
The aging analysis of finance receivables at December 31, was as follows (in thousands): 
 2020
 Current31-60 Days
Past Due		61-90 Days
Past Due		Greater than
90 Days
Past Due		Total
Past Due		Total
Finance
Receivables
Retail finance receivables$6,164,369 $106,818 $39,933 $33,075 $179,826 $6,344,195 
Wholesale financial receivables489,556 166 23 4 193 489,749 
$6,653,925 $106,984 $39,956 $33,079 $180,019 $6,833,944 

 2019
 Current31-60 Days
Past Due		61-90 Days
Past Due		Greater than
90 Days
Past Due		Total
Past Due		Total
Finance
Receivables
Retail finance receivables$6,171,930 $142,479 $53,995 $48,024 $244,498 $6,416,428 
Wholesale financial receivables1,152,416 1,145 384 2,574 4,103 1,156,519 
$7,324,346 $143,624 $54,379 $50,598 $248,601 $7,572,947 
The recorded investment of retail and wholesale finance receivables, excluding non-accrual status finance receivables, that were contractually past due 90 days or more at December 31, for the past five years was as follows (in thousands):
20202019201820172016
United States$32,599 $47,138 $41,285 $39,051 $39,399 
Canada480 888 1,051 1,025 1,326 
$33,079 $48,026 $42,336 $40,076 $40,725 
Prior to the Company's January 1, 2020 adoption of ASU 2016-13, finance receivables were considered impaired when management determined it was probable that the Company would not be able to collect all amounts due according to the terms of the loan agreement. Portions of the allowance for credit losses were established to cover estimated losses on finance receivables specifically identified for impairment. The unspecified portion of the allowance for credit losses covered estimated losses on finance receivables which were collectively reviewed for impairment.
The allowance for credit losses and finance receivables by portfolio, segregated by those amounts that were individually evaluated for impairment and those that were collectively evaluated for impairment, at December 31, was as follows (in thousands):
 2019
 RetailWholesaleTotal
Allowance for credit losses, ending balance:
Individually evaluated for impairment$0 $2,100 $2,100 
Collectively evaluated for impairment188,501 7,980 196,481 
$188,501 $10,080 $198,581 
Finance receivables, ending balance:
Individually evaluated for impairment$0 $4,601 $4,601 
Collectively evaluated for impairment6,416,428 1,151,918 7,568,346 
$6,416,428 $1,156,519 $7,572,947 
66

2019 $20,416
2020 16,195
2021 13,702
2022 10,330
2023 5,345
Thereafter 7,988
Total operating lease payments $73,976
Additional information related to the wholesale finance receivables that were individually deemed to be impaired under ASC Topic 310, Receivables at December 31, 2019 included (in thousands):
Recorded InvestmentUnpaid Principal BalanceRelated AllowanceAverage Recorded InvestmentInterest Income Recognized
Wholesale:
No related allowance recorded$0 $0 $— $0 $0 
Related allowance recorded4,994 4,601 2,100 4,976 0 
$4,994 $4,601 $2,100 $4,976 $0 
9.Retail finance receivables were not evaluated individually for impairment prior to charge-off at December 31, 2019.
Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize economic loss, the Company may modify certain finance receivables in troubled debt restructurings. Total finance receivables in troubled debt restructurings were not significant as of December 31, 2020 and December 31, 2019. Additionally, in certain situations, the Company may offer short-term adjustments to customer payment due dates without affecting the associated interest rate or loan term. During the second quarter and into the first part of the third quarter of 2020, the Company offered an increased amount of short-term payment due date extensions on eligible retail loans to help retail customers get through financial difficulties associated with the COVID-19 pandemic. Through the remainder of 2020, the volume of payment extensions on eligible retail loans declined but has not yet returned to pre-COVID-19 pandemic levels. The Company continues to grant payment extensions to customers in accordance with its policies.
8. Goodwill and Intangible Assets
On March 4, 2019, the Company purchased certain assets and liabilities of StaCyc, Inc. for total consideration of $14.9 million including cash paid at acquisition of $7.0 million. The following table summarizes changesprimary assets acquired and included in the Motorcycles segment were goodwill of $9.5 million, which was tax deductible, and intangible assets of $5.3 million.
Changes in the carrying amount of goodwill in the Motorcycles segment for the following years ended December 31, was as follows (in thousands):
202020192018
Balance, beginning of period$64,160 $55,048 $55,947 
Acquisitions0 9,520 0 
Currency translation1,816 (408)(899)
Balance, end of period$65,976 $64,160 $55,048 
  2018 2017 2016
Balance, beginning of period $55,947
 $53,391
 $54,182
Currency translation (899) 2,556
 (791)
Balance, end of period $55,048
 $55,947
 $53,391
The following table summarizesIntangible assets, excluding goodwill, included in the Motorcycles segment intangible assets other than goodwill at December 31 (in thousands):
  2018  
  Gross Carrying Amount Accumulated Amortization Net Estimated useful life (years)
   Customer relationships 7,234
 (1,236) 5,998
 20
  2017  
  Gross Carrying Amount Accumulated Amortization Net Estimated useful life (years)
   Customer relationships 7,860
 (950) 6,910
 20

consist primarily of customer relationships and trademarks with useful lives ranging from 5 to 20 years. Intangible assets other than goodwill are includedamortized on a straight-line basis over their estimated useful lives. Intangible assets are recorded in otherOther long-term assets on the Company's consolidatedConsolidated balance sheets. The gross carrying amounts at December 31, 2020 and 2019 differ from the acquisition date amounts due to changes in foreign currency exchange rates.


Total amortization expense of other intangible Intangible assets was $0.4 million, $4.2 million and $7.0 million for 2018, 2017 and 2016, respectively. The Company estimates future amortization to beat December 31, were as follows (in thousands):
202020192018
Gross carrying amount$12,979 $12,837 $7,234 
Accumulated amortization(3,350)(2,240)(1,236)
$9,629 $10,597 $5,998 
67

  Estimated Amortization
2019 $372
2020 372
2021 372
2022 372
2023 372
Thereafter 4,138
Total $5,998
Amortization of intangible assets, excluding goodwill, recorded in Selling, administrative and engineering expense on the Consolidated statements of operations was $1.1 million, $0.9 million and $0.4 million for 2020, 2019 and 2018, respectively. Future amortization of the Company's intangible assets as of December 31, 2020 is as follows (in thousands):
2021$1,072 
20221,072 
20231,072 
2024830 
2025750 
Thereafter4,833 
$9,629 
The Financial Services segment had no0 goodwill or intangible assets at December 31, 20182020 and 2017.2019.
10.9. Derivative Financial Instruments and Hedging Activities
The Company is exposed to certain risks such asfrom fluctuations in foreign currency exchange rate risk,rates, interest rate risk,rates and commodity price risk.prices. To reduce its exposure to such risks, the Company selectively uses derivative financial instruments. All derivative transactions are authorized and executed pursuant to regularly reviewed policies and procedures which prohibit the use of financial instruments for speculative trading purposes.
All derivative instruments are recognized on the balance sheet at fair value. In accordance with ASC Topic 815, “Derivatives and Hedging,” the accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings. For derivative instruments that are designated as cash flow hedges, the effective portion of gains and losses that result from changes in the fair value of derivative instruments is initially recorded in other comprehensive income (OCI) and subsequently reclassified into earnings when the hedged item affects income. The Company assesses, both at the inception of each hedge and on an on-going basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Any ineffective portion is immediately recognized in earnings. No component of a hedging derivative instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative instruments that do not qualify for hedge accounting are recorded at fair value, and any changes in fair value are recorded in current period earnings.
The Company sells its products internationally,in foreign currencies and in most markets those sales are made in the foreign country’s local currency. As a result, the Company’s earnings can be affected by fluctuations in the value of the U.S. dollar relative to foreign currency. The Company utilizes foreign currency exchange contracts to mitigate the effects of foreign currency exchange rate fluctuations related to the Euro, the Australian dollar, the Japanese yen, the Brazilian real, the Canadian dollar, Mexican peso, Chinese yuan, Indian rupee, Singapore dollar, Thai baht, and the Mexican peso.Pound sterling. The Company's foreign currency exchange contracts are entered into with banks and allow the Company to exchange a specified amountgenerally have maturities of foreign currency for U.S. dollars at a future date, based on a fixed exchange rate.less than one year.
The Company utilizes commodity contracts to hedge portionsmitigate the effects of the cost of certain commoditiescommodity price fluctuations related to metals and fuel consumed in the Company’s motorcycle production and distribution operations.
The Company’s foreign currency exchange contracts andCompany's commodity contracts generally have maturities of less than one year.
The Company periodically utilizes treasury rate lock contracts to fix the interest rate on a portion of the principal related to thean anticipated issuance of long-term debt. To the extent effective, the gains and losses on the fair value of the treasury rate lock are recorded in accumulated other comprehensive loss until the forecasted debt, is issued. Gains and losses are subsequently reclassified into earnings over the life of the debt.
The Company periodically utilizes interest rate swaps to reduce the impact of fluctuations in interest rates on its long-termmedium-term notes with floating interest rates, and cross-currency swaps to mitigate the effect of foreign currency exchange rate fluctuations on foreign currency-denominated debt. The Company also utilizes interest rate caps to facilitate certain asset-backed securitization transactions.


The following tables summarizeAll derivative financial instruments are recognized on the Consolidated balance sheets at fair value. In accordance with ASC Topic 815, Derivatives and Hedging (ASC Topic 815), the accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the Company’stype of hedging relationship.
Changes in the fair value of derivative financial instruments that are designated as cash flow hedges are initially recorded in Other comprehensive income (loss) (OCI) and subsequently reclassified into earnings when the hedged item affects income. The Company assesses, both at the inception of each hedge and on an ongoing basis, whether the derivative financial instruments that are designated as cash flow hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. No component of a designated hedging derivative financial instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative financial instruments not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign currency, commodity risks, and interest rate risks. Changes in the fair value of derivative financial instruments not designated as hedging instruments are recorded directly in income.
68

The notional and fair values of the Company's derivative financial instruments under ASC Topic 815, at December 31, were as follows (in thousands):
   2018 2017
 
Derivatives Designated As Hedging
Instruments Under ASC Topic 815
 
Notional
Value
 
Asset
Fair Value(a)
 
Liability
Fair Value(b)
 
Notional
Value
 
Asset
Fair Value(a)
 
Liability
Fair Value(b)
 
 
Foreign currency contracts(c)
 $442,976
 $15,071
 $313
 $675,724
 $1,388
 $21,239
 
Commodities contracts(c)
 827
 —
 46
 915
 —
 69
 
Interest rate swap(c)
 900,000
 —
 4,494
 —
 —
 —
 Total $1,343,803
 $15,071
 $4,853
 $676,639
 $1,388
 $21,308
   2018 2017
 
Derivatives Not Designated As Hedging
Instruments Under ASC Topic 815
 
Notional
Value
 
Asset
Fair Value(a)
 
Liability
Fair Value(b)
 
Notional
Value
 
Asset
Fair Value(a)
 
Liability
Fair Value(b)
 
 Commodities contracts $5,239
 $—
 $463
 $4,532
 $381
 $—
 Total $5,239
 $—
 $463
 $4,532
 $381
 $—

Derivative Financial Instruments
Designated as Cash Flow Hedging Instruments
 20202019
Notional
Value		Other
Current Assets		Accrued LiabilitiesNotional
Value		Other
Current Assets		Accrued Liabilities
Foreign currency contracts$533,925 $11 $21,927 $434,321 $3,505 $3,661 
Commodity contracts671 0 52 616 0 80 
Cross-currency swaps1,367,460 138,622 0 660,780 8,326 0 
Interest rate swaps450,000 0 3,086 900,000 0 9,181 
$2,352,056 $138,633 $25,065 $1,995,717 $11,831 $12,922 
Derivative Financial Instruments
Not Designated as Hedging Instruments
 20202019
Notional
Value		Other
Current Assets		Accrued LiabilitiesNotional
Value		Other
Current Assets		Accrued Liabilities
Foreign currency contracts$245,494 $737 $435 $220,139 $721 $865 
Commodity contracts6,806 849 21 8,270 95 147 
Interest rate caps978,058 47 0 375,980 2 0 
$1,230,358 $1,633 $456 $604,389 $818 $1,012 
(a)Included in other current assets
(b)Included in accrued liabilities
(c)Derivative designated as a cash flow hedge
The following tables summarize the amount of gains and losses for the following years ended December 31 related to derivative financial instruments designated as cash flow hedges (in thousands):
  
Amount of Gain/(Loss)
Recognized in OCI, before tax
Cash Flow Hedges 2018 2017 2016
Foreign currency contracts $41,657
 $(53,964) $28,099
Commodities contracts 34
 (246) 77
Treasury rate locks 41
 (719) —
Interest rate swap (6,046) —
 —
Total $35,686
 $(54,929) $28,176
   
Amount of Gain/(Loss)
Reclassified from AOCL into Income
 Cash Flow Hedges 2018 2017 2016 
Expected to be Reclassified
Over the Next Twelve Months
 
 
Foreign currency contracts(a)
 $11,492
 $(7,202) $18,253
 $13,562
 
Commodities contracts(a)
 24
 —
 (258) (46)
 
Treasury rate locks(b)
 (498) (442) (362) (492)
 
Interest rate swap(b)
 (1,552) —
 —
 (2,061)
 Total $9,466
 $(7,644) $17,633
 $10,963
(a)Gain/(loss) reclassified from accumulated other comprehensive loss (AOCL) to income is included in cost of goods sold
(b)Gain/(loss) reclassified from AOCL to income is included in interest expense
Forfor the years ended December 31, 2018were as follows (in thousands):
 Gain/(Loss)
Recognized in OCI		Gain/(Loss)
Reclassified from AOCL into Income
202020192018202020192018
Foreign currency contracts$(14,507)$8,235 $41,657 $9,859 $21,433 $11,492 
Commodity contracts(160)(103)34 (189)(70)24 
Cross-currency swaps130,297 8,326 0 153,472 12,156 0 
Treasury rate lock contracts0 0 41 (492)(492)(498)
Interest rate swaps(8,449)(9,981)(6,046)(14,543)(5,295)(1,552)
$107,181 $6,477 $35,686 $148,107 $27,732 $9,466 
69

The location and2017, the cash flow hedges were highly effective and, as a result, the amount of hedge ineffectiveness was not material. No amounts were excluded from effectiveness testing.
The following table summarizes the amount of gains and losses recognized in income related to derivative financial instruments designated as cash flow hedges for the years ended December 31, were as follows (in thousands):
 Motorcycles
cost of goods sold		Selling, administrative &
engineering expense		Interest expenseFinancial Services interest expense
2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$2,435,745 $1,050,627 $31,121 $246,447 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$9,859 $— $— $— 
Commodity contracts$(189)$— $— $— 
Cross-currency swaps$— $153,472 $— $— 
Treasury rate lock contracts$— $— $(362)$(130)
Interest rate swaps$— $— $— $(14,543)
2019
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$3,229,798 $1,199,056 $31,078 $210,438 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$21,433 $— $— $— 
Commodity contracts$(70)$— $— $— 
Cross-currency swaps$— $12,156 $— $— 
Treasury rate lock contracts$— $— $(362)$(130)
Interest rate swaps$— $— $— $(5,295)
2018
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$3,351,796 $1,258,098 $30,884 $193,187 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$11,492 $— $— $— 
Commodity contracts$24 $— $— $— 
Treasury rate lock contracts$— $— $(362)$(136)
Interest rate swaps$— $— $— $(1,552)
 The amount of net loss included in Accumulated other comprehensive loss (AOCL) at December 31, 2020, estimated to be reclassified into income over the next 12 months was $32.9 million.
The amount of gains and losses recognized in income related to derivative financial instruments not designated as hedging instruments as of December 31, were as follows (in thousands). Gains and losses on foreign currency contracts and commodity contracts were recorded in Motorcycles and Related Products cost of goods sold and the interest rate caps were recorded in Financial Services interest expense.
 Amount of Gain/(Loss)
Recognized in Income
202020192018
Foreign currency contracts$(205)$191 $0 
Commodity contracts(148)17 (430)
Interest rate caps(532)(143)0 
$(885)$65 $(430)
70

The Company is exposed to credit loss risk in the event of non-performance by counterparties to its derivative financial instruments. Although no assurances can be given, the Company does not expect any of the counterparties to its derivative financial instruments to fail to meet their obligations. To manage credit loss risk, the Company evaluates counterparties based on credit ratings and, on a quarterly basis, evaluates each hedge’s net position relative to the counterparty’s ability to cover their position.
10. Leases
The Company determines if an arrangement is or contains a lease at contract inception. Right-of-use (ROU) assets related to the Company's leases are recorded in Lease assets and lease liabilities are recorded in Accrued liabilities and Lease liability on the Consolidated balance sheets. 
ROU assets represent the Company’s right to use an underlying asset over the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The ROU asset also includes prepaid lease payments and initial direct costs and is reduced for lease incentives paid by the lessor. The discount rate used to determine the present value is generally the Company's incremental borrowing rate because the implicit rate in the lease is not readily determinable. The lease term used to calculate the ROU asset and lease liabilities includes periods covered by options to extend or terminate when the Company is reasonably certain the lease term will include these optional periods.
In accordance with ASC Topic 842, Leases (ASC Topic 842),the Company elected the short-term lease practical expedient that allows entities to recognize lease payments on a straight-line basis over the lease term for leases with a term of 12 months or less. The Company has also elected the practical expedient under ASC Topic 842 allowing entities to not separate non-lease components from lease components, but instead account for such components as a single lease component for all leases except leases involving assets operated by a third-party.
The Company has operating lease arrangements for sales and administrative offices, manufacturing and distribution facilities, product testing facilities, equipment and vehicles. The Company’s leases have remaining lease terms ranging from 1 to 11 years, some of which include options to extend the lease term for periods generally not greater than 5 years and some of which include options to terminate the leases within 1 year. Certain leases also include options to purchase the leased asset. The Company's leases do not contain any material residual value guarantees or material restrictive covenants.
Operating lease expense for the years ended December 31, 2020 and 2019 was $26.7 million and $27.4 million, respectively. This includes variable lease costs related to leases involving assets operated by a third-party of approximately $5.6 million and $6.5 million for the years ended December 31, 2020 and 2019, respectively. Other variable and short-term lease costs were not material.
Balance sheet information related to the Company's leases at December 31, was as follows (in thousands):
20202019
Lease assets$45,203 $61,618 
Accrued liabilities$17,081 $19,013 
Lease liabilities30,115 44,447 
$47,196 $63,460 
  
Amount of (Loss)/Gain
Recognized in Income on Derivative
Derivatives Not Designated As Hedges 2018 2017 2016
Commodities contracts(a)
 $(430) $503
 $167
Total $(430) $503
 $167
71


Future maturities of the Company's operating lease liabilities as of December 31, 2020 were as follows (in thousands):

2021$18,160 
202213,573 
20235,462 
20243,518 
20255,787 
Thereafter3,592 
Future lease payments50,092 
Present value discount(2,896)
Lease liabilities$47,196 

Other lease information surrounding the Company's operating leases as of December 31, was as follows (dollars in thousands):
(a)Gain/(loss) recognized in income is included in cost of goods sold
20202019
Cash outflows for amounts included in the measurement of lease liabilities$20,533$21,491
Right-of-use assets obtained in exchange for lease obligations, net of modifications$1,833$21,579
Weighted-average remaining lease term (in years)3.784.68
Weighted-average discount rate3.1 %2.1 %

11. Debt
Debt with a contractual term less than one year12 months is generally classified as short-term debt and consisted of the following as ofat December 31, (in thousands): 
20202019
Unsecured commercial paper$1,014,274 $571,995 
  2018 2017
Unsecured commercial paper $1,135,810
 $1,273,482
Total short-term debt $1,135,810
 $1,273,482
Debt with a contractual term greater than one year12 months is generally classified as long-term debt and consisted of the following as ofat December 31, (in thousands):
20202019
Secured debt:
Asset-backed Canadian commercial paper conduit facility$116,678 $114,693 
Asset-backed U.S. commercial paper conduit facilities402,205 490,427 
Asset-backed securitization debt1,800,393 766,965 
Unamortized discounts and debt issuance costs(8,437)(2,573)
2,310,839 1,369,512 
72

  2018 2017
Secured debt (Note 12)    
Asset-backed Canadian commercial paper conduit facility $155,951
 $174,779
Asset-backed U.S. commercial paper conduit facilities 582,717
 279,457
Asset-backed securitization debt 95,216
 353,085
Less: unamortized discount and debt issuance costs (49) (461)
Total secured debt 833,835
 806,860
     
Unsecured notes (at par value)    
6.80% Medium-term notes due in 2018, issued May 2008 —
 877,488
2.25% Medium-term notes due in 2019, issued January 2016 600,000
 600,000
       Floating-rate Medium-term notes due in 2019, issued March 2017(a)
 150,000
 150,000
2.40% Medium-term notes due in 2019, issued September 2014 600,000
 600,000
2.15% Medium-term notes due in 2020, issued February 2015 600,000
 600,000
Floating-rate Medium-term notes due in 2020, issued May 2018(b)
 450,000
 —
2.40% Medium-term notes due in 2020, issued March 2017 350,000
 350,000
2.85% Medium-term notes due in 2021, issued January 2016 600,000
 600,000
Floating-rate Medium-term notes due in 2021, issued November 2018(c)
 450,000
 —
3.55% Medium-term notes due in 2021, issued May 2018 350,000
 —
2.55% Medium-term notes due in 2022, issued June 2017 400,000
 400,000
3.35% Medium-term notes due in 2023, issued February 2018 350,000
 —
3.50% Senior unsecured notes due in 2025, issued July 2015 450,000
 450,000
4.625% Senior unsecured notes due in 2045, issued July 2015 300,000
 300,000
Less: unamortized discount and debt issuance costs (20,369) (19,821)
Gross long-term debt 6,463,466
 5,714,527
Less: current portion of long-term debt, net of unamortized discount and debt issuance costs (1,575,799) (1,127,269)
Total long-term debt $4,887,667
 $4,587,258
(a)Floating interest rate based on LIBOR plus 35 bps.
(b)Floating interest rate based on LIBOR plus 50 bps. The Company utilized an interest rate swap designated as a cash flow hedge to convert this from a floating rate basis to a fixed rate basis. Refer to Note 10 of the Notes to the Consolidated Financial Statements for further details.
(c)Floating interest rate based on LIBOR plus 94 bps. The Company utilized an interest rate swap designated as a cash flow hedge to convert this from a floating rate basis to a fixed rate basis. Refer to Note 10 of the Notes to the Consolidated Financial Statements for further details.

20202019
Unsecured notes (at par value):
Medium-term notes:
Due in 2020, issued February 20152.15%0 600,000 
Due in 2020, issued May 2018LIBOR + 0.50%0 450,000 
Due in 2020, issued March 20172.40%0 350,000 
Due in 2021, issued January 20162.85%600,000 600,000 
Due in 2021, issued in November 2018LIBOR + 0.94%450,000 450,000 
Due in 2021, issued May 20183.55%350,000 350,000 
Due in 2022, issued February 20194.05%550,000 550,000 
Due in 2022, issued June 20172.55%400,000 400,000 
Due in 2023, issued February 20183.35%350,000 350,000 
Due in 2023, issued May 2020(a)
4.94%797,206 0 
Due in 2024, issued November 2019(b)
3.14%735,882 672,936 
Due in 2025, issued June 20203.35%700,000 0 
Unamortized discounts and debt issuance costs(15,374)(12,809)
4,917,714 4,760,127 
Senior notes:
Due in 2025, issued July 20153.50%450,000 450,000 
Due in 2045, issued July 20154.625%300,000 300,000 
Unamortized discounts and debt issuance costs(6,023)(6,704)
743,977 743,296 
5,661,691 5,503,423 
Long-term debt7,972,530 6,872,935 
Current portion of long-term debt, net(2,039,597)(1,748,109)
Long-term debt, net$5,932,933 $5,124,826 

(a)Euro denominated €650.0 million par value remeasured to U.S. dollar at December 31, 2020

(b)Euro denominated €600.0 million par value remeasured to U.S. dollar at December 31, 2020 and 2019, respectively

A summary of theThe Company’s expectedfuture principal payments foron debt obligations as of December 31, 2018 is2020 were as follows (in thousands):
2021$3,063,227 
20221,655,414 
20231,793,635 
20241,054,362 
2025700,000 
Thereafter750,000 
$9,016,638 
2019 $2,717,597
2020 1,562,889
2021 1,570,815
2022 578,256
2023 440,137
Thereafter 750,000
Total $7,619,694
Unsecured Commercial Paper – Commercial paper maturities may range up to 365 days from the issuance date. The weighted-average interest rate of outstanding commercial paper balances was 2.79%1.34% and 1.48%1.94% at December 31, 20182020 and 2017,2019, respectively.
Credit Facilities – In April 2018,2020, the Company entered into a $780.0$707.5 million five-yearfive-year credit facility to replace the $675.0$765.0 million five-yearfive-year credit facility that was due to mature in April 2019 and also terminated the $100.0 million 364-day credit facility that would have matured at the end of April 2018.2021. The new five-yearfive-year credit facility matures in April 2025. The Company also amended the $780.0 million five-year credit facility to $707.5 million with no change to the maturity date of April 2023. The Company also hashad a $765.0$195.0 million five-year364-day credit facility which matureswas due to mature in May 2020. In April 2021.2020, the Company extended the maturity date of this credit facility to August 2020; however, this facility was terminated on May 18, 2020. At the time of termination, there were no outstanding borrowings under this 364-day credit facility. On June 1, 2020, the Company entered into a new $350.0 million 364-day credit facility, and on June 4, 2020, the Company borrowed $150.0 million under this facility. On December 9, 2020, the Company amended this facility to allow for the early repayment of the $150.0 million borrowing, which was repaid in full on this date, along with the related interest. The two five-year
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five-year credit facilities (together, the Global Credit Facilities), as well as the $350.0 million 364-day credit facility, bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities and the $350.0 million 364-day credit facility also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments under the Global Credit Facilities.commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program. In May 2018, the Company renewed its $25.0 million 364-day credit facility that was due to mature in that month. The $25.0 million credit facility bears interest at variable interest rates, and the Company pays a fee based on the unused portion of the $25.0 million commitment. This credit facility matures in May 2019.
Unsecured Notes – The fixed-rate NotesU.S. dollar-denominated unsecured notes provide for semi-annual interest payments, the fixed-rate foreign currency-dominated unsecured notes provide for annual interest payments, and the floating-rate Notesunsecured notes provide for quarterly interest payments. Principal on the Notesunsecured notes is due at maturity.
During February, May, and June 2018, $877.5of 2020, $600.0 million of 6.80%2.15%, $450.0 million of floating rate, and $350.0 million 2.40% medium-term notes matured, respectively, and the principal and accrued interest were paid in full. During January, March, and November 2017, $400.0September of 2019, $600.0 million of 2.70% and $400.02.25%, $150.0 million of 1.55%floating-rate, and $600.0 million of 2.40% medium-term notes matured, respectively, and the principal and accrued interest were paid in full.
Operating and Financial Covenants – HDFS and the Company are subject to various operating and financial covenants related to the credit facilities and various operating covenants under the Notesmedium-term and senior notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below.
The operating covenants limit the Company’s and HDFS’HDFS' ability to:
•Assume or incur certain liens;
•Participate in certain mergers or consolidations; and
•Purchase or hold margin stock.
Under the current financial covenants of the Global Credit Facilities, the ratio of HDFS'sHDFS’ consolidated debt, excluding secured debt, to HDFS'sHDFS' consolidated allowance for credit losses on finance receivables plus HDFS’ consolidated shareholders' equity, excluding accumulated other comprehensive income (loss)loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of HDFS and its subsidiaries, and the Company's consolidated shareholders’ equity excludes accumulated other comprehensive income (loss))AOCL), cannot exceed 0.7 to 1.0 as of the end of any fiscal quarter. No financial covenants are required under the Notesmedium-term or senior notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.
At December 31, 20182020 and 2017,2019, HDFS and the Company remained in compliance with all of thesethe then existing covenants.
12. Asset-Backed Financing
The Company participates in asset-backed financing both through asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. See Note 1 for more information onIn the Company's asset-backed financing programs, the Company transfers retail motorcycle finance receivables to special purpose entities (SPEs), which are considered VIEs under U.S. GAAP. Each SPE then converts those assets into cash, through the issuance of debt. The Company retains servicing rights for all of the retail motorcycle finance receivables transferred to SPEs as part of an asset-backed financing. The accounting treatment for asset-backed financings depends on the terms of the related transaction and the Company’s continuing involvement with the VIE.
In transactions where the Company has power over the significant activities of the VIE and has an obligation to absorb losses or the right to receive benefits from the VIE that are potentially significant to the VIE, the Company is the primary beneficiary of the VIE and consolidates the VIE within its consolidated financial statements. On a consolidated basis, the asset-backed financing is treated as a secured borrowing in this type of transaction and is referred to as an on-balance sheet asset-backed financing.
In transactions where the Company is not the primary beneficiary of the VIE, the Company must determine whether it can achieve a sale for accounting purposes under ASC Topic 860, Transfers and Servicing (ASC Topic 860). To achieve a sale for accounting purposes, the assets being transferred must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond the Company’s control. If the Company does not meet all of these criteria for sale accounting, then the transaction is accounted for as a secured borrowing and is referred to as an on-balance sheet asset-backed financing.
If the Company meets all three of the sale criteria above, the transaction is recorded as a sale for accounting purposes and is referred to as an off-balance sheet asset-backed financing. Upon sale, the retail motorcycle finance receivables are removed from the Company’s Consolidated balance sheets and a gain or loss is recognized for the difference between the
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cash proceeds received, the assets derecognized, and the liabilities recognized as part of the transaction. The gain or loss on sale is included in Financial Services revenue in the Consolidated statements of operations.
The Company is not required, and does not currently intend, to provide any additional financial support to the on- or off-balance sheet VIEs associated with these transactions. Investors and creditors in these transactions only have recourse to the assets held by the VIEs.


The following table shows the assets and liabilities related to the on-balance sheet asset-backed financings included in the financial statements Consolidated balance sheets at December 31, were as follows (in thousands):
2020
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations$2,129,372 $(124,627)$116,268 $2,622 $2,123,635 $1,791,956 
Asset-backed U.S. commercial paper conduit facility441,402 (25,793)26,624 1,131 443,364 402,205 
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility133,976 (6,508)9,073 126 136,667 116,678 
$2,704,750 $(156,928)$151,965 $3,879 $2,703,666 $2,310,839 
2019
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations$826,047 $(24,935)$36,037 $778 $837,927 $764,392 
Asset-backed U.S. commercial paper conduit facilities533,587 (16,076)27,775 1,642 546,928 490,427 
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility132,279 (2,786)7,686 296 137,475 114,693 
$1,491,913 $(43,797)$71,498 $2,716 $1,522,330 $1,369,512 
 2018
 Finance receivables Allowance for credit losses Restricted cash Other assets 
Total
assets
 Asset-backed debt
On-balance sheet assets and liabilities           
Consolidated VIEs           
Asset-backed securitizations$158,718
 $(4,691) $17,191
 $329
 $171,547
 $95,167
Asset-backed U.S. commercial paper conduit facilities631,588
 (18,733) 30,012
 1,234
 644,101
 582,717
Unconsolidated VIEs           
Asset-backed Canadian commercial paper conduit facility181,774
 (3,130) 8,779
 343
 187,766
 155,951
Total on-balance sheet assets and liabilities$972,080
 $(26,554) $55,982
 $1,906
 $1,003,414
 $833,835
            
 2017
 Finance receivables Allowance for credit losses Restricted cash Other assets 
Total
assets
 Asset-backed debt
On-balance sheet assets and liabilities           
Consolidated VIEs           
Asset-backed securitizations$439,301
 $(13,686) $34,919
 $1,260
 $461,794
 $352,624
Asset-backed U.S. commercial paper conduit facilities300,530
 (9,392) 13,787
 888
 305,813
 279,457
Unconsolidated VIEs           
Asset-backed Canadian commercial paper conduit facility203,691
 (3,746) 9,983
 470
 210,398
 174,779
Total on-balance sheet assets and liabilities$943,522
 $(26,824) $58,689
 $2,618
 $978,005
 $806,860
On-Balance Sheet Asset-Backed Securitization VIEs
– The Company transfers U.S. retail motorcycle finance receivables to SPEs which in turn issue secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. Each on-balance sheet asset-backed securitization SPE is a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the asset-backed securitization transactions and are not available to pay other obligations or claims of the Company’s creditors until the associated secured debt and other obligations are satisfied. Restricted cash balances held by the SPEs are used only to support the securitizations. There are no amortization schedules for the secured notes; however, the debt is reduced monthly as available collections on the related U.S. retail motorcycle finance receivables are applied to outstanding principal. The secured notes’ contractual livesnotes currently have various contractual maturities during 2022.ranging from 2022 to 2028.
The Company is the primary beneficiary of its on-balance sheet asset-backed securitization VIEs because it retains servicing rights and a residual interest in the VIEs in the form of a debt security. As the servicer, the Company is the variable interest holder with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a residual interest holder, the Company has the obligation to absorb losses and the right to receive benefits which could potentially be significant to the VIE.
There were noIn 2020, the Company transferred $2.42 billion of U.S. retail motorcycle finance receivables to four separate SPEs which, in turn, issued $2.08 billion, or $2.06 billion net of discounts and issuance costs, of secured notes through four separate on-balance sheet asset-backed securitization transactions during 2018transactions. In 2019, the Company transferred $1.12 billion of U.S. retail motorcycle finance receivables to two separate SPEs which, in turn, issued $1.03 billion, or 2017. $1.02 billion net of discount and issuance costs, of secured notes through two separate on-balance sheet asset-backed securitization transactions.

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At December 31, 2018,2020, the Company's consolidatedConsolidated balance sheetsheets included outstanding balances related to the following secured notes with the related maturity dates and interest rates (in thousands):
Issue DatePrincipal Amount
at Date of Issuance		Weighted-Average Rate
at Date of Issuance		Contractual Maturity Date
at Date of Issuance
May 2020$750,1783.38%April 2028
May 2020$500,0002.37%October 2021 - October 2028
April 2020$300,0003.30%November 2027
January 2020$525,0001.83%February 2021 - April 2027
June 2019$525,0002.37%July 2020 - November 2026
May 2019$500,0003.05%July 2026
Issue Date 
Principal
Amount at Date of Issuance
 
Weighted-Average
Rate at Date of
Issuance
 Contractual Maturity Date
May 2015 $500,000 0.88% May 2016 - December 2022
January 2015 $700,000 0.89% February 2016 - August 2022


In addition, outstanding balances related to the followingThere were no secured notes included in the Company's consolidated Consolidated balance sheetsheets at December 31, 20172019 that were repaid in full during 2018 (in thousands):
 Issue Date 
Principal
Amount at Date of Issuance
 
Weighted-Average
Rate at Date of
Issuance
 Contractual Maturity Date
 
 April 2014 $850,000 0.66% April 2015 - October 2021
2020.For the years ended December 31, 20182020 and 2017,2019, interest expense on the secured notes was $3.2$42.1 million and $7.9$13.3 million,, respectively, which is included in Financial Services interest expense.expense. The weighted average interest rate of the outstanding on-balance sheet asset-backed securitization transactions was 1.67%2.39% and 1.53%2.36% at December 31, 20182020 and 2017,2019, respectively.
On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE
The– Until November 25, 2020, the Company hashad two separate agreements with third-party bank-sponsored asset-backed U.S. commercial paper conduits, under which ita $300.0 million revolving facility agreement and a $600.0 million revolving facility agreement (together, the Former U.S. Conduit Facilities). On November 25, 2020, the Company amended each revolving facility agreement by consolidating the two agreements into one $900.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits.Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party bank-sponsored asset-backed U.S. commercial paper conduits. On November 30, 2018,In addition to the Company renewed its existing $600.0$900.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits. Also on that date, the Company amended its existing $300.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits, increasing the aggregate commitment, to $600.0 million. The aggregate commitment under thisthe agreement will be reduced monthly as collections onallows for additional borrowings, at the related finance receivables are appliedlender’s discretion, of up to the outstanding principal until the outstanding principal balance is less than or equal to $300.0 million, at which point the aggregate commitment will equal $300.0 million. Availability under the $900.0 million revolving facilities (together, thefacility (the U.S. Conduit Facilities)Facility) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.
Under the U.S. Conduit Facilities,Facility, the assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates or LIBOR toif funded by a conduit lender through the extent the advance isissuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, plus, inthe terms of the interest are based on LIBOR. In each case,of these cases, a program fee is assessed based on the outstanding principal. The U.S. Conduit FacilitiesFacility also provideprovides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt will beis reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facilities,Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 54 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of December 31, 2020, the U.S. Conduit Facilities haveFacility has an expiration date of November 29, 2019.19, 2021.
The Company is the primary beneficiary of its U.S. Conduit FacilitiesFacility VIE because it retains servicing rights and a residual interest in the VIE in the form of a debt security. As the servicer, the Company is the variable interest holder with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a residual interest holder, the Company has the obligation to absorb losses and the right to receive benefits which could potentially be significant to the VIE.
The following table includes quarterly transfersIn 2020, the Company transferred $195.3 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $163.6 million of debt under the Former U.S. Conduit Facilities. In 2019, the Company transferred $174.4 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $154.6 million of debt under the Former U.S. Conduit Facilities.
For the year ended December 31, 2020 interest expense under the Former U.S. Conduit Facilities and the respective proceeds (in thousands):
 2018 2017
 Transfers Proceeds Transfers Proceeds
First quarter$32,900
 $29,300
 $333,400
 $300,000
Second quarter59,100
 53,300
 28,200
 24,000
Third quarter—
 —
 34,100
 29,600
Fourth quarter400,200
 356,800
 34,000
 29,700
 $492,200
 $439,400
 $429,700
 $383,300
U.S. Conduit Facility was a total of $8.9 million. For the yearsyear ended December 31, 2018 and 2017,2019 interest expense under the Former U.S. Conduit Facilities was $10.9 million and $7.1 million, respectively, which$18.5 million. The interest expense is included in Financial Services interest expense.expense. The weighted average interest rate of the outstanding U.S. Conduit FacilitiesFacility was 3.26% and 2.33%1.61% at December 31, 2018and 2017, respectively.2020. The weighted average interest rate of the outstanding Former U.S. Conduit Facilities was 2.63% at December 31, 2019.
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On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility


– In June 2018,2020, the Company renewed its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$220.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 54 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of December 31, 2020, the Canadian Conduit expires onhas an expiration date of June 28, 2019.
The following table includes quarterly transfers of Canadian retail motorcycle finance receivables to the Canadian Conduit and the respective proceeds (in thousands):
 2018 2017
 Transfers Proceeds Transfers Proceeds
First quarter$7,600
 $6,200
 $6,300
 $5,500
Second quarter38,900
 32,200
 14,200
 12,400
Third quarter—
 —
 —
 —
Fourth quarter39,000
 32,200
 84,900
 69,100
 $85,500
 $70,600
 $105,400
 $87,000

For the years ended December 31, 2018 and 2017, interest expense on the Canadian Conduit was $3.8 million and $2.6 million, respectively, which is included in Financial Services interest expense. The weighted average interest rate of the outstanding Canadian Conduit was 2.68% and 1.96% at December 31, 2018 and 2017, respectively.25, 2021.
The Company is not the primary beneficiary of the Canadian bank-sponsored, multi-seller conduit VIE; therefore, the Company does not consolidate the VIE. However, the Company treats the conduit facility as a secured borrowing as it maintains effective control over the assets transferred to the VIE and therefore does not meet the requirements for sale accounting.
As the Company participates in and does not consolidate the Canadian bank-sponsored, multi-seller conduit VIE, the maximum exposure to loss associated with this VIE, which would only be incurred in the unlikely event that all the finance receivables and underlying collateral have no residual value, is $31.8$20.0 million at December 31, 2018.2020. The maximum exposure is not an indication of the Company's expected loss exposure.
In 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $61.6 million. In 2019, the Company transferred $28.2 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $23.4 million.
For the years ended December 31, 2020 and 2019, interest expense on the Canadian Conduit was $2.9 million and $3.6 million, respectively, which is included in Financial Services interest expense. The weighted average interest rate of the outstanding Canadian Conduit was 2.13% and 2.68% at December 31, 2020 and 2019, respectively.
Off-Balance Sheet Asset-Backed Securitization VIE
– There were no off-balance sheet asset-backed securitization transactions during the years ended December 31, 20182020, 2019 and 2017.2018. During the second quarter of 2016, the Company sold retail motorcycle finance receivables with a principal balance of $301.8 million into a securitization VIE that was not consolidated, recognized a gain of $9.3 million and received cash proceeds of $312.6 million. The gain on sale was included in Financial Services revenue on the Consolidated statements of operations. In April 2020, the Company repurchased the finance receivables associated with this off-balance sheet asset-backed securitization VIE for $27.4 million.
Similar to an on-balance sheet asset-backed securitization, the Company transferred U.S. retail motorcycle finance receivables to an SPE which in turn issued secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. The off-balance sheet asset-backed securitization SPE iswas a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitization arewere only available for payment of the secured debt and other obligations arising from the asset-backed securitization transaction and arewere not available to pay other obligations or claims of the Company’s creditors. In an on-balance sheet asset-backed securitization, the Company retains a financial interest in the VIE in the form of a debt security. As part of this off-balance sheet securitization, the Company did not retain any financial interest in the VIE beyond servicing rights and ordinary representations and warranties and related covenants.
The Company iswas not the primary beneficiary of the off-balance sheet asset-backed securitization VIE because it only retained servicing rights and doesdid not have the obligation to absorb losses or the right to receive benefits from the VIE which could potentially be significant to the VIE. Accordingly, this transaction met the accounting sale requirements under ASC Topic 860 and was recorded as a sale for accounting purposes. Upon the sale in 2016, the retail motorcycle finance receivables were removed from the Company’s Consolidated balance sheetsheets and a gain was recognized for the difference between the cash proceeds received, the assets


derecognized and the liabilities recognized as part of the transaction. The gain on sale was included in Financial Services revenue in the consolidated statement of income.
At December 31, 2018, the assets of this off-balance sheet asset-backed securitization VIE were $79.6 million and represented the current unpaid principal balance of the retail motorcycle finance receivables, which was the Company’s maximum exposure to loss in the off-balance sheet VIE at December 31, 2018. This is based on the unlikely event that all the receivables have underwriting defects or other defects that trigger a violation of certain covenants and that the underlying collateral has no residual value. This maximum exposure is not an indication of expected losses.
Servicing Activities
–The Company services all retail motorcycle finance receivables that it originates. When the Company transfers retail motorcycle finance receivables to SPEs through asset-backed financings, the Company retains the right to service the finance receivables and receives servicing fees based on the securitized finance receivables balance and certain ancillary fees. In on-balance sheet asset-backed financing,financings, servicing fees are eliminated in consolidation and therefore are not recorded on a consolidated basis. In off-balance sheet asset-backed financings, servicing fees and ancillary fees are recorded in Financial Services revenue in the consolidatedConsolidated statements of income.operations. The fees the Company is paid for
77

servicing represent adequate compensation and, consequently, the Company does not recognize a servicing asset or liability. The Company recognized servicing fee income of $1.1$0.1 million and $1.9$0.6 million for the years ended December 31, 20182020 and December 31, 2017,2019, respectively.
The unpaid principal balance of serviced retail motorcycle finance receivables serviced by the Company at December 31, was as follows (in thousands):
2018 201720202019
On-balance sheet retail motorcycle finance receivables$6,185,350
 $5,993,185
On-balance sheet retail motorcycle finance receivables$6,187,300 $6,274,551 
Off-balance sheet retail motorcycle finance receivables79,613
 146,425
Off-balance sheet retail motorcycle finance receivables0 35,197 
Total serviced retail motorcycle finance receivables$6,264,963
 $6,139,610
$6,187,300 $6,309,748 
The unpaid principal balance of servicedretail motorcycle finance receivables serviced by the Company 30 days or more delinquent at December 31, was as follows (in thousands):
Amount 30 days or more past due:
2018 201720202019
On-balance sheet retail motorcycle finance receivables$228,015
 $227,127
On-balance sheet retail motorcycle finance receivables$176,733 $244,498 
Off-balance sheet retail motorcycle finance receivables1,658
 2,106
Off-balance sheet retail motorcycle finance receivables0 885 
Total serviced retail motorcycle finance receivables$229,673
 $229,233
$176,733 $245,383 
Credit losses, net of recoveries for the servicedretail motorcycle finance receivables serviced by the Company, for the years ended December 31, were as follows (in thousands):
20202019
On-balance sheet retail motorcycle finance receivables$87,546 $125,840 
Off-balance sheet retail motorcycle finance receivables13 458 
$87,559 $126,298 
 2018 2017
On-balance sheet retail motorcycle finance receivables$109,448
 $113,316
Off-balance sheet retail motorcycle finance receivables907
 1,191
Total serviced retail motorcycle finance receivables$110,355
 $114,507

13. Fair Value
The Company assesses the inputs used to measure fair value using a three-tier hierarchy.
Level 1 inputs include quoted prices for identical instruments and are the most observable.
Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity prices, and yield curves. The Company uses the market approach to derive the fair value for its Level 2 fair value measurements. ForwardForeign currency contracts, for foreign currency, commodities,commodity contracts, and treasury rate lockscross-currency swaps are valued using quoted forward rates and prices; interest rate swaps and caps are valued using quoted interest rates and yield curves; investments in marketable securities and cash equivalents are valued using quoted prices.


curves.
Level 3 inputs are not observable in the market and include management'sthe Company's judgments about the assumptions market participants would use in pricing the asset or liability.
Recurring Fair Value Measurements
–The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, were as follows (in thousands):
2020
BalanceLevel 1Level 2
Assets:
Cash equivalents$3,019,884 $2,819,884 $200,000 
Marketable securities52,061 52,061 0 
Derivative financial instruments140,266 0 140,266 
$3,212,211 $2,871,945 $340,266 
Liabilities:
Derivative financial instruments$25,521 $0 $25,521 
78

2019
 2018 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
BalanceLevel 1Level 2
Assets:        Assets:
Cash equivalents $998,601
 $728,800
 $269,801
 $—
Cash equivalents$624,832 $459,885 $164,947 
Marketable securities 54,250
 44,243
 10,007
 —
Marketable securities52,575 52,575 0 
Derivatives 15,071
 —
 15,071
 —
Total $1,067,922
 $773,043
 $294,879
 $—
Derivative financial instrumentsDerivative financial instruments12,649 0 12,649 
$690,056 $512,460 $177,596 
Liabilities:        Liabilities:
Derivatives $5,316
 $—
 $5,316
 $—
Derivative financial instrumentsDerivative financial instruments$13,934 $0 $13,934 
  2017 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:        
Cash equivalents $488,432
 $358,500
 $129,932
 $—
Marketable securities 48,006
 48,006
 —
 —
Derivatives 1,769
 —
 1,769
 —
Total $538,207
 $406,506
 $131,701
 $—
Liabilities:        
Derivatives $21,308
 $—
 $21,308
 $—
Nonrecurring Fair Value Measurements
Repossessed inventory is recorded at the lower of cost or net realizable value through a nonrecurring fair value measurement.– Repossessed inventory was $20.2$17.7 million and $19.6$21.4 million at December 31, 2020 and 2019, respectively, for which the fair value adjustment was $9.7$4.2 million and $9.0$11.9 million, at December 31, 2018 and 2017, respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.
Fair Value of Financial Instruments Measured at Cost
– The carrying value of the Company’s cashCash and cash equivalents and restrictedRestricted cash approximates their fair values.


The following table summarizes the fair value and carrying value of the Company’s remaining financial instruments that are measured at cost or amortized cost at December 31, were as follows (in thousands):
 2018 2017 20202019
 Fair Value Carrying Value Fair Value Carrying Value Fair ValueCarrying ValueFair ValueCarrying Value
Assets:        Assets:
Finance receivables, net $7,304,334
 $7,221,931
 $7,021,549
 $6,965,086
Finance receivables, net$6,586,348 $6,443,008 $7,419,627 $7,374,366 
Liabilities:        Liabilities:
DepositsDeposits$79,965 $79,965 $0 $0 
Debt:Debt:
Unsecured commercial paper $1,135,810
 $1,135,810
 $1,273,482
 $1,273,482
Unsecured commercial paper$1,014,274 $1,014,274 $571,995 $571,995 
Asset-backed U.S. commercial paper conduit facilities $582,717
 $582,717
 $279,457
 $279,457
Asset-backed U.S. commercial paper conduit facilities$402,205 $402,205 $490,427 $490,427 
Asset-backed Canadian commercial paper conduit facility $155,951
 $155,951
 $174,779
 $174,779
Asset-backed Canadian commercial paper conduit facility$116,678 $116,678 $114,693 $114,693 
Asset-backed securitization debtAsset-backed securitization debt$1,817,892 $1,791,956 $768,094 $764,392 
Medium-term notes $4,829,671
 $4,887,007
 $4,189,092
 $4,165,706
Medium-term notes$5,118,928 $4,917,714 $4,816,153 $4,760,127 
Senior unsecured notes $707,198
 $742,624
 $784,433
 $741,961
Asset-backed securitization debt $94,974
 $95,167
 $351,767
 $352,624
Senior notesSenior notes$828,141 $743,977 $774,949 $743,296 
Finance Receivables, Netnet – The carrying value of retail and wholesale finance receivables in the financial statements is amortized cost less an allowance for credit losses. The fair value of retail finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects current credit, interest rate and prepayment risks associated with similar types of instruments. Fair value is determined based on Level 3 inputs. The amortized cost basis of wholesale finance receivables approximates fair value because they are generally either are short-term or have interest rates that adjust with changes in market interest rates.
DebtDeposits – The carrying value of debt indeposits is amortized cost and approximates carrying value due to the financial statementsshort maturities of the deposits. Fair value is calculated using Level 2 inputs.
Debt – The carrying value of debt is generally amortized cost, net of discounts and debt issuance costs. The carryingfair value of unsecured commercial paper and credit facility borrowings are calculated using Level 2 inputs and approximates faircarrying value due to its short maturity. The carryingfair value of debt provided under the U.S. conduit facilitiesConduit Facilities and Canadian conduit facilityConduit Facility is calculated using Level 2 inputs and approximates faircarrying value since the interest rates charged under the facilityfacilities are tied directly to market rates and fluctuate as market rates change. The fair values of the medium-term notes and senior unsecured notes are estimated based upon rates currently available for debt with similar terms and remaining maturities (Level 2 inputs). The fair value of the fixed-rate debt related to on-balance sheet asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities (Level 2 inputs). The fair value of the floating-rate debt related to on-balance sheet asset-backed securitization transactions is calculated using Level 2 inputs and approximates carrying value since the interest rates charged are tied directly to market rates and fluctuate as market rates change.
79

14. Product Warranty and Recall Campaigns
The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except in Japan, where the Company currently provides a standard three-year limited warranty. The Company also provides a five-year unlimited warranty on the battery for new electric motorcycles. In addition, the Company provides a one-year warranty for parts and accessories. The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company accrues for future warranty claims at the time of sale using an estimated cost based primarily on historical Company claim information.
Additionally, the Company has from time to time initiated certain voluntary recall campaigns. The Company records estimated recall costs when the liability is both probable and estimable. This generally occurs when the Company's management approves and commits to a recall. The warranty and recall liability is included in Accrued Liabilities and Other long-term liabilities on the Consolidatedbalance sheets. Changes in the Company’s warranty and recall liability were as follows as of December 31, (in thousands):
202020192018
Balance, beginning of period$89,793 $131,740 $94,200 
Warranties issued during the period32,042 50,470 53,367 
Settlements made during the period(51,420)(90,404)(79,300)
Recalls and changes to pre-existing warranty liabilities(1,207)(2,013)63,473 
Balance, end of period$69,208 $89,793 $131,740 
The liability for recall campaigns was $24.7 million, $36.4 million and $73.3 million at December 31, 2020, 2019 and 2018, respectively. Additionally, the Company recorded supplier recoveries within operating expenses separate from the amounts disclosed above of $28.0 million in 2019.
15. Employee Benefit Plans and Other Postretirement Benefits
The Company has a qualified defined benefit pension plan and postretirement healthcare benefit plans. The plans which cover certain eligible employees and retirees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993.employees.
Pension benefits are based primarily on years of service and, for certain plans,participants, levels of compensation. EmployeesPlan participants are eligible to receive postretirement healthcare benefits upon attaining age 55 after rendering at least 10 years of service to the Company. Some of the plans require employeeparticipant contributions to partially offset benefit costs.


Obligations and Funded Status:
The following table provides the changes in the benefit obligations,obligation, fair value of plan assets and the funded status of the Company’s pension and SERPA plans and the postretirement healthcare plans as of the Company’s measurement dates of December 31, 2018 and 2017 measurement dateswere as follows (in thousands):
 Pension and SERPA BenefitsPostretirement Healthcare Benefits
 2020201920202019
Change in benefit obligation:
Benefit obligation, beginning of period$2,212,012 $1,984,708 $293,505 $286,574 
Service cost27,224 25,408 11,761 4,449 
Interest cost76,447 85,483 9,391 11,753 
Actuarial losses (gains)228,081 236,719 18,824 9,590 
Plan participant contributions0 0 2,140 1,999 
Plan amendments0 8,371 0 0 
Special early retirement benefits0 1,583 0 0 
Benefits paid(137,381)(126,079)(19,703)(20,860)
Net curtailments and settlements(15,948)(4,181)(673)0 
Benefit obligation, end of period2,390,435 2,212,012 315,245 293,505 
80

  Pension and SERPA Benefits 
Postretirement
Healthcare Benefits
  2018 2017 2018 2017
Change in benefit obligation:        
Benefit obligation, beginning of period $2,201,021
 $1,986,435
 $338,488
 $346,431
Service cost 32,340
 31,584
 7,180
 7,500
Interest cost 82,778
 85,076
 11,556
 13,648
Actuarial (gains) losses (213,583) 195,444
 (42,039) (8,408)
Plan participant contributions —
 —
 2,492
 2,525
Plan amendments (12,926) (13,227) (4,710) —
Benefits paid (106,280) (84,291) (23,448) (23,208)
Net curtailments and settlements 1,358
 —
 (2,945) —
Benefit obligation, end of period 1,984,708
 2,201,021
 286,574
 338,488
Change in plan assets:        
Fair value of plan assets, beginning of period 2,162,885
 1,899,889
 217,537
 170,092
Actual return on plan assets (185,468) 320,144
 (13,287) 32,445
Company contributions —
 25,000
 —
 15,000
Plan participant contributions —
 —
 2,492
 2,525
Benefits paid (102,799) (82,148) (16,385) (2,525)
Fair value of plan assets, end of period 1,874,618
 2,162,885
 190,357
 217,537
Funded status of the plans, December 31 $(110,090) $(38,136) $(96,217) $(120,951)
Amounts recognized in the Consolidated Balance Sheets, December 31:        
Prepaid benefit costs (long-term assets) $—
 $19,816
 $—
 $—
Accrued benefit liability (current liabilities) (2,314) (3,346) (1,764) (2,198)
Accrued benefit liability (long-term liabilities) (107,776) (54,606) (94,453) (118,753)
Net amount recognized $(110,090) $(38,136) $(96,217) $(120,951)
 Pension and SERPA BenefitsPostretirement Healthcare Benefits
 2020201920202019
Change in plan assets:
Fair value of plan assets, beginning of period2,209,222 1,874,618 220,992 190,357 
Return on plan assets361,674 459,388 36,349 41,717 
Plan participant contributions0 0 2,140 1,999 
Benefits paid(136,921)(124,784)(15,446)(13,081)
Fair value of plan assets, end of period2,433,975 2,209,222 244,035 220,992 
Funded status of the plan$43,540 $(2,790)$(71,210)$(72,513)
Funded status as recognized on the Consolidated balance sheets:
Pension and postretirement assets$82,537 $56,014 $13,174 $0 
Accrued liabilities(8,814)(2,666)(361)0 
Pension and postretirement liabilities(30,183)(56,138)(84,023)(72,513)
$43,540 $(2,790)$(71,210)$(72,513)
Amounts included in Accumulated other comprehensive loss, net of tax:
Prior service credits$(5,712)$(6,489)$(5,438)$(7,559)
Actuarial losses (gains)445,804 496,919 (4,942)(1,321)
$440,092 $490,430 $(10,380)$(8,880)
During 2018, the2020, actuarial gainslosses related to the obligation for pension and SERPA benefits were due primarily to an increasea decrease in the discount rate. Conversely, during 2017, therate, partially offset by changes in mortality assumptions, demographic assumptions and a reduction in plan participants. During 2019, actuarial losses related to this obligation were due primarily to a decrease in the discount rate.rate partially offset by changes in mortality assumptions.
During 2018,2020 and 2019, the actuarial gainslosses related to the obligation for postretirement healthcare benefits were due primarily to an increasedecreases in the discount rate, partially offset by favorable claim cost experience and a change in the benefit delivery structure. During 2017, the actuarial gains related to this obligation were due primarily to favorable claim cost and census experience, partially offset by the impact of a decrease in the discount rate.adjustments.


The funded status of the qualified pension plan and the SERPA plans are combined above. Plan level information for plansPlans with projected benefit obligations (PBO) or accumulated benefit obligations (ABO) in excess of the fair value of plan assets at December 31, is presented below (in millions)thousands):
20202019
 2018 2017
Plans with PBOs in excess of fair value of plan assets:    
Plans with PBO in excess of fair value of plan assets:Plans with PBO in excess of fair value of plan assets:
PBO $1,984.7
 $58.0
PBO$38,996 $58,804 
Fair value of plan assets $1,874.6
 $—
Fair value of plan assets$0 $0 
    
Plans with ABOs in excess of fair value of plan assets:    
Plans with ABO in excess of fair value of plan assets:Plans with ABO in excess of fair value of plan assets:
ABO $40.1
 $42.1
ABO$30,598 $44,232 
Fair value of plan assets $—
 $—
Fair value of plan assets$0 $0 
The total ABO for all the Company's pension and SERPA plans combined was $1.90$2.30 billion and $2.10$2.12 billion as of December 31, 20182020 and 2017,2019, respectively.
81

Benefit Costs:
Components of net periodic benefit costs for the years ended December 31 (in thousands):
  
Pension and
SERPA Benefits
 
Postretirement
Healthcare Benefits
  2018 2017 2016 2018 2017 2016
Service cost $32,340
 $31,584
 $33,437
 $7,180
 $7,500
 $7,478
Interest cost 82,778
 85,076
 90,827
 11,556
 13,648
 14,814
Expected return on plan assets (147,671) (141,385) (145,781) (14,161) (12,623) (12,069)
Amortization of unrecognized:            
Prior service (credit) cost (420) 1,018
 1,019
 (1,842) (2,171) (2,803)
Net loss 64,773
 43,993
 46,351
 1,817
 3,261
 3,537
Net curtailment loss (gain) 1,017
 —
 —
 (886) —
 —
Settlement loss —
 —
 1,463
 —
 —
 —
Net periodic benefit cost $32,817
 $20,286
 $27,316
 $3,664
 $9,615
 $10,957
Service costs arecost is allocated among selling,Selling, administrative and engineering expense, Motorcycles and Related Products cost of goods sold and inventory.Inventories, net. Amounts capitalized in inventory are not significant. Non-service cost components of net periodic benefit cost are presented in otherOther (expense) income, (expense), net. Refer to Note 1 regarding the adoption of ASU 2017-07 for further discussion regarding the classificationnet. Components of net periodic benefit cost. costs for the Company's defined benefit plans for the years ended December 31, were as follows (in thousands):
 Pension and SERPA BenefitsPostretirement Healthcare Benefits
 202020192018202020192018
Service cost$27,224 $25,408 $32,340 $11,761 $4,449 $7,180 
Interest cost76,447 85,483 82,778 9,391 11,753 11,556 
Expected return on plan assets(135,056)(142,323)(147,671)(13,870)(14,030)(14,161)
Amortization of unrecognized:
Prior service credit(1,088)(1,930)(420)(2,381)(2,381)(1,842)
Net loss65,489 44,511 64,773 492 277 1,817 
Special early retirement benefits0 1,583 0 0 0 0 
Curtailment loss (gain)74 0 1,017 (392)(960)(886)
Settlement loss2,742 1,503 0 0 0 0 
Net periodic benefit cost$35,832 $14,235 $32,817 $5,001 $(892)$3,664 
The expected return on plan assets is calculated based on the market-relatedmarket related value of plan assets. The market-relatedmarket related value of plan assets is different from the fair value in that asset gains/gains and losses are smoothed over a five-year period. 
Unrecognized gains and losses related to plan obligations and assets are initially recorded in other comprehensive income and result from actual experience that differs from assumed or expected results, and the impacts of changes in assumptions. Unrecognized plan asset gains and losses not yet reflected in the market-relatedmarket related value of plan assets are not subject to amortization. Remaining unrecognized gains and losses that exceed 10% of the greater of the projected benefit obligation or the market-relatedmarket related value of plan assets are amortized to earnings over the estimated future service period of active plan participants. The impacts of plan amendments, if any, are amortized over the estimated future service period of plan participants at the time of the amendment.






Amounts included in accumulated other comprehensive loss, net of tax, at December 31, 2018 which have not yet been recognized in net periodic benefit cost are as follows (in thousands):
  
Pension and
SERPA Benefits
 
Postretirement
Healthcare Benefits
 Total
Prior service credit $(14,371) $(9,381) $(23,752)
Net actuarial loss 593,608
 12,005
 605,613
Total $579,237
 $2,624
 $581,861
Assumptions:
Weighted-average assumptions used to determine benefit obligations and net periodic benefit cost at December 31, were as follows:
 
Pension and
SERPA Benefits
 
Postretirement
Healthcare Benefits
Pension and SERPA BenefitsPostretirement Healthcare Benefits
 2018 2017 2016 2018 2017 2016 202020192018202020192018
Assumptions for benefit obligations:            Assumptions for benefit obligations:
Discount rate 4.38% 3.71% 4.30% 4.23% 3.52% 4.03%Discount rate2.62 %3.49 %4.38 %2.11 %3.26 %4.23 %
Rate of compensation increase 3.38% 3.43% 3.50% n/a
 n/a
 n/a
Rate of compensation increase3.34 %3.39 %3.38 %n/an/an/a
Assumptions for net periodic benefit cost:            Assumptions for net periodic benefit cost:
Discount rate 3.71% 4.30% 4.53% 3.52% 4.03% 4.29%Discount rate3.49 %4.38 %3.71 %3.26 %4.23 %3.52 %
Expected return on plan assets 7.25% 7.25% 7.50% 7.25% 7.25% 7.50%Expected return on plan assets6.70 %7.10 %7.25 %7.00 %7.25 %7.25 %
Rate of compensation increase 3.43% 3.50% 3.50% n/a
 n/a
 n/a
Rate of compensation increase3.39 %3.38 %3.43 %n/an/an/a
Plan Assets:
Pension Plan Assets -– The Company’s investment objective is to ensure assets are sufficient to pay benefits while mitigating the volatility of retirement plan assets or liabilities recorded in the balance sheet. The Company mitigates volatility through asset diversification and partial asset/liability matching. The investment portfolio for the Company's pension plan assets contains a diversified blend of equity and fixed-income investments. The Company’s current overall targeted asset allocation as a percentage of total market value was approximately 56%53% equities and 44%47% fixed-income and cash. Assets are rebalanced regularly to keep the actual allocation in line with targets. Equity holdings primarily include investments in small-, medium- and large-cap companies in the U.S. (including, including Company stock),stock, investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign obligations. In addition, cash
82

equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews.
Postretirement Healthcare Plan Assets -– The Company's investment objective is to maximize the return on assets to help pay benefits by prudently investing in equities, fixed income and alternative assets. The Company's current overall targeted asset allocation as a percentage of total market value was approximately 69% equities and 31% fixed-income and cash. Equity holdings primarily include investments in small-, medium- and large-cap companies in the U.S., investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign obligations. In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews.


The following tables present the fair values of the plan assets related to the Company’s pension and postretirement healthcare plans within the fair value hierarchy as defined in Note 13.
The fair values of the Company’s pension plan assets as of at December 31, 20182020 were as follows (in thousands):
BalanceLevel 1Level 2
Cash and cash equivalents$56,153 $0 $56,153 
Equity holdings:
U.S. companies785,227 769,583 15,644 
Foreign companies114,013 106,783 7,230 
Harley-Davidson common stock46,741 46,741 0 
Pooled equity funds381,538 381,538 0 
Other66 66 0 
1,327,585 1,304,711 22,874 
Fixed-income holdings:
U.S. Treasuries59,116 59,116 0 
Federal agencies15,230 0 15,230 
Corporate bonds691,003 0 691,003 
Pooled fixed income funds148,717 51,456 97,261 
Foreign bonds110,062 0 110,062 
Municipal bonds14,671 0 14,671 
1,038,799 110,572 928,227 
Plan assets subject to fair value leveling2,422,537 $1,415,283 $1,007,254 
Plan assets measured at net asset value:
Limited partnership interests537 
Real estate investment trusts10,901 
11,438 
$2,433,975 
  Balance as of December 31, 2018 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
Cash and cash equivalents $40,984
 $—
 $40,984
Equity holdings:      
U.S. companies 636,308
 621,459
 14,849
Foreign companies 66,143
 66,143
 —
Harley-Davidson common stock 43,455
 43,455
 —
Pooled equity funds 330,476
 330,476
 —
Other 85
 85
 —
Total equity holdings 1,076,467
 1,061,618
 14,849
Fixed-income holdings:      
U.S. Treasuries 45,102
 45,102
 —
Federal agencies 27,811
 —
 27,811
Corporate bonds 434,070
 —
 434,070
Pooled fixed income funds 140,630
 42,400
 98,230
Foreign bonds 83,852
 266
 83,586
Municipal bonds 9,276
 —
 9,276
Total fixed-income holdings 740,741
 87,768
 652,973
Total assets in the fair value hierarchy 1,858,192
 $1,149,386
 $708,806
Assets measured at net asset value as a practical expedient:      
Limited partnership interests 5,918
    
Real estate investment trusts 10,508
    
Total pension plan assets $1,874,618
    
Included in the pension plan assets are 1,273,592 shares of the Company’s common stock with a market value of $43.5$46.7 million at December 31, 2018.2020.

83


The fair values of the Company’s postretirement healthcare plan assets as of at December 31, 20182020 were as follows (in thousands):
BalanceLevel 1Level 2
Cash and cash equivalents$4,306 $0 $4,306 
Equity holdings:
U.S. companies115,272 115,272 0 
Foreign companies29,670 29,670 0 
Pooled equity funds27,207 27,207 0 
Other5 5 0 
172,154 172,154 0 
Fixed-income holdings:
U.S. Treasuries2,873 2,873 0 
Federal agencies6,970 0 6,970 
Corporate bonds12,460 0 12,460 
Pooled fixed income funds37,989 37,989 0 
Foreign bonds970 0 970 
Municipal bonds458 0 458 
61,720 40,862 20,858 
Plan assets subject to fair value leveling238,180 $213,016 $25,164 
Plan assets measured at net asset value:
Real estate investment trusts5,855 
$244,035 

84

  Balance as of December 31, 2018 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
Cash and cash equivalents $5,276
 $—
 $5,276
Equity holdings:      
U.S. companies 86,975
 86,949
 26
Foreign companies 16,342
 16,342
 —
Pooled equity funds 20,747
 20,747
 —
Other 9
 9
 —
Total equity holdings 124,073
 124,047
 26
Fixed-income holdings:      
U.S. Treasuries 8,707
 8,707
 —
Federal agencies 5,445
 —
 5,445
Corporate bonds 6,590
 —
 6,590
Pooled fixed income funds 33,959
 33,959
 —
Foreign bonds 538
 —
 538
Municipal bonds 272
 —
 272
Total fixed-income holdings 55,511
 42,666
 12,845
Total assets in the fair value hierarchy 184,860
 $166,713
 $18,147
Assets measured at net asset value as a practical expedient:      
Real estate investment trusts 5,497
    
Total postretirement healthcare plan assets $190,357
    



The fair values of the Company’s pension plan assets as of at December 31, 20172019 were as follows (in thousands):
BalanceLevel 1Level 2
 Balance as of December 31, 2017 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
Cash and cash equivalents $51,082
 $1,057
 $50,025
Cash and cash equivalents$35,463 $0 $35,463 
Equity holdings:      Equity holdings:
U.S. companies 722,527
 705,111
 17,416
U.S. companies728,892 707,276 21,616 
Foreign companies 78,765
 78,765
 —
Foreign companies79,707 77,275 2,432 
Harley-Davidson common stock 64,800
 64,800
 —
Harley-Davidson common stock47,365 47,365 0 
Pooled equity funds 416,881
 416,881
 —
Pooled equity funds377,301 377,301 0 
Other 119
 119
 —
Other72 72 0 
Total equity holdings 1,283,092
 1,265,676
 17,416
1,233,337 1,209,289 24,048 
Fixed-income holdings:      Fixed-income holdings:
U.S. Treasuries 39,866
 39,866
 —
U.S. Treasuries67,234 67,234 0 
Federal agencies 29,188
 —
 29,188
Federal agencies15,434 0 15,434 
Corporate bonds 462,563
 —
 462,563
Corporate bonds583,475 0 583,475 
Pooled fixed income funds 189,361
 61,875
 127,486
Pooled fixed income funds142,134 48,674 93,460 
Foreign bonds 81,732
 —
 81,732
Foreign bonds103,439 0 103,439 
Municipal bonds 11,800
 —
 11,800
Municipal bonds12,339 0 12,339 
Total fixed-income holdings 814,510
 101,741
 712,769
Total assets in the fair value hierarchy 2,148,684
 $1,368,474
 $780,210
Assets measured at net asset value as a practical expedient:      
924,055 115,908 808,147 
Plan assets subject to fair value levelingPlan assets subject to fair value leveling2,192,855 $1,325,197 $867,658 
Plan assets measured at net asset value:Plan assets measured at net asset value:
Limited partnership interests 9,099
    Limited partnership interests4,118 
Real estate investment trust 5,102
    Real estate investment trust12,249 
Total pension plan assets $2,162,885
    
16,367 
$2,209,222 
Included in the pension plan assets were 1,273,592 shares of the Company’s common stock with a market value of $64.8$47.4 million at December 31, 2017.2019.

85


The fair values of the Company’s postretirement healthcare plan assets as of at December 31, 20172019 were as follows (in thousands):
BalanceLevel 1Level 2
Cash and cash equivalents$2,458 $0 $2,458 
Equity holdings:
U.S. companies104,399 104,399 0 
Foreign companies22,422 21,744 678 
Pooled equity funds25,029 25,029 0 
Other7 7 0 
151,857 151,179 678 
Fixed-income holdings:
U.S. Treasuries5,782 5,782 0 
Federal agencies7,986 0 7,986 
Corporate bonds8,425 0 8,425 
Pooled fixed income funds36,720 36,720 0 
Foreign bonds672 0 672 
Municipal bonds454 0 454 
60,039 42,502 17,537 
Plan assets subject to fair value leveling214,354 $193,681 $20,673 
Plan assets measured at net asset value:
Real estate investment trust6,638 
$220,992 
  Balance as of December 31, 2017 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
Cash and cash equivalents $19,317
 $—
 $19,317
Equity holdings:      
U.S. companies 101,720
 101,720
 —
Foreign companies 19,498
 19,495
 3
Pooled equity funds 23,563
 23,563
 —
Other 14
 14
 —
Total equity holdings 144,795
 144,792
 3
Fixed-income holdings:      
U.S. Treasuries 6,803
 6,803
 —
Federal agencies 5,060
 —
 5,060
Corporate bonds 6,756
 —
 6,756
Pooled fixed income funds 27,461
 27,461
 —
Foreign bonds 311
 —
 311
Municipal bonds 284
 —
 284
Total fixed-income holdings 46,675
 34,264
 12,411
Total assets in the fair value hierarchy 210,787
 $179,056
 $31,731
Assets measured at net asset value as a practical expedient:      
Real estate investment trust 6,750
    
Total postretirement healthcare plan assets $217,537
    
For 2019,2021, the Company’s overall expected long-term rate of return is 7.10%6.20% for pension assets and 7.25%6.70% for postretirement healthcare plan assets. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based on historical returns adjusted to reflect the current view of the long-term investment market.
Postretirement Healthcare Cost:
The weighted-average healthcare cost trend raterates used in determining the accumulated postretirement benefit obligation of the healthcare plans waswere as follows:
 2018 201720202019
Healthcare cost trend rate for next year 6.75% 7.00%Healthcare cost trend rate for next year7.00 %7.25 %
Rate to which the cost trend rate is assumed to decline (the ultimate rate) 5.00% 5.00%Rate to which the cost trend rate is assumed to decline (the ultimate rate)5.00 %5.00 %
Year that the rate reaches the ultimate trend rate 2026
 2026
Year that the rate reaches the ultimate trend rate20292029
Future Contributions and Benefit Payments:
During 2018,Based on the Company did not make any voluntary contributions to itsfunded status of the qualified pension plan, or postretirement healthcare plans. Nothere is no requirement for the Company to make contributions to the qualified pension plan contributions are requiredassets in 2019.2021. The Company expects that 20192021 postretirement healthcare plan benefits and benefits due under the SERPA plans will be paid by the Company or, in the case of postretirement healthcare plan benefits, partially funded partially with plan assets.

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The Company's future expected benefit payments for the next five years and thereafteras of December 31, 2020 were as follows (in thousands):
Pension BenefitsSERPA BenefitsPostretirement Healthcare Benefits
 
Pension
Benefits
 
SERPA
Benefits
 
Postretirement
Healthcare
Benefits
2019 $111,980
 $2,314
 $25,934
2020 $93,580
 $2,862
 $27,328
2021 $95,690
 $3,272
 $26,660
2021$99,727 $8,813 $23,444 
2022 $99,118
 $3,504
 $25,378
2022$102,183 $1,684 $23,707 
2023 $102,190
 $4,467
 $23,815
2023$104,792 $1,955 $23,775 
2024-2028 $568,867
 $28,663
 $109,562
20242024$107,078 $1,919 $23,465 
20252025$110,810 $1,818 $23,157 
2026-20302026-2030$587,220 $11,071 $108,384 
Defined Contribution Plans:
The Company has various defined contribution benefit plans that in total cover substantially all full-time employees. Employees can make voluntary contributions in accordance with the provisions of their respective plan, which includes a 401(k) tax deferral option. The Company makes additional contributions to the plans on behalf of the employees and expensed $21.7 million, $21.9 million and $20.1 million $19.0 millionduring 2020, 2019 and $18.2 million for Company contributions during 2018, 2017 and 2016, respectively.respectively related to the contributions.
15.16. Commitments and Contingencies
The Company is subject to lawsuits and other claims related to environmental, product and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter.
Environmental Protection Agency Notice:
In December 2009, the Company received formal, written requests for information from the United States Environmental Protection Agency (EPA) regarding: (i) certificates of conformity for motorcycle emissions and related designations and labels, (ii) aftermarket parts, and (iii) warranty claims on emissions related components. The Company promptly submitted written responses to the EPA’s inquiry and has engaged in information exchanges and discussions with the EPA. In August 2016, the Company entered into a consent decree with the EPA regarding these issues, and the consent decree was subsequently revised in July 2017 (the Settlement). In the Settlement, the Company agreed to, among other things, pay a fine, and not sell tuning products unless they are approved by the EPA or California Air Resources Board. In December 2017, the EPA filed the Settlement with the U.S. District Court for the District of Columbia for the purpose of obtaining court approval of the Settlement. Three amicus briefs opposing portions of the Settlement were filed with the court by the deadline of January 31, 2018. On March 1, 2018, the Company and the EPA each filed separate response briefs. The Company is awaiting the court's decision on whether or not to finalize the Settlement. The Company has an accrual associated with this matter which is included in accrued liabilities in the consolidated balance sheets, and as a result, if it is finalized, the Settlement would not have a material adverse effect on the Company's financial condition or results of operations. The Settlement is not final until it is approved by the court, and if it is not approved by the court, the Company cannot reasonably estimate the impact of any remedies the EPA might seek beyond the Company's current reserve for this matter.
York Environmental Matters:
Matter – The Company is involved with government agencies and groups of potentially responsible partiesthe U.S. Navy related to a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. The Company has been working with the Pennsylvania Department of Environmental Protection (PADEP) since 1986 andan agreement with the U.S. Environmental Protection Agency (EPA) in undertaking environmental investigation and remediation activities, including a site-wide remedial investigation/feasibility study (RI/FS).
In January 1995, the Company entered into a settlement agreement (the Agreement) with the Navy and the parties amended the Agreement in 2013 to address ordnance and explosive waste. The Agreementwhich calls for the U.S. Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of costs associated with environmental investigation and remediation activities at the York facility (Response Costs). The trust administers the payment of the Response Costs incurred atA site wide remedial investigation/feasibility study and a proposed final remedy for the York facility as coveredhave been completed and approved by the Agreement.


Pennsylvania Department of Environmental Protection and the United States Environmental Protection Agency (EPA). The associated cleanup plan documents were approved in February 2020 and the remaining cleanup activities are expected to begin in 2021. The Company has an accrual for its estimate of its share of the estimated future Response Costs at the York facility which is includedrecorded in otherOther long-term liabilities in the consolidated balance sheets. While the work on the RI/FS is now complete and the final remedy was proposed in late 2018, it has not yet been approved, and given the uncertainty that exists concerning the nature and scope of additional environmental remediation that may ultimately be required under the approved final remedy, the Company is unable to make a reasonable estimate of those additional costs, if any, that may result.Consolidated balance sheets.
The estimate of the Company's future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date, and the estimated costs to complete the necessary investigation and remediation activities.
Product Liability Matters:
Matters – The Company is involved in product liability suits related to the operation of its business. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and that product liability suits will not have a material adverse effect on the Company’s consolidatedConsolidated financial statements.statements.
16.     Capital Stock
Common Stock:
The Company is authorized to issue 800,000,000 shares of common stock of $0.01 par value. There were 159.7 million and 168.1 million common shares outstanding as of December 31, 2018 and 2017, respectively. During 2016, the Company retired 165.0 million shares of its treasury stock.
During 2018, the Company repurchased 9.4 million shares of its common stock at a weighted-average price of $41.71. This includes 0.2 million shares of common stock that were repurchased from employees that surrendered stock to satisfy withholding taxes in connection with the vesting of restricted stock awards. The remaining repurchases were made pursuant to the following authorizations (in millions of shares):
   Shares Repurchased Authorization Remaining
at December 31, 2018
Board of Directors’ Authorization 2018 2017 2016 
2015 Authorization —
 —
 9.0
 —
2016 Authorization 9.2
 8.7
 0.7
 1.4
2018 Authorization —
 —
 —
 15.0
Total 9.2
 8.7
 9.7
 16.4
2015 Authorization – In June 2015, the Company’s Board of Directors authorized the Company to buy back up to 15.0 million shares of its common stock with no dollar limit or expiration date.
2016 Authorization – In February 2016, the Company’s Board of Directors separately authorized the Company to buy back up to 20.0 million shares of its common stock with no dollar limit or expiration date.
2018 Authorization – In February 2018, the Company's Board of Directors separately authorized the Company to buy back up to 15.0 million shares of its common stock with no dollar limit or expiration date.
Preferred Stock:
The Company is authorized to issue 2,000,000 shares of preferred stock of $1.00 par value, none of which is outstanding.
17. Share-Based Awards
The Company has a share-based compensation plan which was approved by its shareholders in April 20142020 (the Plan) under which theits Board of Directors may grant to employees share-based awards including restricted stock units (RSUs), performance shares, and nonqualified stock options and stock appreciation rights (SARs).options. Performance shares include a three-yearthree-year performance period with vesting based on achievement of internal performance targets. RSUs granted under the Plan vest ratably over a three-yearthree-year period with the first one-third of the grant vesting one year after the date of grant. Dividends are paid on RSUs settled with stock and performance shares settled with stock. Dividend equivalents are paid on RSUs and performance shares settled with cash. TheStock options and SARs granted under the Plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and vest ratably over a three-year period with the first one-third of the grant becoming exercisable one year after the date of grant. The options and SARs expire 10 years from the date of grant. At December 31, 2020, there were 5.4 million shares of common stock available for future awards under the Plan.
The Company recognizes the cost of its share-based awards in the Consolidated statements of operations. The cost of each share-based equity award is based on the grant date fair value and the cost of each share-based cash-settled award is based on the settlement date fair value. Forfeitures for share-


basedshare-based awards are estimated at the grant date and adjusted when it is likely to change. At December 31,Share-based award expense is recognized on a straight-line basis over the service or performance periods of each separately vesting tranche within the awards. The expense recognized reflects the number of awards that are ultimately expected to vest based on the service and, if applicable, performance requirements of each award. Total share-
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based award compensation expense recognized by the Company during 2020, 2019 and 2018 there were 8.7was $23.5 million, shares$33.7 million and $35.5 million, respectively, or $18.0 million, $25.8 million and $27.2 million net of common stock available for future awards under the Plan.taxes, respectively.
Restricted Stock Units and Performance Shares - Settled in Stock:
Stock – The fair value of RSUs and performance shares settled in stock is determined based on the market price of the Company’s sharesstock on the grant date. The following table summarizes the activity for these awards for the year ended December 31, 20182020 was as follows (in thousands, except for per share amounts):
 Shares / Units 
Weighted-Average
Fair Value
Per Share
Shares & UnitsWeighted-Average Fair Value Per Share
Nonvested, beginning of period 1,601
 $49
Nonvested, beginning of period2,011 $43 
Granted 927
 $47
Granted1,189 $33 
Vested (485) $52
Vested(682)$45 
Forfeited (149) $49
Forfeited(749)$37 
Nonvested, end of period 1,894
 $48
Nonvested, end of period1,769 $36 
As of December 31, 2018,2020, there was $37.0$19.6 million of unrecognized compensation cost related to RSUs and performance shares settled in stock, (netnet of estimated forfeitures)forfeitures, that is expected to be recognized over a weighted-average period of 1.71.5 years.
Restricted Stock Units and Performance Shares - Settled in Cash:
Cash – RSUs and performance shares that are settled in cash are recorded in the Company’s consolidatedConsolidated balance sheets as a liability until vested. The fair value is determined based on the market price of the Company’s stock and is remeasured at each balance sheet date. The following table summarizes the activity for these awards for the year ended December 31, 20182020 was as follows (in thousands, except for per share amounts):
UnitsWeighted-Average Fair Value Per Share
Nonvested, beginning of period127 $35 
Granted101 $36 
Vested(50)$33 
Forfeited(22)$28 
Nonvested, end of period156 $37 
  Units 
Weighted-Average
Fair Value
Per Share
Nonvested, beginning of period 101
 $43
Granted 71
 $34
Vested (45) $48
Forfeited (22) $43
Nonvested, end of period 105
 $37
Stock Options:
Options – There were no0 stock options granted in 2018, 20172020, 2019 or 2016.2018. All outstanding stock options were vested as of December 31, 2018. The Company’s policy is to issue new shares of common stock upon the exercise of employee stock options.
The following table summarizes the stock option transactions for the year ended December 31, 20182020 were as follows (in thousands, except for per share amounts):
OptionsWeighted-Average Exercise Price
Outstanding, beginning of period816 $56 
Exercised(4)$24 
Forfeited(154)$56 
Outstanding, end of period658 $56 
Exercisable, end of period658 $56 
  Options 
Weighted-
Average Price
Outstanding, beginning of period 1,404
 $48
Exercised (160) $22
Forfeited (189) $59
Outstanding, end of period 1,055
 $50
Exercisable, end of period 1,055
 $50


The following table summarizes the aggregate intrinsic value related to stock options exercised, outstanding and exercisable as of and for the years ended December 31, was as follows (in thousands):
202020192018
Exercised$21 $2,614 $3,855 
Outstanding$0 $52 $2,366 
Exercisable$0 $52 $2,366 
88

  2018 2017 2016
Exercised $3,855
 $4,051
 $9,595
Outstanding $2,366
 $11,711
 $22,383
Exercisable $2,366
 $11,711
 $22,383
Stock options outstanding at December 31, 20182020 were as follows (options in thousands):
Price RangeWeighted-Average
Contractual Life		OptionsWeighted-Average
Exercise Price
$40.01 to $500.7173 $44 
$50.01 to $602.0122 $52 
$60.01 to $702.7363 $63 
Options outstanding2.0658 $56 
Options exercisable2.0658 $56 
Price Range 
Weighted-Average
Contractual Life
 Options 
Weighted-Average
Exercise Price
$10.01 to $20 0.1 50
 $12
$20.01 to $30 1.1 127
 $24
$30.01 to $40 0.0 —
 $—
$40.01 to $50 2.6 219
 $44
$50.01 to $60 3.8 171
 $52
$60.01 to $70 5.2 488
 $63
Options outstanding 4.0 1,055
 $50
Options exercisable 4.0 1,055
 $50

Stock Appreciation Rights (SARs):
There were no SARs granted in 2018, 2017 or 2016. SARs vest under the same terms and conditions as options; however, they are settled in cash equal to their settlement date fair value. As a result, SARs are recorded in the Company’s consolidated balance sheets as a liability until the date of exercise. The fair value of each unvested SAR award was estimated using a lattice-based valuation model. In accordance with ASC Topic 718, “Stock Compensation,” the fair value of each SAR award is recalculated at the end of each reporting period and the liability and expense adjusted based on the new fair value and the percent vested. All outstanding SAR awards were vested as of December 31, 2018. The assumptions used to determine the fair value of the unvested SAR awards at December 31, 2017 were as follows:
2017
Expected average term (in years)5.7
Expected volatility28% - 31%
Expected dividend yield2.9%
Risk-free interest rate1.3% - 2.5%
The following table summarizes the SAR transactions for the year ended December 31, 2018 (in thousands, except per share amounts):
  SARs 
Weighted-Average
Price
Outstanding, beginning of period 27
 $30
Exercised (14) $24
Outstanding, end of period 13
 $36
Exercisable, end of period 13
 $36


18. Accumulated Other Comprehensive Loss
The following table sets forth the changesChanges in accumulatedAccumulated other comprehensive loss (AOCL) for the years ended December 31, were as follows (in thousands):
2020
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(40,813)$(14,586)$(481,550)$(536,949)
Other comprehensive income, before reclassifications37,088 107,181 2,193 146,462 
Income tax expense(3,864)(23,626)(515)(28,005)
33,224 83,555 1,678 118,457 
Reclassifications:
Net gains on derivative financial instruments— (148,107)— (148,107)
Prior service credits(a)
— — (3,469)(3,469)
Actuarial losses(a)
— — 65,981 65,981 
Curtailment and settlement losses(a)
— — 3,040 3,040 
Reclassifications before tax0 (148,107)65,552 (82,555)
Income tax benefit (expense)0 33,022 (15,392)17,630 
0 (115,085)50,160 (64,925)
Other comprehensive income (loss)33,224 (31,530)51,838 53,532 
Balance, end of period$(7,589)$(46,116)$(429,712)$(483,417)

2019
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(49,608)$1,785 $(581,861)$(629,684)
Other comprehensive income, before reclassifications9,229 6,477 90,071 105,777 
Income tax expense(434)(1,541)(21,149)(23,124)
8,795 4,936 68,922 82,653 
Reclassifications:
Net gains on derivative financial instruments— (27,732)— (27,732)
Prior service credits(a)
— — (4,311)(4,311)
Actuarial losses(a)
— — 44,788 44,788 
Curtailment and settlement losses(a)
— — 543 543 
Reclassifications before tax0 (27,732)41,020 13,288 
Income tax benefit (expense)0 6,425 (9,631)(3,206)
0 (21,307)31,389 10,082 
Other comprehensive income (loss)8,795 (16,371)100,311 92,735 
Balance, end of period$(40,813)$(14,586)$(481,550)$(536,949)
89

  2018
  Foreign currency translation adjustments Marketable securities Derivative financial instruments Pension and postretirement benefit plans Total
Balance, beginning of period $(21,852) $—
 $(17,254) $(460,943) $(500,049)
Other comprehensive (loss) income before reclassifications (28,212) —
 35,686
 (84,725) (77,251)
Income tax 3,202
 —
 (8,455) 19,893
 14,640
Net other comprehensive (loss) income before reclassifications (25,010) —
 27,231
 (64,832) (62,611)
Reclassifications:          
Realized (gains) losses - foreign currency contracts(a)
 —
 —
 (11,492) —
 (11,492)
Realized (gains) losses - commodities contracts(a)
 —
 —
 (24) —
 (24)
Realized (gains) losses - treasury rate locks(b)
 —
 —
 498
 —
 498
Realized (gains) losses - interest rate swaps(b)
 —
 —
 1,552
 —
 1,552
Prior service credits(c)
 —
 —
 —
 (2,262) (2,262)
Actuarial losses(c)
 —
 —
 —
 66,590
 66,590
Curtailment and settlement gains(c)
 —
 —
 —
 (886) (886)
Total before tax —
 —
 (9,466) 63,442
 53,976
Income tax —
 —
 2,244
 (14,896) (12,652)
Net reclassifications —
 —
 (7,222) 48,546
 41,324
Other comprehensive (loss) income (25,010) —
 20,009
 (16,286) (21,287)
Reclassification of certain tax effects (2,746) —
 (970) (104,632) (108,348)
Balance, end of period $(49,608) $—
 $1,785
 $(581,861) $(629,684)

2018
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(21,852)$(17,254)$(460,943)$(500,049)
Other comprehensive (loss) income, before reclassifications(28,212)35,686 (84,725)(77,251)
Income tax benefit (expense)3,202 (8,455)19,893 14,640 
(25,010)27,231 (64,832)(62,611)
Reclassifications:
Net gains on derivative financial instruments— (9,466)— (9,466)
Prior service credits(a)
— — (2,262)(2,262)
Actuarial losses(a)
— — 66,590 66,590 
Curtailment and settlement gains(a)
— — (886)(886)
Reclassifications before tax0 (9,466)63,442 53,976 
Income tax benefit (expense)0 2,244 (14,896)(12,652)
0 (7,222)48,546 41,324 
Other comprehensive (loss) income(25,010)20,009 (16,286)(21,287)
Reclassification of certain tax effects(2,746)(970)(104,632)(108,348)
Balance, end of period$(49,608)$1,785 $(581,861)$(629,684)
  2017
  Foreign currency translation adjustments Marketable securities Derivative financial instruments Pension and postretirement benefit plans Total
Balance, beginning of period $(68,132) $(1,194) $12,524
 $(508,579) $(565,381)
Other comprehensive income (loss) before reclassifications 52,145
 1,896
 (54,929) 24,321
 23,433
Income tax (5,865) (702) 20,338
 (5,711) 8,060
Net other comprehensive income (loss) before reclassifications 46,280
 1,194
 (34,591) 18,610
 31,493
Reclassifications:          
Realized (gains) losses - foreign currency contracts(a)
 —
 —
 7,202
 —
 7,202
Realized (gains) losses - treasury rate lock(b)
 —
 —
 442
 —
 442
Prior service credits(c)
 —
 —
 —
 (1,153) (1,153)
Actuarial losses(c)
 —
 —
 —
 47,254
 47,254
Total before tax —
 —
 7,644
 46,101
 53,745
Income tax —
 —
 (2,831) (17,075) (19,906)
Net reclassifications —
 —
 4,813
 29,026
 33,839
Other comprehensive income (loss) 46,280
 1,194
 (29,778) 47,636
 65,332
Balance, end of period $(21,852) $—
 $(17,254) $(460,943) $(500,049)
(a)Amounts reclassified are included in the computation of net periodic benefit cost, discussed further in Note 15.


  2016
  Foreign currency translation adjustments Marketable securities Derivative financial instruments Pension and postretirement benefit plans Total
Balance, beginning of period $(58,844) $(1,094) $5,886
 $(561,153) $(615,205)
Other comprehensive (loss) income before reclassifications (7,591) (159) 28,176
 33,937
 54,363
Income tax (1,697) 59
 (10,436) (12,570) (24,644)
Net other comprehensive (loss) income before reclassifications (9,288) (100) 17,740
 21,367
 29,719
Reclassifications:          
Realized (gains) losses - foreign currency contracts(a)
 —
 —
 (18,253) —
 (18,253)
Realized (gains) losses - commodities contracts(a)
 —
 —
 258
 —
 258
Realized (gains) losses - treasury rate lock(b)
 —
 —
 362
 —
 362
Prior service credits(c)
 —
 —
 —
 (1,784) (1,784)
Actuarial losses(c)
 —
 —
 —
 49,888
 49,888
Curtailment and settlement losses(c)
 —
 —
 —
 1,463
 1,463
Total before tax —
 —
 (17,633) 49,567
 31,934
Income tax —
 —
 6,531
 (18,360) (11,829)
Net reclassifications —
 —
 (11,102) 31,207
 20,105
Other comprehensive (loss) income (9,288) (100) 6,638
 52,574
 49,824
Balance, end of period $(68,132) $(1,194) $12,524
 $(508,579) $(565,381)

(a)Amounts reclassified to net income are included in Motorcycles and Related Products cost of goods sold.
(b)Amounts reclassified to net income are presented in interest expense.
(c)Amounts reclassified are included in the computation of net periodic benefit cost. See Note 14 for information related to pension and postretirement benefit plans.
19. Reportable Segments and Geographic Information
Reportable Segments:
Segments – Harley-Davidson, Inc. is the parent company for the groups of companies doing businessreferred to as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two2 segments: the Motorcycles and Related Products (Motorcycles) segment and the Financial Services segment.Services. The Company’s reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.
The Motorcycles segment consists of HDMC which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles as well as motorcycle parts, accessories, general merchandise and related services. The Company’s products are sold to retail customers primarily through a network of independent dealers. The Company conducts business on a global basis, with sales in the United States,U.S., Canada, Latin America, Europe/Middle East/Africa (EMEA), Asia Pacific, and Asia Pacific.Latin America.
The Financial Services segment consists of HDFS which providesis engaged in the business of financing and servicing wholesale inventory receivables and retail financing and providesconsumer loans, primarily for the purchase of Harley-Davidson motorcycles. HDFS also works with certain unaffiliated insurance companies to provide motorcycle insurance and insurance-related programs primarilyprotection products to Harley-Davidson dealers and their retail customers.motorcycle owners. HDFS conducts business principally in the United StatesU.S. and Canada.

90


Information bySelected segment information is set forth below for the years ended December 31, (in thousands):
202020192018
Motorcycles and Related Products:
Motorcycles revenue$3,264,054 $4,572,678 $4,968,646 
Gross profit828,309 1,342,880 1,616,850 
Selling, administrative and engineering expense895,321 1,020,907 1,101,086 
Restructuring expense119,110 32,353 93,401 
Operating (loss) income(186,122)289,620 422,363 
Financial Services:
Financial Services revenue790,323 789,111 748,229 
Financial Services expense583,623 523,123 457,069 
Restructuring expense10,899 0 0 
Operating income195,801 265,988 291,160 
Operating income$9,679 $555,608 $713,523 
  2018 2017 2016
Motorcycles net revenue $4,968,646
 $4,915,027
 $5,271,376
Gross profit 1,616,850
 1,642,697
 1,845,379
Selling, administrative and engineering expense 1,101,086
 1,035,921
 1,074,615
Restructuring expense 93,401
 —
 —
Operating income from Motorcycles 422,363
 606,776
 770,764
Financial Services revenue 748,229
 732,197
 725,082
Financial Services expense 457,069
 456,892
 449,552
Operating income from Financial Services 291,160
 275,305
 275,530
Operating income $713,523
 $882,081
 $1,046,294
As discussed in Note 1, the Company adopted ASU 2017-07 on January 1, 2018, which required the Company to record the non-service cost components of net periodic benefit cost in non-operating income on a prospective and retrospective basis. As a result, operating income from Motorcycles excludes these costs for all periods presented.
Financial Services revenue includes $9.0$6.1 million, $6.9$10.0 million and $4.4$9.0 million of interest thatpaid by HDMC paid to HDFS on wholesale finance receivables in 2018, 20172020, 2019 and 2016,2018, respectively. The offsetting cost of these interest incentives was recorded as a reduction to Motorcycles net revenue.
Information byAdditional segment information is set forth below as of December 31, (in thousands):
MotorcyclesFinancial ServicesConsolidated
2020:
Assets$2,492,515 $9,518,086 $12,010,601 
Depreciation and amortization$177,113 $8,602 $185,715 
Capital expenditures$128,798 $2,252 $131,050 
2019:
Assets$2,548,115 $7,980,044 $10,528,159 
Depreciation and amortization$223,656 $8,881 $232,537 
Capital expenditures$176,264 $5,176 $181,440 
2018:
Assets$2,562,931 $8,102,733 $10,665,664 
Depreciation and amortization$260,707 $4,156 $264,863 
Capital expenditures$197,905 $15,611 $213,516 
91

  Motorcycles 
Financial
Services
 Consolidated
2018      
Total assets $2,562,931
 $8,102,733
 $10,665,664
Depreciation and amortization $260,707
 $4,156
 $264,863
Capital expenditures $197,905
 $15,611
 $213,516
2017      
Total assets $2,449,603
 $7,523,069
 $9,972,672
Depreciation and amortization $215,639
 $6,549
 $222,188
Capital expenditures $193,204
 $13,090
 $206,294
2016      
Total assets $2,490,450
 $7,399,790
 $9,890,240
Depreciation and amortization $202,122
 $7,433
 $209,555
Capital expenditures $245,316
 $10,947
 $256,263


Geographic Information:
Information – Included in the consolidatedConsolidated financial statements are the following amounts relating to geographic locations for the years ended December 31, (in thousands):
202020192018
Motorcycles revenue(a):
United States$2,043,851 $2,971,223 $3,159,049 
EMEA589,943 743,385 893,589 
Canada99,219 210,381 230,211 
Japan137,815 156,644 161,370 
Australia and New Zealand107,891 117,525 147,561 
Other countries285,335 373,520 376,866 
$3,264,054 $4,572,678 $4,968,646 
Financial Services revenue(a):
United States$757,730 $754,535 $712,898 
Canada20,353 22,799 23,120 
Europe8,300 8,435 8,411 
Other countries3,940 3,342 3,800 
$790,323 $789,111 $748,229 
Long-lived assets(b):
United States$644,224 $757,594 $838,446 
International:
Thailand94,749 78,651 50,331 
Other countries4,811 11,137 15,355 
99,560 89,788 65,686 
$743,784 $847,382 $904,132 
(a)Revenue is attributed to geographic regions based on location of customer.
(b)Long-lived assets include all long-term assets except those specifically excluded under ASC Topic 280, Segment Reporting, such as deferred income taxes and finance receivables.
92
  2018 2017 2016
Revenue from Motorcycles(a):
      
United States $3,159,049
 $3,215,513
 $3,579,129
EMEA 893,589
 790,725
 798,489
Japan 161,370
 180,938
 200,309
Canada 230,211
 232,883
 212,099
Australia and New Zealand 147,561
 168,670
 181,809
Other foreign countries 376,866
 326,298
 299,541
Total revenue from Motorcycles $4,968,646
 $4,915,027
 $5,271,376
Revenue from Financial Services(a):
      
United States $712,898
 $698,383
 $692,784
Europe 8,411
 6,845
 6,528
Canada 23,120
 22,580
 21,626
Other foreign countries 3,800
 4,389
 4,144
Total revenue from Financial Services $748,229
 $732,197
 $725,082
Long-lived assets(b):
      
United States $838,446
 $912,032
 $943,479
International 65,686
 55,749
 38,114
Total long-lived assets $904,132
 $967,781
 $981,593


(a)Revenue is attributed to geographic regions based on location of customer.
(b)Long-lived assets include all long-term assets except those specifically excluded under ASC Topic 280, “Segment Reporting,” such as deferred income taxes and finance receivables.
20. Supplemental Consolidating Data
The supplemental consolidating data for the periods noted is presented for informational purposes. The supplemental consolidating data may bepurposes and is different than segment information presented elsewhere due to the allocation of intercompany eliminationsconsolidating reporting adjustments to reportingthe reportable segments. All supplementalSupplemental consolidating data for 2020 is presented in thousands.as follows (in thousands):

 Year Ended December 31, 2020
 HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$3,279,407 $0 $(15,353)$3,264,054 
Financial Services0 783,421 6,902 790,323 
3,279,407 783,421 (8,451)4,054,377 
Costs and expenses:
Motorcycles and Related Products cost of goods sold2,435,745 0 0 2,435,745 
Financial Services interest expense0 246,447 0 246,447 
Financial Services provision for credit losses0 181,870 0 181,870 
Selling, administrative and engineering expense907,257 152,258 (8,888)1,050,627 
Restructuring expense119,110 10,899 0 130,009 
3,462,112 591,474 (8,888)4,044,698 
Operating (loss) income(182,705)191,947 437 9,679 
Other expense, net(1,848)0 0 (1,848)
Investment income107,560 0 (100,000)7,560 
Interest expense31,121 0 0 31,121 
(Loss) income before income taxes(108,114)191,947 (99,563)(15,730)
Income tax (benefit) provision(59,231)42,203 0 (17,028)
Net (loss) income$(48,883)$149,744 $(99,563)$1,298 


93

  Year Ended December 31, 2018
  
HDMC
Entities
 
HDFS
Entities
 Eliminations Consolidated
Revenue:        
Motorcycles and Related Products $4,981,445
 $—
 $(12,799) $4,968,646
Financial Services —
 747,432
 797
 748,229
Total revenue 4,981,445
 747,432
 (12,002) 5,716,875
Costs and expenses:        
Motorcycles and Related Products cost of goods sold 3,352,438
 —
 (642) 3,351,796
Financial Services interest expense —
 193,187
 —
 193,187
Financial Services provision for credit losses —
 106,870
 —
 106,870
Selling, administrative and engineering expense 1,104,919
 164,623
 (11,444) 1,258,098
Restructuring expense 93,401
 —
 —
 93,401
Total costs and expenses 4,550,758
 464,680
 (12,086) 5,003,352
Operating income 430,687
 282,752
 84
 713,523
Other income (expense), net 3,039
 —
 —
 3,039
Investment income 235,951
 —
 (235,000) 951
Interest expense 30,884
 —
 —
 30,884
Income before provision for income taxes 638,793
 282,752
 (234,916) 686,629
Provision for income taxes 85,153
 70,025
 —
 155,178
Net income $553,640
 $212,727
 $(234,916) $531,451

 December 31, 2020
 HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
ASSETS
Current assets:
Cash and cash equivalents$666,161 $2,591,042 $0 $3,257,203 
Accounts receivable, net220,110 0 (77,028)143,082 
Finance receivables, net0 1,509,539 0 1,509,539 
Inventories, net523,497 0 0 523,497 
Restricted cash0 131,642 0 131,642 
Other current assets93,510 190,690 (3,730)280,470 
1,503,278 4,422,913 (80,758)5,845,433 
Finance receivables, net0 4,933,469 0 4,933,469 
Property, plant and equipment, net709,845 33,939 0 743,784 
Pension and postretirement assets95,711 0 0 95,711 
Goodwill65,976 0 0 65,976 
Deferred income taxes69,688 90,011 (1,161)158,538 
Lease assets40,564 4,639 0 45,203 
Other long-term assets184,300 33,115 (94,928)122,487 
$2,669,362 $9,518,086 $(176,847)$12,010,601 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$277,429 $90,503 $(77,028)$290,904 
Accrued liabilities444,786 115,506 (3,078)557,214 
Deposits0 79,965 0 79,965 
Short-term debt0 1,014,274 0 1,014,274 
Current portion of long-term debt, net0 2,039,597 0 2,039,597 
722,215 3,339,845 (80,106)3,981,954 
Long-term debt, net743,977 5,188,956 0 5,932,933 
Lease liability26,313 3,802 0 30,115 
Pension and postretirement liabilities114,206 0 0 114,206 
Deferred income taxes7,166 1,441 0 8,607 
Other long-term liabilities171,242 46,514 2,245 220,001 
Commitments and contingencies (Note 16)0000
Shareholders’ equity884,243 937,528 (98,986)1,722,785 
$2,669,362 $9,518,086 $(176,847)$12,010,601 

94

  Year Ended December 31, 2017
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Revenue:        
Motorcycles and Related Products $4,925,003
 $—
 $(9,976) $4,915,027
Financial Services —
 734,008
 (1,811) 732,197
Total revenue 4,925,003
 734,008
 (11,787) 5,647,224
Costs and expenses:        
Motorcycles and Related Products cost of goods sold 3,272,330
 —
 —
 3,272,330
Financial Services interest expense —
 180,193
 —
 180,193
Financial Services provision for credit losses —
 132,444
 —
 132,444
Selling, administrative and engineering expense 1,037,529
 154,232
 (11,585) 1,180,176
Total costs and expenses 4,309,859
 466,869
 (11,585) 4,765,143
Operating income 615,144
 267,139
 (202) 882,081
Other income (expense), net 9,182
 —
 —
 9,182
Investment income 199,580
 —
 (196,000) 3,580
Interest expense 31,004
 —
 —
 31,004
Income before provision for income taxes 792,902
 267,139
 (196,202) 863,839
Provision for income taxes 214,175
 127,905
 —
 342,080
Net income $578,727
 $139,234
 $(196,202) $521,759



 Year Ended December 31, 2020
 HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Cash flows from operating activities:
Net (loss) income$(48,883)$149,744 $(99,563)$1,298 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization177,113 8,602 0 185,715 
Amortization of deferred loan origination costs0 71,142 0 71,142 
Amortization of financing origination fees681 13,754 0 14,435 
Provision for long-term employee benefits40,833 0 0 40,833 
Employee benefit plan contributions and payments(20,722)0 0 (20,722)
Stock compensation expense17,905 1,859 3,730 23,494 
Net change in wholesale finance receivables related to sales0 0 531,701 531,701 
Provision for credit losses0 181,870 0 181,870 
Deferred income taxes(19,097)(24,697)(285)(44,079)
Other, net544 13,718 (436)13,826 
Changes in current assets and liabilities:
Accounts receivable, net161,012 0 (33,355)127,657 
Finance receivables - accrued interest and other0 7,418 0 7,418 
Inventories, net80,858 0 0 80,858 
Accounts payable and accrued liabilities(34,755)(40,851)32,519 (43,087)
Derivative financial instruments(3,566)85 0 (3,481)
Other13,929 (4,081)(836)9,012 
414,735 228,819 533,038 1,176,592 
Net cash provided by operating activities365,852 378,563 433,475 1,177,890 
Cash flows from investing activities:
Capital expenditures(128,798)(2,252)0 (131,050)
Origination of finance receivables0 (5,616,347)2,118,861 (3,497,486)
Collections on finance receivables0 6,192,625 (2,652,336)3,540,289 
Other investing activities18,073 3,391 0 21,464 
Net cash (used) provided by investing activities(110,725)577,417 (533,475)(66,783)
95

  Year Ended December 31, 2016
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Revenue:        
Motorcycles and Related Products $5,281,355
 $—
 $(9,979) $5,271,376
Financial Services —
 726,736
 (1,654) 725,082
Total revenue 5,281,355
 726,736
 (11,633) 5,996,458
Costs and expenses:        
Motorcycles and Related Products cost of goods sold 3,425,997
 —
 —
 3,425,997
Financial Services interest expense —
 173,756
 —
 173,756
Financial Services provision for credit losses —
 136,617
 —
 136,617
Selling, administrative and engineering expense 1,076,375
 149,157
 (11,738) 1,213,794
Total costs and expenses 4,502,372
 459,530
 (11,738) 4,950,164
Operating income 778,983
 267,206
 105
 1,046,294
Other income (expense), net 2,642
 —
 —
 2,642
Investment income 187,645
 —
 (183,000) 4,645
Interest expense 29,670
 —
 —
 29,670
Income before provision for income taxes 939,600
 267,206
 (182,895) 1,023,911
Provision for income taxes 231,986
 99,761
 —
 331,747
Net income $707,614
 $167,445
 $(182,895) $692,164
 Year Ended December 31, 2020
 HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Cash flows from financing activities:
Proceeds from issuance of medium-term notes0 1,396,602 0 1,396,602 
Repayments of medium-term notes0 (1,400,000)0 (1,400,000)
Proceeds from securitization debt0 2,064,450 0 2,064,450 
Repayments of securitization debt0 (1,041,751)0 (1,041,751)
Borrowings of asset-backed commercial paper0 225,187 0 225,187 
Repayments of asset-backed commercial paper0 (318,828)0 (318,828)
Net increase in unsecured commercial paper0 444,380 0 444,380 
Deposits0 79,947 0 79,947 
Dividends paid(68,087)(100,000)100,000 (68,087)
Repurchase of common stock(8,006)0 0 (8,006)
Issuance of common stock under share-based plans89 0 0 89 
Net cash (used) provided by financing activities(76,004)1,349,987 100,000 1,373,983 
Effect of exchange rate changes on cash, cash equivalents and restricted cash16,389 2,323 0 18,712 
Net increase in cash, cash equivalents and restricted cash$195,512 $2,308,290 $0 $2,503,802 
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$470,649 $434,717 $0 $905,366 
Net increase in cash, cash equivalents and restricted cash195,512 2,308,290 0 2,503,802 
Cash, cash equivalents and restricted cash, end of period$666,161 $2,743,007 $0 $3,409,168 



  December 31, 2018
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
ASSETS        
Current assets:        
Cash and cash equivalents $544,548
 $659,218
 $—
 $1,203,766
Marketable securities 10,007
 —
 —
 10,007
Accounts receivable, net 425,727
 —
 (119,253) 306,474
Finance receivables, net —
 2,214,424
 —
 2,214,424
Inventories 556,128
 —
 —
 556,128
Restricted cash —
 49,275
 —
 49,275
Other current assets 91,172
 59,070
 (5,874) 144,368
Total current assets 1,627,582
 2,981,987
 (125,127) 4,484,442
Finance receivables, net —
 5,007,507
 —
 5,007,507
Property, plant and equipment, net 847,176
 56,956
 —
 904,132
Goodwill 55,048
 —
 —
 55,048
Deferred income taxes 105,388
 37,603
 (1,527) 141,464
Other long-term assets 144,122
 18,680
 (89,731) 73,071
  $2,779,316
 $8,102,733
 $(216,385) $10,665,664
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $258,587
 $145,527
 $(119,253) $284,861
Accrued liabilities 496,643
 110,063
 (5,576) 601,130
Short-term debt —
 1,135,810
 —
 1,135,810
Current portion of long-term debt, net —
 1,575,799
 —
 1,575,799
Total current liabilities 755,230
 2,967,199
 (124,829) 3,597,600
Long-term debt, net 742,624
 4,145,043
 —
 4,887,667
Pension liability 107,776
 —
 —
 107,776
Postretirement healthcare liability 94,453
 —
 —
 94,453
Other long-term liabilities 164,243
 37,142
 2,834
 204,219
Commitments and contingencies (Note 15) 
 
 
 
Shareholders’ equity 914,990
 953,349
 (94,390) 1,773,949
  $2,779,316
 $8,102,733
 $(216,385) $10,665,664


  December 31, 2017
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
ASSETS        
Current assets:        
Cash and cash equivalents $338,186
 $349,335
 $—
 $687,521
Accounts receivable, net 483,709
 —
 (153,723) 329,986
Finance receivables, net —
 2,105,662
 —
 2,105,662
Inventories 538,202
 —
 —
 538,202
Restricted cash —
 47,518
 —
 47,518
Other current assets 132,999
 48,521
 (5,667) 175,853
Total current assets 1,493,096
 2,551,036
 (159,390) 3,884,742
Finance receivables, net —
 4,859,424
 —
 4,859,424
Property, plant and equipment, net 922,280
 45,501
 —
 967,781
Prepaid pension costs 19,816
 —
 —
 19,816
Goodwill 55,947
 —
 —
 55,947
Deferred income taxes 66,877
 43,515
 (1,319) 109,073
Other long-term assets 138,344
 23,593
 (86,048) 75,889
  $2,696,360
 $7,523,069
 $(246,757) $9,972,672
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $214,263
 $167,057
 $(153,723) $227,597
Accrued liabilities 444,028
 90,942
 (5,148) 529,822
Short-term debt —
 1,273,482
 —
 1,273,482
Current portion of long-term debt, net —
 1,127,269
 —
 1,127,269
Total current liabilities 658,291
 2,658,750
 (158,871) 3,158,170
Long-term debt, net 741,961
 3,845,297
 —
 4,587,258
Pension liability 54,606
 —
 —
 54,606
Postretirement healthcare liability 118,753
 —
 —
 118,753
Other long-term liabilities 171,200
 35,503
 2,905
 209,608
Commitments and contingencies (Note 15) 
 
 
 
Shareholders’ equity 951,549
 983,519
 (90,791) 1,844,277
  $2,696,360
 $7,523,069
 $(246,757) $9,972,672


  Year Ended December 31, 2018
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Cash flows from operating activities:        
Net income $553,640
 $212,727
 $(234,916) $531,451
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization of intangibles 260,707
 4,156
 —
 264,863
Amortization of deferred loan origination costs —
 81,315
 —
 81,315
Amortization of financing origination fees 663
 7,704
 —
 8,367
Provision for long-term employee benefits 36,481
 —
 —
 36,481
Employee benefit plan contributions and payments (10,544) —
 —
 (10,544)
Stock compensation expense 31,855
 3,684
 —
 35,539
Net change in wholesale finance receivables related to sales —
 —
 (56,538) (56,538)
Provision for credit losses —
 106,870
 —
 106,870
Deferred income taxes (41,905) 7,716
 208
 (33,981)
Other, net 36,840
 798
 (84) 37,554
Changes in current assets and liabilities:        
Accounts receivable, net 43,613
 —
 (34,470) 9,143
Finance receivables—accrued interest and other —
 773
 —
 773
Inventories (31,059) —
 —
 (31,059)
Accounts payable and accrued liabilities 152,930
 (1,778) 45,040
 196,192
Derivative instruments 337
 136
 —
 473
Other 39,031
 (10,216) 207
 29,022
Total adjustments 518,949
 201,158
 (45,637) 674,470
Net cash provided by operating activities 1,072,589
 413,885
 (280,553) 1,205,921
Cash flows from investing activities:        
Capital expenditures (197,905) (15,611) —
 (213,516)
Origination of finance receivables —
 (7,192,063) 3,439,246
 (3,752,817)
Collections on finance receivables —
 6,719,362
 (3,393,693) 3,325,669
Purchases of marketable securities (10,007) —
 —
 (10,007)
Other (11,598) —
 —
 (11,598)
Net cash used by investing activities (219,510) (488,312) 45,553
 (662,269)


  Year Ended December 31, 2018
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Cash flows from financing activities:        
Proceeds from issuance of medium-term notes —
 1,591,828
 —
 1,591,828
Repayments of medium-term notes —
 (877,488) —
 (877,488)
Repayments of securitization debt —
 (257,869) —
 (257,869)
Borrowings of asset-backed commercial paper —
 509,742
 —
 509,742
Repayments of asset-backed commercial paper —
 (212,729) —
 (212,729)
Net decrease in credit facilities and unsecured commercial paper —
 (135,356) —
 (135,356)
Dividends paid (245,810) (235,000) 235,000
 (245,810)
Purchase of common stock for treasury (390,606) —
 —
 (390,606)
Issuance of common stock under employee stock option plans 3,525
 —
 —
 3,525
Net cash (used) provided by financing activities (632,891) 383,128
 235,000
 (14,763)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (13,826) (1,525) —
 (15,351)
Net increase in cash, cash equivalents and restricted cash $206,362
 $307,176
 $—
 $513,538
Cash, cash equivalents and restricted cash:        
Cash, cash equivalents and restricted cash—beginning of period $338,186
 $408,024
 $—
 $746,210
Net increase in cash, cash equivalents and restricted cash 206,362
 307,176
 —
 513,538
Cash, cash equivalents and restricted cash—end of period $544,548
 $715,200
 $—
 $1,259,748



  Year Ended December 31, 2017
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Cash flows from operating activities:        
Net income $578,727
 $139,234
 $(196,202) $521,759
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization of intangibles 215,639
 6,549
 —
 222,188
Amortization of deferred loan origination costs —
 82,911
 —
 82,911
Amortization of financing origination fees 655
 7,390
 —
 8,045
Provision for long-term employee benefits 29,900
 —
 —
 29,900
Employee benefit plan contributions and payments (63,277) —
 —
 (63,277)
Stock compensation expense 29,570
 2,921
 —
 32,491
Net change in wholesale finance receivables related to sales —
 —
 35,172
 35,172
Provision for credit losses —
 132,444
 —
 132,444
Deferred income taxes 29,949
 21,497
 (591) 50,855
Other, net 4,858
 3,498
 203
 8,559
Changes in current assets and liabilities:        
Accounts receivable, net (6,792) —
 (11,357) (18,149)
Finance receivables – accrued interest and other —
 (1,313) —
 (1,313)
Inventories (20,584) —
 —
 (20,584)
Accounts payable and accrued liabilities 9,753
 (11,497) 11,872
 10,128
Derivative instruments 1,785
 81
 —
 1,866
Other (31,868) (1,684) 5,618
 (27,934)
Total adjustments 199,588
 242,797
 40,917
 483,302
Net cash provided by operating activities 778,315
 382,031
 (155,285) 1,005,061
Cash flows from investing activities:        
Capital expenditures (193,204) (13,090) —
 (206,294)
Origination of finance receivables —
 (7,109,624) 3,517,676
 (3,591,948)
Collections on finance receivables —
 6,786,702
 (3,558,391) 3,228,311
Sales and redemptions of marketable securities 6,916
 —
 —
 6,916
Other 547
 —
 —
 547
Net cash used by investing activities (185,741) (336,012) (40,715) (562,468)


  Year Ended December 31, 2017
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Cash flows from financing activities:        
Proceeds from issuance of medium-term notes —
 893,668
 —
 893,668
Repayments of medium-term notes —
 (800,000) —
 (800,000)
Repayments of securitization debt —
 (444,671) —
 (444,671)
Borrowings of asset-backed commercial paper —
 469,932
 —
 469,932
Repayments of asset-backed commercial paper —
 (176,227) —
 (176,227)
Net increase in credit facilities and unsecured commercial paper —
 212,809
 —
 212,809
Dividends paid (251,862) (196,000) 196,000
 (251,862)
Purchase of common stock for treasury (465,263) —
 —
 (465,263)
Issuance of common stock under employee stock option plans 11,353
 —
 —
 11,353
Net cash used by financing activities (705,772) (40,489) 196,000
 (550,261)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 25,844
 903
 —
 26,747
Net (decrease) increase in cash, cash equivalents and restricted cash $(87,354) $6,433
 $—
 $(80,921)
Cash, cash equivalents and restricted cash:        
Cash, cash equivalents and restricted cash – beginning of period $425,540
 $401,591
 $—
 $827,131
Net (decrease) increase in cash, cash equivalents and restricted cash (87,354) 6,433
 —
 (80,921)
Cash, cash equivalents and restricted cash – end of period $338,186
 $408,024
 $—
 $746,210


  Year Ended December 31, 2016
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Cash flows from operating activities:        
Net income $707,614
 $167,445
 $(182,895) $692,164
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization of intangibles 202,122
 7,433
 —
 209,555
Amortization of deferred loan origination costs —
 86,681
 —
 86,681
Amortization of financing origination fees 654
 8,598
 —
 9,252
Provision for long-term employee benefits 38,273
 —
 —
 38,273
Employee benefit plan contributions and payments (55,809) —
 —
 (55,809)
Stock compensation expense 29,811
 2,525
 —
 32,336
Net change in wholesale finance receivables related to sales —
 —
 (3,233) (3,233)
Provision for credit losses —
 136,617
 —
 136,617
Gain on off-balance sheet asset-backed securitization —
 (9,269) —
 (9,269)
Loss on debt extinguishment —
 118
 —
 118
Deferred income taxes 7,772
 (7,705) (232) (165)
Other, net (7,041) 239
 (105) (6,907)
Changes in current assets and liabilities:        
Accounts receivable, net (67,621) —
 21,687
 (45,934)
Finance receivables – accrued interest and other —
 (1,489) —
 (1,489)
Inventories 85,072
 —
 —
 85,072
Accounts payable and accrued liabilities 26,005
 25,027
 (12,795) 38,237
Derivative instruments (3,413) —
 —
 (3,413)
Other (25,415) (2,332) —
 (27,747)
Total adjustments 230,410
 246,443
 5,322
 482,175
Net cash provided by operating activities 938,024
 413,888
 (177,573) 1,174,339
Cash flows from investing activities:        
Capital expenditures (245,316) (10,947) —
 (256,263)
Origination of finance receivables —
 (7,420,177) 3,755,682
 (3,664,495)
Collections on finance receivables —
 6,936,140
 (3,761,109) 3,175,031
Proceeds from finance receivables sold —
 312,571
 —
 312,571
Sales and redemptions of marketable securities 40,014
 —
 —
 40,014
Other 411
 —
 —
 411
Net cash used by investing activities (204,891) (182,413) (5,427) (392,731)


  Year Ended December 31, 2016
  HDMC
Entities		 HDFS
Entities		 Eliminations Consolidated
Cash flows from financing activities:        
Proceeds from issuance of medium-term notes —
 1,193,396
 —
 1,193,396
Repayments of medium-term notes —
 (451,336) —
 (451,336)
Repayments of securitization debt —
 (665,400) —
 (665,400)
Borrowings of asset-backed commercial paper —
 62,396
 —
 62,396
Repayments of asset-backed commercial paper —
 (71,500) —
 (71,500)
Net decrease in credit facilities and unsecured commercial paper —
 (145,812) —
 (145,812)
Dividends paid (252,321) (183,000) 183,000
 (252,321)
Purchase of common stock for treasury (465,341) —
 —
 (465,341)
Excess tax benefits from share-based payments 2,251
 —
 —
 2,251
Issuance of common stock under employee stock option plans 15,782
 —
 —
 15,782
Net cash used by financing activities (699,629) (261,256) 183,000
 (777,885)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (8,407) (1,036) —
 (9,443)
Net increase (decrease) in cash, cash equivalents and restricted cash $25,097
 $(30,817) $—
 $(5,720)
Cash, cash equivalents and restricted cash:        
Cash, cash equivalents and restricted cash – beginning of period $400,443
 $432,408
 $—
 $832,851
Net increase (decrease) in cash, cash equivalents and restricted cash 25,097
 (30,817) —
 (5,720)
Cash, cash equivalents and restricted cash – end of period $425,540
 $401,591
 $—
 $827,131
21. Subsequent Event

In February 2019,2021, HDFS issued $550.0 $600.0 million of medium-termsecured notes that mature in February 2022 and havethrough an annualon-balance sheet asset-backed securitization transaction at a weighted average interest rate of 4.05%0.30%.



SUPPLEMENTARY DATA
Quarterly financial data (unaudited)
(In millions, except per share data)
  
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
  April 1, 2018 Mar 26, 2017 July 1, 2018 June 25, 2017 Sep 30, 2018 Sep 24, 2017 Dec 31, 2018 Dec 31, 2017
Motorcycles:                
Revenue $1,363.9
 $1,328.7
 $1,525.1
 $1,577.1
 $1,123.9
 $962.1
 $955.6
 $1,047.0
Operating income (loss)(a)
 $172.8
 $236.5
 $243.4
 $317.4
 $65.7
 $17.4
 $(59.5) $35.5
Financial Services:                
Revenue $178.2
 $173.2
 $188.1
 $188.0
 $191.7
 $189.1
 $190.2
 $181.9
Operating income $63.6
 $52.6
 $80.5
 $81.9
 $83.8
 $77.1
 $63.3
 $63.7
Consolidated:                
Income (loss) before taxes $230.2
 $284.7
 $319.4
 $394.4
 $141.2
 $89.9
 $(4.1) $94.8
Net income $174.8
 $186.4
 $242.3
 $258.9
 $113.9
 $68.2
 $0.5
 $8.3
Earnings per common share:                
Basic $1.04
 $1.06
 $1.45
 $1.48
 $0.69
 $0.40
 $0.00
 $0.05
Diluted $1.03
 $1.05
 $1.45
 $1.48
 $0.68
 $0.40
 $0.00
 $0.05
(a)The Company adopted ASU 2017-07 on January 1, 2018. Upon adoption, the Company reclassified the non-service cost components of net periodic benefit cost, previously recorded in Motorcycles and Related Products cost of goods sold and Selling, administrative and engineering expense, to Other income (expense), net.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None. 
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
– In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.
Management’s Report on Internal Control over Financial Reporting
– The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation under the
96

framework in Internal Control – Integrated Framework, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2018.2020. Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statementsfinancial statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the effectiveness of the Company’s internal control over financial reporting.


Attestation Report of Independent Registered Public Accounting Firm
– The attestation report required under this Item 9A is contained in Item 8 of Part II8. Consolidated Financial Statements and Supplementary Data of this Annual Report on Form 10-K under the heading “ReportReport of Independent Registered Public Accounting Firm.”Firm.
Changes in Internal Controls
– There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 20182020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information to be included in the Company’s definitive proxy statement for the 20192021 annual meeting of shareholders which will be filed on or about March 29, 2019 (the Proxy Statement), under the captions “QuestionsQuestions and Answers about the Company – Who are our Executive Officers for SEC Purposes?,” “Corporate Governance PrinciplesBoard Matters and Board MattersCorporate Governance – Audit and Finance Committee” “Proposal I –, Proposal 1: Election of Directors” “Section, Section 16(a) Beneficial Ownership Reporting Compliance,” “Audit, Audit and Finance Committee Report”, and “Corporate Governance Principles and Board Matters and Corporate Governance – Independence of Directors”Directors is incorporated by reference herein.
The Company has adopted the Harley-Davidson, Inc. Financial Code of Ethics applicable to the Company’s chief executive officer, the chief financial officer, the principal accounting officer and the controllerChief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Controller and other persons performing similar finance functions. The Company has posted a copy of the Harley-Davidson, Inc. Financial Code of Ethics on the Company’s website at http://investor.harley-davidson.com/. The Company intends to satisfy the disclosure requirements under Item 5.05 of the Securities and Exchange Commission’s Current Report on Form 8-K regarding amendments to, or waivers from, the Harley-Davidson, Inc. Financial Code of Ethics by posting such information on its website at www.harley-davidson.com.www.harley-davidson.com. The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K. 
Item 11. Executive Compensation
The information to be included in the Proxy Statement under the captions “Executive Compensation” Executive Compensation and “HumanHuman Resources Committee Report on Executive Compensation”Compensation is incorporated by reference herein. 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information to be included in the Proxy Statement under the caption “CommonCommon Stock Ownership of Certain Beneficial Owners and Management”Management is incorporated by reference herein.
The following table provides information about the Company’s equity compensation plans as of December 31, 2018:2020:
Plan Category 
Number of securities
to be issued upon the
exercise of
outstanding options
 
Weighted-
average
exercise
price of
outstanding
options
 
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
the first column)
Plan CategoryNumber of securities to be issued upon the exercise of outstanding optionsWeighted-average exercise price of outstanding optionsNumber of securities remaining available for future issuance under equity compensation plans
(excluding securities reflected in the first column)
Plan approved by shareholders:Plan approved by shareholders:
Management employees 1,055,468
 $50.11
 8,731,837
Management employees658,357 $55.85 5,395,000 
Plan not approved by shareholders:Plan not approved by shareholders:
Non-employee Board of Directors —
 $—
 279,304
Non-employee Board of Directors— $— 152,495 
Total all plans 1,055,468
 

 9,011,141
658,357 5,547,495 
Documents for the Company’s equity compensation plans have been filed with the Securities and Exchange Commission on a timely basis and included in the list of exhibits to this annual reportAnnual Report on Form 10-K.
Under the Company’s management plan theits Board of Directors may grant to employees share-based awards including restricted stock units (RSUs), performance shares, and nonqualified stock options and stock appreciation rights (SARs).options. Performance shares include a three-year performance period with vesting based on achievement of internal performance targets. RSUs vest ratably over a three-year
97

period. TheStock options and SARs granted under the Plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and vest ratably over a three-year period with the first one-


thirdone-third of the grant becoming exercisable one year after the date of grant. TheStock options and SARs expire 10 years from the date of grant.
The Company's Director Compensation Policy provides non-employee Directors with compensation that includes an annual retainer as well as a grant of share units. The payment of share units is deferred until a directorDirector ceases to serve as a directorDirector and the share units are payable at that time in actual shares of common stock. The Company's Director Compensation Policy also provides that a non-employee Director may elect to receive 50% or 100% of the annual retainer to be paid in each calendar year in the form of common stock based upon the fair market value of the common stock at the time of the annual meeting of shareholders. Each Director must receive a minimum of one-half of his or hertheir annual retainer in common stock until the Director reaches the Director stock ownership guidelines defined below.
In May 2016, the Company's Board of Directors approved the “Board of Directors and Senior Executive Stock Ownership Guidelines” (Ownership Guidelines). The Ownership Guidelines stipulate that all Directors hold five times their annual retainer in shares of common stock and Vice Presidents, General Managers or higher (Senior Executives) hold from two times to six times of their base salary in shares of common stock, or certain rights to acquire common stock, depending on their level. The Directors and Senior Executives have five years from the date they are elected a Director or become a Senior Executive to accumulate the appropriate number of shares of common stock. Restricted stock, restricted stock units,RSUs, shares held in 401(k) accounts, shares issuable under vested unexercised stock options, performance shares and performance share units (at target amount), stock appreciation rights, deferred stock units and shares of common stock held directly count toward satisfying the guidelines for common stock ownership.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information to be included in the Company's Proxy Statement under the caption “Certain Transactions”captions Certain Transactions and “Corporate Governance Principles and Board Matters and Corporate Governance – Independence of Directors” isDirectors are incorporated by reference herein.
Item 14. Principal Accounting Fees and Services
The information to be included in the Company's Proxy Statement under the caption “RatificationProposal 3: Ratification of the Selection of Independent Registered Public Accounting Firm – Fees Paid to Ernst & Young LLP”LLP is incorporated by reference herein.

98



PART IV

Item 15. Exhibits and Financial Statements
(a) The following documents are filed as part of this Form 10-K:
(1)
Financial Statements under Item 8. Consolidated Financial Statements and Supplementary Data
Reports of Independent Registered Public Accounting Firm
40
Consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018
44
Consolidated statements of comprehensive income for the years ended December 31, 2020, 2019, and 2018
45
Consolidated balance sheets at December 31, 2020 and 2019
46
Consolidated statements of cash flows for the years ended December 31, 2020, 2019, and 2018
48
Consolidated statements of shareholders’ equity for the years ended December 31, 2020, 2019, and 2018
49
Notes to Consolidated financial statements
50
(2)Financial Statement Schedule
Schedule II – Valuation and qualifying accounts
100
(3)
101
(1) Financial Statements 
  Consolidated statements of income for each of the three years in the period ended December 31, 2018
50
  Consolidated statements of comprehensive income for each of the three years in the period ended December 31, 2018
51
  Consolidated balance sheets at December 31, 2018 and December 31, 2017
52
  Consolidated statements of cash flows for each of the three years in the period ended December 31, 2018
54
  Consolidated statements of shareholders’ equity for each of the three years in the period ended December 31, 2018
55
  Notes to consolidated financial statements
56
(2) Financial Statement Schedule 
  Schedule II – Valuation and qualifying accounts
114
(3) Exhibits
115
Reference is made to the separate Index to Exhibits contained on pages 115101 through 119105 filed herewith.
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules.
Item 16. Form 10-K Summary
None.


99
Schedule II

HARLEY-DAVIDSON, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2018, 20172020, 2019 and 20162018
(In thousands)
202020192018
Accounts receivable - Allowance for doubtful accounts
Balance, beginning of period$4,928 $4,007 $4,091 
Provision charged to expense853 1,569 731 
Reserve adjustments88 7 (137)
Write-offs, net of recoveries(2,127)(655)(678)
Balance, end of period$3,742 $4,928 $4,007 
Finance receivables - Allowance for credit losses
Balance, beginning of period$198,581 $189,885 $192,471 
Cumulative effect of change in accounting(a)
100,604 0 0 
Provision for credit losses181,870 134,536 106,870 
Charge-offs, net of recoveries(90,119)(125,840)(109,456)
Balance, end of period$390,936 $198,581 $189,885 
Inventories - Allowance for obsolescence(b)
Balance, beginning of period$49,349 $39,015 $38,669 
Provision charged to expense43,357 24,984 25,722 
Reserve adjustments718 (39)(332)
Write-offs, net of recoveries(21,429)(14,611)(25,044)
Balance, end of period$71,995 $49,349 $39,015 
Deferred tax assets - Valuation allowance
Balance, beginning of period$29,024 $21,868 $21,561 
Adjustments9,048 7,156 307 
Balance, end of period$38,072 $29,024 $21,868 
(a)On January 1, 2020, the Company adopted Accounting Standards Update No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and increased the allowance for loan loss through Retained Earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolios at date of adoption.
(b)Inventory obsolescence reserves deducted from cost determined on first-in, first-out (FIFO) basis, before deductions for last-in, first-out (LIFO) valuation reserves.
100
  2018 2017 2016
Accounts receivable – allowance for doubtful accounts      
Balance, beginning of period $4,091
 $2,741
 $2,905
Provision charged to expense 731
 1,328
 (101)
Reserve adjustments (137) 99
 (63)
Write-offs, net of recoveries (678) (77) —
Balance, end of period $4,007
 $4,091
 $2,741
Finance receivables – allowance for credit losses      
Balance, beginning of period $192,471
 $173,343
 $147,178
Provision for credit losses 106,870
 132,444
 136,617
Charge-offs, net of recoveries (109,456) (113,316) (107,161)
Other(a)  
 —
 —
 (3,291)
Balance, end of period $189,885
 $192,471
 $173,343
Inventories – allowance for obsolescence(b)
      
Balance, beginning of period $38,669
 $39,873
 $26,740
Provision charged to expense 25,722
 16,940
 21,137
Reserve adjustments (332) 306
 (88)
Write-offs, net of recoveries (25,044) (18,450) (7,916)
Balance, end of period $39,015
 $38,669
 $39,873
Deferred tax assets – valuation allowance      
Balance, beginning of period $21,561
 $30,953
 $20,659
Adjustments 307
 (9,392) 10,294
Balance, end of period $21,868
 $21,561
 $30,953


(a)Related to the sale of finance receivables in 2016 with a principal balance of $301.8 million
through an off-balance sheet asset-backed securitization transaction (see Note 12 for additional information).
(b)Inventory obsolescence reserves deducted from cost determined on first-in, first-out (FIFO) basis, before deductions for last-in, first-out (LIFO) valuation reserves.







INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit No.
Exhibit NoDescription
Asset Purchase Agreement, dated April 30, 2015, among Harley-Davidson Canada LP, Fred Deeley Imports Ltd. and Harley-Davidson Motor Company, Inc., as amended (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2015 (File No. 1-9183))
Restated Articles of Incorporation as amended through April 27, 2015 (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
Harley-Davidson, Inc. By-Laws, as amended through April 27, 20156, 2020 (incorporated herein by reference by reference to Exhibit 3.23.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 29, 20152020 (File No. 1-9183))
Indenture to provide for the issuance of indebtedness dated as of November 21, 2003 between Harley-Davidson Funding Corp., Issuer, Harley-Davidson Financial Services, Inc. and Harley-Davidson Credit Corp., Guarantors, to BNY Midwest Trust Company, Trustee (incorporated herein by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-9183))
4.2
5-Year Credit Agreement, dated as of April 6, 2018, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent 2020 (incorporated herein by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2018 (File No. 1-9183))
Officers’ Certificate, dated May 22, 2008, pursuant to Sections 102 and 301 of the Indenture, dated November 21, 2003, with the forms of 6.80% Medium-Term Notes, Series C due 2018 (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated May 15, 2008 (File No. 1-9183))
4.4
Indenture, dated as of March 4, 2011, among Harley-Davidson Financial Services, Inc., Issuer, Harley-Davidson Credit Corp., Guarantor, and Bank of New York Mellon Trust Company, N.A., Trustee (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated March 1, 2011 (File No. 1-9183))
Officers' Certificate, dated September 16, 2014, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the forms of 2.400% Medium-Term Notes due 2019 (incorporated herein by reference to Exhibit 4.14 to the Registrant’s Annual Report of Form 10-K for the year ended December 31, 2014 (File No. 1-9183))
4.6
Officers' Certificate, dated February 26, 2015, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.150% Medium-Term Notes due 2020 (incorporated herein by reference to Exhibit 4.10 to the Registrant’s Annual Report ofon Form 10-K for the year ended December 31, 2015 (File No. 1-9183))
Indenture, dated July 28, 2015, by and between Harley-Davidson, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee. (incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated July 28, 2015 (File No. 1-9183))
Officers' Certificate, dated July 28, 2015 establishing the form of 3.500% Senior Notes due 2025 and 4.625% Senior Notes due 2045 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on From 8-K dates July 28, 2015 (File No. 1-9183))
Officers' Certificate dated January 8, 2016, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.250% Medium-Term Notes due 2019 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated January 5, 2016 (File No. 1-9183))
4.10
Officers' Certificate, dated January 8, 2016, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.850% Medium-Term Notes due 2021 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated January 5, 2016 (File No. 1-9183))
Amendment No. 1 to 5-Year Credit Agreement, dated as of April 6, 2018, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the 5-Year Credit Agreement, dated as of April 7, 2016, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2018 (File No. 1-9183))
5-Year Credit Agreement, dated as of April 7, 2016 among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2016 (File No. 1-9183))

Various instruments relating to the Company’s long-term debt described in this report need not be filed herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant, by signing this report, agrees to furnish the Securities and Exchange Commission, upon its request, with a copy of any such instrument.

*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.
115


INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit NoDescription
4.134.9
Amendment No. 1 5-year Credit Agreement, dated as of April 7, 2016, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto, and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the 5-year Credit Agreement, dated as of April 7, 2014 among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 27, 2016 (File No. 1-9183))
Officers' Certificate, dated March 10, 2017, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.400% Medium-Term Notes due 2020(incorporated2020 (incorporated herein by reference to Exhibit 4.14 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 1-9183))
Officers' Certificate, dated March 10, 2017, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of Floating Rate Medium-Term Notes due 2019 (incorporated herein by reference to Exhibit 4.15 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 1-9183))
4.16
Officers' Certificate, dated June 9, 2017, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.550% Medium-Term Notes due 2022 (incorporated herein by reference to Exhibit 4.17 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 1-9183))
Officers' Certificate, dated February 9, 2018, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 3.350% Medium-Term Notes due 2023 (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2018 (File No. 1-9183))
Officers' Certificate, dated May 21, 2018, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 3.550% Medium-Term Notes due 2021(incorporated2021 (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2018 (File No. 1-9183))
Various instruments relating to the Company’s long-term debt described in this report need not be filed herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant, by signing this report, agrees to furnish the Securities and Exchange Commission, upon its request, with a copy of any such instrument.

*    Represents a management contract or compensatory plan, contract or arrangement in which a Director or named executive officer of the Company participated.
101

INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit No.Description
Officers' Certificate, dated May 21, 2018, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of Floating Rate Medium-Term Notes due 2020 (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2018 (File No. 1-9183))
Officers' Certificate, dated November 28, 2018, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of Floating Rate Medium-Term Notes due 2020
10.1*
Harley-Davidson, Inc. 2004 Incentive Stock Plan as amended through April 28, 20072021 (incorporated herein by reference to Exhibit 10.44.20 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 1-9183))
Officers' Certificate, dated February 4, 2019, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 4.05% Medium-Term Notes due 2022 (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2007March 31, 2019 (File No. 1-9183))
Fiscal Agency Agreement, dated November 19, 2019, relating to the 0.9% Medium Term Notes due November 2024, among certain subsidiaries of the Company, The Bank of New York Mellon Trust Company, N.A. and The Bank of New York Mellon, London Branch (incorporated herein by reference to Exhibit 4.20 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 1-9183))
364-Day Credit Agreement, dated May 13, 2019, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto, and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent (incorporated herein by reference to Exhibit 4.21 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 1-9183))
Description of Registrants Securities (incorporated herein by reference to Exhibit 4.22 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2019 (File No. 1-9183))
Amendment No. 2 to 5-Year Credit Agreement, dated as of April 1, 2020, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the 5-Year Credit Agreement, dated as of April 7, 2016, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 29, 2020 (File No. 1-9183))
Amendment No. 2 to 5-Year Credit Agreement, dated as of April 1, 2020, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the 5-Year Credit Agreement, dated as of April 6, 2018, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 29, 2020 (File No. 1-9183))
Amendment No. 1 to 364-Day Credit Agreement, dated as of April 23, 2020, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto, and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the 364-Day Credit Agreement, dated as of May 13, 2019, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 29, 2020 (File No. 1-9183))
Fiscal Agency Agreement, dated May 19, 2020, relating to the 3.875% Medium Term Notes due May 2023, among certain subsidiaries of the Company, The Bank of New York Mellon, London Branch and The Bank of New York Mellon SA/NV, Luxembourg Branch (incorporated herein by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 28, 2020 (File No. 1-9183))
Officers' Certificate, dated June 8, 2020, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 3.350% Medium-Term Notes due 2025 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 28, 2020 (File No. 1-9183))
364-Day Credit Agreement, dated June 1, 2020, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto, and Toronto Dominion (Texas) LLC., as, global administrative agent (incorporated herein by reference to Exhibit 4.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 28, 2020 (File No. 1-9183))
Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held on April 25, 2009 filed on April 3, 2009 (File No. 1-9183))
Amended and Restated Harley-Davidson, Inc. 2014 Incentive Stock Plan as amended effective January 25, 2019 (incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (File No. 1-9183))




*    Represents a management contract or compensatory plan, contract or arrangement in which a Director or named executive officer of the Company participated.
102


INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit No.Description
Harley-Davidson, Inc. 2020 Incentive Stock Plan (incorporated herein by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held on April 26, 2014May 21, 2020 filed on March 14, 2014April 9, 2020 (File No. 1-9183))
Amended and Restated Harley-Davidson, Inc. Director Stock Plan as amended effective December 1, 2014 (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 1-9183))
Director Compensation Policy approved April 29, 2016 (incorporated herein by reference from Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 26, 2016 (File No. 1-9183))
Deferred Compensation Plan for Nonemployee Directors as amended and restated effective January 1, 2009 (incorporated herein by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-9183))
Harley-Davidson Management Deferred Compensation Plan as amended and restated effective January 1, 2017 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 25, 2016 (File No. 1-9183))
Harley-Davidson, Inc. Employee Incentive Plan (incorporated herein by reference to the Appendix to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held April 25, 2015 (File No. 1-9183))
Harley-Davidson, Inc. Short-Term Incentive Plan for Senior Executives (incorporated herein by reference to Appendix D to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held April 30, 2011 (File No. 1-9183))
Harley-Davidson Pension Benefit Restoration Plan as amended and restated effective January 1, 2009 (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-9183))





*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.
116



INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit NoDescription
10.11*
Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
Form of Notice of Grant of Stock Options and Option Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
Form of Notice of Special Grant of Stock Options and Option Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
Form of Notice of Grant of Stock Appreciation Rights and Stock Appreciation Rights Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.15*
Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan to each of Messrs. Hund, Levatich and Olin (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 1, 2009 (File No. 1-9183))
Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-9183))
10.19*
Form of Notice of Special Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-9183))
10.20*
Form of Notice of Grant Award of Stock Options and Stock Option Agreement (Standard) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
Form of Notice of Grant Award of Stock Options and Stock Option Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Deferred) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.23*
Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (International) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.24*
Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Special) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.25*
Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Standard) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.26*
Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.27*
Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Deferred) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.28*
Form of Notice of Grant Award of Stock Appreciation Rights and Stock Appreciation Rights Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))





*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.
117



INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit NoDescription
10.29*
Executive Severance Plan (incorporated herein by reference to Exhibit 4.1410.36 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 1-9183))
Form of Transition Agreement between the Registrant and each of Messrs. Levatich and Olin (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 1-9183))
Transition Agreement between the Registrant and Mr. Hund dated November 30, 2009 (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 1-9183))




*    Represents a management contract or compensatory plan, contract or arrangement in which a Director or named executive officer of the Company participated.
103


INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit No.Description
Form of Aircraft Time Sharing Agreement between the Registrant and each of Messrs. Levatich, Olin, JonesMansfield and Hund and Ms. Bischmann (incorporatedMses. Kumbier and Anding (incorporated herein by reference to Exhibit 10.1 to the Registrant’sRegistrant's Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 20122019 (File No. 1-9183))
Form of Non-competition and Non-solicitation Agreement between Harley-Davidson Canada LP, Fred Deeley Imports Ltd. and Harley-Davidson Motor Company, Inc., as amended (incorporated herein by reference to exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 28, 2015 (File No. 1-9183))
Form of Notice of Award of Performance Shares and Performance Shares Agreement (Standard) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.43 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 1-9183))
10.35*
Form of Notice of Award of Performance Share Units and Performance Share Unit Agreement (Standard International)
 of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 1-9183))
10.36*
Form of Notice of Award of Performance Shares and Performance Shares Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 1-9183))
10.37*
Harley-Davidson Retiree Insurance Allowance Plan, as amended and restated effective January 1, 2016 (incorporated herein by reference to Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 1-9183))
Form of Notice of Award of Performance Shares and Performance Share Agreement (Standard) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2017 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-Q for the quarter ended March 26, 2017 (File No. 1-9183))
Form of Notice of Award of Performance SharesShare Units and Performance Share Unit Agreement (Standard International) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2017(incorporated2017 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-Q for the quarter ended March 26, 2017 (File No. 1-9183))
Form of Notice of Award of Performance Shares and Performance Share Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2017 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-Q for the quarter ended March 26, 2017 (File No. 1-9183))
Form of Notice of Award of Performance SharesRestricted Stock Units and Performance ShareRestricted Stock Unit Agreement (Special Retention) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2017 (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-Q for the quarter ended March 26, 2017 (File No. 1-9183))
Form of Transition Agreement between the Registrant and each of Mr. Mansfield and Mses. Michelle Kumbier and Tchernavia Rocker and Mr. Paul JonesAnding (incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ended April 1, 2018 (File No. 1-9183))
Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Standard), Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Standard International), Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Special), Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Special Retention), and Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2018 (incorporated herein by reference to Exhibit 10.43 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 1-9183))
Form of Notice of Award of Performance Shares and Performance Shares Agreement (Standard), Form of Notice of Award of Performance Share Units and Performance Share Unit Agreement (Standard International), and Form of Notice of Award of Performance Shares and Performance Shares Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2018





*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of (incorporated herein by reference to Exhibit 10.44 to the Company participated.
118



Registrant's Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 1-9183))
INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit NoDescription
10.45*10.32*
Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Standard), Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Standard International), Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Special), and Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Special Retention) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2019 (incorporated herein by reference to Exhibit 10.45 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 1-9183))
Form of Notice of Award of Performance Shares and Performance Shares Agreement (Standard) and Form of Notice of Award of Performance Share Units and Performance Share Unit Agreement (Standard International) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan first approved for use in February 2019 (incorporated herein by reference to Exhibit 10.46 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018 (File No. 1-9183))
List of SubsidiariesSettlement Agreement, dated March 27, 2020, by and among Harley-Davidson, Inc., and Impala Master Fund Ltd. and Impala Asset Management LLC (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 30, 2020 (File No. 1-9183))
Acting President and Chief Executive Officer offer letter (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-Q for the quarter ended March 29, 2020 (File No. 1-9183))




*    Represents a management contract or compensatory plan, contract or arrangement in which a Director or named executive officer of the Company participated.
104


INDEX TO EXHIBITS
[Items 15(a)(3) and 15(c)]
Exhibit No.Description
Form of Transition Agreement between the Registrant and each of Messrs. Zeitz, Krause, Niketh, and Root and Mses. Giuffre and Goetter (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-Q for the quarter ended September 27, 2020 (File No. 1-9183))
Settlement and General Release Agreement between the Registrant and Ms. Kumbier dated August 14, 2020 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-Q for the quarter ended September 27, 2020 (File No. 1-9183))
Harley-Davidson, Inc. Subsidiaries
Consent of Independent Registered Public Accounting Firm
Chief Executive Officer Certification pursuant to Rule 13a-14(a)
Chief Financial Officer Certification pursuant to Rule 13a-14(a)
Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101






























Various instruments relating to the Company’s long-term debt described in this report need not be filed herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. The registrant, by signing this report, agrees to furnish the Securities and Exchange Commission, upon its request, with a copy of any such instrument.









*Represents a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated.
119

*    Represents a management contract or compensatory plan, contract or arrangement in which a Director or named executive officer of the Company participated.
105




SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 28, 2019.23, 2021.
 
HARLEY-DAVIDSON, INC.
HARLEY-DAVIDSON, INC.
By:/s/ Jochen Zeitz
By:/S/ Matthew S. LevatichJochen Zeitz
Matthew S. Levatich
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 28, 2019.
23, 2021.
NameTitle
NameTitle
/s/ Jochen Zeitz
/S/ Matthew S. LevatichChairman, President and Chief Executive Officer
Matthew S. LevatichJochen Zeitz(Principal executive officer)
/S/ John A. Olins/ Gina GoetterSenior Vice President and Chief Financial Officer
John A. OlinGina Goetter(Principal financial officer)
/S/s/ Mark R. KornetzkeChief Accounting Officer
Mark R. Kornetzke(Principal accounting officer)
/S/s/ Troy AlsteadDirector
Troy Alstead
/S/s/ R. John AndersonDirector
R. John Anderson
/S/s/ Michael J. CaveNon-Executive ChairmanDirector
Michael J. Cave
/S/s/ Allan GolstonDirector
Allan Golston
/S/s/ Sara L. LevinsonDirector
Sara L. Levinson
/S/s/ N. Thomas LinebargerDirectorNon-Executive Chairman
N. Thomas Linebarger
/S/s/ Brian NiccolDirector
Brian Niccol
/S/s/ Maryrose SylvesterDirector
Maryrose Sylvester
/S/ Jochen ZeitzDirector
Jochen Zeitz



120
106