UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April 1, 2018~~March 31, 2019



¨	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)



Wisconsin		39-1382325
(State of organization)		(I.R.S. Employer Identification No.)

3700 West Juneau Avenue Milwaukee, Wisconsin		53208
(Address of principal executive offices)		(Zip code)

Registrants telephone number: (414) 342-4680

None

(Former name, former address and former fiscal year, if changed since last report)

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 requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes x No ¨

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”,~~filer,” “smaller reporting company,” and ~~emerging~~"emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth 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.~~Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company as(as defined in Rule 12b-2 of the Exchange ~~Act.~~ Act).

Yes ¨ No x

Securities Registered Pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
COMMON STOCK PAR VALUE $.01 PER SHARE	HOG	NEW YORK STOCK EXCHANGE

Number of shares of the registrant’s common stock outstanding at May ~~4, 2018: 166,436,632~~3, 2019: 159,072,779 shares

Harley-Davidson, Inc.

Form 10-Q

For The Quarter Ended ~~April 1, 2018~~March 31, 2019

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)


	Three months ended				Three months ended
	April 1, 2018		March 26, 2017		March 31, 2019		April 1, 2018
Revenue:
Motorcycles and Related Products	$	1,363,947	$	1,328,711	$	1,195,637	$	1,363,947
Financial Services	178,174		173,221		188,743		178,174
Total revenue	1,542,121		1,501,932		1,384,380		1,542,121
Costs and expenses:
Motorcycles and Related Products cost of goods sold	890,174		853,888		848,198		890,174
Financial Services interest expense	48,450		43,289		52,324		48,450
Financial Services provision for credit losses	30,052		43,589		34,491		30,052
Selling, administrative and engineering expense	290,186		271,984		268,625		290,186
Restructuring expense	46,842		—		13,630		46,842
Total costs and expenses	1,305,704		1,212,750		1,217,268		1,305,704
Operating income	236,417		289,182		167,112		236,417
Other income (expense), net	220		2,296		4,660		220
Investment income	1,203		879		6,358		1,203
Interest expense	7,690		7,673		7,731		7,690
Income before provision for income taxes	230,150		284,684		170,399		230,150
Provision for income taxes	55,387		98,315		42,454		55,387
Net income	$	174,763	$	186,369	$	127,945	$	174,763
Earnings per common share:
Basic	$	1.04	$	1.06	$	0.80	$	1.04
Diluted	$	1.03	$	1.05	$	0.80	$	1.03
Cash dividends per common share	$	0.370	$	0.365	$	0.375	$	0.370

The accompanying notes are an integral part of the consolidated financial statements.

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three months ended					Three months ended
	April 1, 2018		March 26, 2017			March 31, 2019			April 1, 2018
Net income	$	174,763	$	186,369		$	127,945		$	174,763
Other comprehensive income (loss), net of tax:
Other comprehensive income, net of tax:
Foreign currency translation adjustments	6,915		15,557			331			6,915
Derivative financial instruments	765		(9,052		)	(441		)	765
Marketable securities	—		(10		)
Pension and postretirement benefit plans	85,765		7,256			7,743			85,765
Total other comprehensive income, net of tax	93,445		13,751			7,633			93,445
Comprehensive income	$	268,208	$	200,120		$	135,578		$	268,208

The accompanying notes are an integral part of the consolidated financial statements.

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)


	(Unaudited)						(Unaudited)			(Unaudited)						(Unaudited)
	April 1, 2018			December 31, 2017			March 26, 2017			March 31, 2019			December 31, 2018			April 1, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	753,517		$	687,521		$	839,700		$	749,600		$	1,203,766		$	753,517
Marketable securities	—			—			5,004			10,003			10,007			—
Accounts receivable, net	355,107			329,986			335,578			353,541			306,474			355,107
Finance receivables, net	2,341,918			2,105,662			2,354,095			2,443,899			2,214,424			2,341,918
Inventories	564,571			538,202			485,476			595,806			556,128			564,571
Restricted cash	54,569			47,518			75,705			43,471			49,275			54,569
Other current assets	150,472			175,853			142,362			177,761			144,368			150,472
Total current assets	4,220,154			3,884,742			4,237,920			4,374,081			4,484,442			4,220,154
Finance receivables, net	4,784,524			4,859,424			4,792,027			4,994,693			5,007,507			4,784,524
Property, plant and equipment, net	934,645			967,781			953,044			876,003			904,132			934,645
Prepaid pension costs	122,230			19,816			—			—			—			122,230
Goodwill	56,524			55,947			53,967			64,131			55,048			56,524
Deferred income taxes	77,624			109,073			165,196			132,988			141,464			77,624
Lease assets										55,305			—			—
Other long-term assets	81,920			75,889			79,701			83,412			73,071			81,920
	$	10,277,621		$	9,972,672		$	10,281,855		$	10,580,613		$	10,665,664		$	10,277,621
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	319,040		$	227,597		$	358,684		$	380,918		$	284,861		$	319,040
Accrued liabilities	566,408			529,822			547,637			644,171			601,130			566,408
Short-term debt	1,036,976			1,273,482			953,357			1,192,925			1,135,810			1,036,976
Current portion of long-term debt, net	1,872,679			1,127,269			697,061			1,372,050			1,575,799			1,872,679
Total current liabilities	3,795,103			3,158,170			2,556,739			3,590,064			3,597,600			3,795,103
Long-term debt, net	4,108,511			4,587,258			5,320,797			4,744,694			4,887,667			4,108,511
Pension liability	54,921			54,606			52,559
Postretirement healthcare liability	113,031			118,753			171,143
Lease liabilities										39,516			—			—
Pension liabilities										98,862			107,776			54,921
Postretirement healthcare liabilities										93,897			94,453			113,031
Other long-term liabilities	210,106			209,608			187,208			215,969			204,219			210,106
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 17)
Shareholders’ equity:
Preferred stock, none issued	—			—			—			—			—			—
Common stock	1,818			1,813			1,813			1,826			1,819			1,818
Additional paid-in-capital	1,432,692			1,422,808			1,397,172			1,465,581			1,459,620			1,432,692
Retained earnings	1,725,626			1,607,570			1,459,431			2,074,669			2,007,583			1,725,626
Accumulated other comprehensive loss	(406,604		)	(500,049		)	(551,630		)	(622,051		)	(629,684		)	(406,604		)
Treasury stock, at cost	(757,583		)	(687,865		)	(313,377		)	(1,122,414		)	(1,065,389		)	(757,583		)
Total shareholders’ equity	1,995,949			1,844,277			1,993,409			1,797,611			1,773,949			1,995,949
	$	10,277,621		$	9,972,672		$	10,281,855		$	10,580,613		$	10,665,664		$	10,277,621

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands)


	(Unaudited)				(Unaudited)		(Unaudited)				(Unaudited)
	April 1, 2018		December 31, 2017		March 26, 2017		March 31, 2019		December 31, 2018		April 1, 2018
Balances held by consolidated variable interest entities (Note 11)
Balances held by consolidated variable interest entities (Note 13)
Current finance receivables, net	$	182,033	$	194,813	$	218,001	$	130,454	$	175,043	$	182,033
Other assets	$	2,175	$	2,148	$	3,204	$	1,416	$	1,563	$	2,175
Non-current finance receivables, net	$	464,185	$	521,940	$	825,825	$	480,936	$	591,839	$	464,185
Restricted cash - current and non-current	$	55,140	$	48,706	$	79,254	$	39,764	$	47,203	$	55,140
Current portion of long-term debt, net	$	205,055	$	209,247	$	253,070	$	137,488	$	189,693	$	205,055
Long-term debt, net	$	361,049	$	422,834	$	718,509	$	408,153	$	488,191	$	361,049

The accompanying notes are an integral part of the consolidated financial statements.

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three months ended						Three months ended
	April 1, 2018			March 26, 2017			March 31, 2019			April 1, 2018
Net cash provided by operating activities (Note 7)	$	191,594		$	159,939
Net cash provided by operating activities (Note 8)							$	32,671		$	191,594
Cash flows from investing activities:
Capital expenditures	(28,436		)	(23,967		)	(35,255		)	(28,436		)
Origination of finance receivables	(798,067		)	(844,692		)	(851,372		)	(798,067		)
Collections on finance receivables	809,800			781,154			815,824			809,800
Acquisition of business							(7,000		)	—
Other	(4,948		)	52			603			(4,948		)
Net cash used by investing activities	(21,651		)	(87,453		)	(77,200		)	(21,651		)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	347,553			497,406			546,655			347,553
Repayments of medium-term notes	—			(400,000		)	(750,000		)	—
Repayments of securitization debt	(67,955		)	(111,359		)	(76,505		)	(67,955		)
Borrowings of asset-backed commercial paper	35,504			305,209			—			35,504
Repayments of asset-backed commercial paper	(45,907		)	(29,383		)	(72,401		)	(45,907		)
Net decrease in credit facilities and unsecured commercial paper	(234,145		)	(101,702		)
Net increase (decrease) in credit facilities and unsecured commercial paper							58,527			(234,145		)
Dividends paid	(62,731		)	(64,611		)	(60,859		)	(62,731		)
Purchase of common stock for treasury	(72,968		)	(79,753		)	(61,712		)	(72,968		)
Issuance of common stock under employee stock option plans	1,719			7,336			616			1,719
Net cash (used) provided by financing activities	(98,930		)	23,143
Net cash used by financing activities							(415,679		)	(98,930		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	2,034			7,219			(409		)	2,034
Net increase in cash, cash equivalents and restricted cash	$	73,047		$	102,848
Net (decrease) increase in cash, cash equivalents and restricted cash							$	(460,617	)	$	73,047
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash—beginning of period	$	746,210		$	827,131		$	1,259,748		$	746,210
Net increase in cash, cash equivalents and restricted cash	73,047			102,848
Net (decrease) increase in cash, cash equivalents and restricted cash							(460,617		)	73,047
Cash, cash equivalents and restricted cash—end of period	$	819,257		$	929,979		$	799,131		$	819,257

Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheet:
Cash and cash equivalents	$	753,517		$	839,700		$	749,600		$	753,517
Restricted cash	54,569			75,705			43,471			54,569
Restricted cash included in other long-term assets	11,171			14,574			6,060			11,171
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows	$	819,257		$	929,979		$	799,131		$	819,257

The accompanying notes are an integral part of the consolidated financial statements.

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except share amounts)

(Unaudited)



	Common Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Balance			Total
	Issued Shares	Balance		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Balance			Total
Balance December 31, 2018	181,931,225	$	1,819	$	1,459,620	$	2,007,583		$	(629,684	)	$	(1,065,389	)	$	1,773,949
Net income	—	—		—		127,945			—			—			127,945
Total other comprehensive income, net of tax (Note 18)	—	—		—		—			7,633			—			7,633
Dividends	—	—		—		(60,859		)	—			—			(60,859		)
Repurchase of common stock	—	—		—		—			—			(61,712		)	(61,712		)
Share-based compensation	702,687	7		5,961		—			—			4,687			10,655
Balance March 31, 2019	182,633,912	$	1,826	$	1,465,581	$	2,074,669		$	(622,051	)	$	(1,122,414	)	$	1,797,611

	Common Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Balance			Total
	Issued Shares	Balance		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Balance			Total
Balance December 31, 2017	181,286,547	$	1,813	$	1,422,808	$	1,607,570		$	(500,049	)	$	(687,865	)	$	1,844,277
Net income	—	—		—		174,763			—			—			174,763
Total other comprehensive income, net of tax (Note 18)	—	—		—		—			93,445			—			93,445
Dividends	—	—		—		(62,731		)	—			—			(62,731		)
Repurchase of common stock	—	—		—		—			—			(72,968		)	(72,968		)
Share-based compensation	489,896	5		9,884		—			—			3,250			13,139
Cumulative effect of change in accounting	—	—		—		6,024			—			—			6,024
Balance April 1, 2018	181,776,443	$	1,818	$	1,432,692	$	1,725,626		$	(406,604	)	$	(757,583	)	$	1,995,949

HARLEY-DAVIDSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Use of Estimates

The consolidated financial statements include the accounts of Harley-Davidson, Inc. and its wholly-owned subsidiaries (the Company), including the accounts of the groups of companies doing business 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 are eliminated.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated balance sheets as of ~~April 1, 2018~~March 31, 2019 and ~~March 26, 2017~~April 1, 2018, the consolidated statements of income for the three month periods then ended, the consolidated statements of comprehensive income for the three month periods then ended, ~~and~~ the consolidated statements of cash flows for the three month periods then ended, and the consolidated statements of shareholders' equity for the three month periods then ended.

Certain information and footnote disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and U.S. generally accepted accounting principles (U.S. GAAP) for interim financial reporting. These consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018.

The Company operates in two reportable segments: Motorcycles &and Related Products (Motorcycles) and Financial Services.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.

2. New Accounting Standards

Accounting Standards Recently ~~Adopted~~

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09 Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company adopted ASU 2014-09 on January 1, 2018. The Company applied the standard to all contracts using the modified retrospective method. As such, the Company recognized the cumulative effect of the adoption as an adjustment to the opening balance of retained earnings. The comparative information has not been restated.

The majority of the Company’s Motorcycles 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 shipped in accordance with ASU 2014-09. The Company recorded a net increase 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 2014-09 on the consolidated statement of income for the three months ended April 1, 2018 and the consolidated balance sheet as of April 1, 2018 (in thousands):

~~Consolidated Statement of Income~~

As Reported Without Adoption of ASC 606 Effect of Change
Revenue:
Motorcycles and Related Products $ 1,363,947
$ 1,367,984
$ (4,037 )
Costs and expenses:
Motorcycles and Related Products cost of goods sold $ 890,174
$ 890,238
$ (64 )
Operating income $ 236,417
$ 240,390
$ (3,973 )
Income before provision for income taxes $ 230,150
$ 234,123
$ (3,973 )
Provision for income taxes $ 55,387
$ 56,350
$ (963 )
Net income $ 174,763
$ 177,773
$ (3,010 )

~~Consolidated Balance Sheet~~

As Reported Without Adoption of ASC 606 Effect of Change
ASSETS
Other current assets $ 150,472
$ 166,864
$ (16,392 )
Deferred income taxes $ 77,624
$ 79,472
$ (1,848 )

LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities $ 566,408
$ 587,662
$ (21,254 )
Retained earnings $ 1,725,626
$ 1,722,612
$ 3,014

In March 2017, the FASB issued ASU No. 2017-07 Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07). ASU 2017-07 amends ASC 715, Compensation - Retirement Benefits by requiring employers to present the service cost component of net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during 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. The Company adopted ASU 2017-07 retrospectively 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 cost (credit) previously recorded in Motorcycles and Related Products cost of goods sold and Selling, administrative and engineering expense of $2.7 million and $(0.4) million, respectively, for the three months ended March 26, 2017 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 and ASU No. 2018-04. The Company adopted ASU 2016-01 on January 1, 2018 on a prospective basis. The adoption of ASU 2016-01 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.

~~Accounting Standards Not Yet~~ Adopted

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842) (ASU 2016-02). ASU 2016-02 amends the existing lease accounting model by requiring a lessee to recognize the rights and obligations resulting from 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~~adopted ASU 2016-02 ~~for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018~~on January 1, 2019 using a modified retrospective approach. ~~Early~~Pursuant to ASU 2018-11, Leases (Topic 842): Targeted Improvements, the Company applied the new leases standard at the adoption ~~is permitted.~~ date and recognized a cumulative effect adjustment to the opening balance sheet on January 1, 2019.

The Company ~~is currently in~~elected the ~~process~~package of ~~gathering and analyzing information necessary to quantify the impact of adopting ASU 2016-02 and evaluating the transition~~ practical expedients ~~it will apply~~ upon transition that allows entities not to reassess lease identification, classification and initial direct costs for leases that existed prior to adoption. The Company ~~anticipates~~also 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 elected the practical expedient 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 adoption of ASU 2016-02 ~~will result~~resulted in ~~an increase in~~the initial recognition of right of use assets and lease liabilities ~~recognized~~related to the Company's leasing arrangements totaling approximately $60 million on January 1, 2019. The adoption of ASU 2016-02 had no impact on opening retained earnings on January 1, 2019 and is not expected to materially impact consolidated net income or cash flows on an on-going basis.

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 ~~balance sheet related to~~fair value of the hedging instrument and amending disclosure requirements, among other things. The Company adopted ASU 2017-12 on January 1, 2019. The adoption of ASU 2017-12 did not have a material impact on its ~~lease arrangements.~~financial statements.

Accounting Standards Not Yet Adopted

In July 2016, the FASB issued ASU No. 2016-13 Financial ~~Instruments-Credit~~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 timely recognition of credit losses on loans and other financial assets and 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 recognition of the financial instrument. The Company 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 permitted 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 performed on testing dates after January 1, 2017.

In August ~~2017,~~2018, the FASB issued ASU No. ~~2017-12 Derivatives and Hedging~~2018-13, Fair Value Measurement (Topic ~~815)~~820): ~~Targeted Improvements~~Disclosure Framework - Changes to ~~Accounting~~the Disclosure Requirements for ~~Hedging Activities~~Fair Value Measurement (ASU ~~2017-12)~~2018-13). ASU ~~2017-12~~2018-13 amends ASC ~~815, Derivatives~~820 to eliminate, modify, 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 theadd certain disclosure requirements for fair value ~~of the hedging instrument and amending disclosure requirements, among other things.~~measurements. The ~~Company~~guidance is ~~required to adopt ASU 2017-12~~effective for fiscal years beginning after December 15, ~~2018,~~2019 and for interim periods within those fiscal years. Early adoption is permitted in any ~~interim~~ period, ~~after issuance of~~for either the ~~ASU. For cash flow and net investment hedges existing at~~whole standard or only 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.~~provisions that eliminate or modify requirements. The amendments ~~related to presentation and disclosure~~ are required ~~prospectively.~~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 ~~adoption of~~adopting ASU ~~2017-12.~~2018-13, but does not believe that it will have a significant impact on its disclosures.

In ~~February~~August 2018, the FASB issued ASU No. ~~2018-02, Reclassification of Certain Tax Effects from Accumulated~~2018-15, Intangibles - Goodwill and Other ~~Comprehensive Income~~- Internal-Use Software (Subtopic 350-40) (ASU ~~2018-02)~~2018-15). ~~Under~~The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the existing ~~U.S. GAAP, the effects of changes in tax rates and laws on deferred tax balances are recorded~~internal-use software guidance to determine which implementation costs to capitalize as ~~a component of income tax~~assets or 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.as incurred. The guidance is effective for fiscal years beginning after December 15, ~~2018,~~2019, and interim periods within those fiscal years. ~~Early adoption in any period is permitted. The Company’s provisional adjustments recorded in 2017 to account for the impact of the 2017 Tax Cuts and Jobs Act resulted in stranded tax effects.~~ The Company is currently evaluating the impact of adopting ASU ~~2018-02.~~2018-15.

3. 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 ~~disaggregates~~includes revenue disaggregated by major source ~~for the three months ended April 1, 2018~~ (in thousands):

Motorcycles and Related Products:
Motorcycles $ 1,121,673
Parts & Accessories 169,075
General Merchandise 56,601
Licensing 8,358
Other 8,240
Revenue from Motorcycles and Related Products 1,363,947
Financial Services:
Interest income 154,041
Securitization and servicing fee income 352
Other income 23,781
Revenue from Financial Services 178,174
Total revenue $ 1,542,121

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

~~Motorcycles and Related Products~~

~~Motorcycles, Parts and Accessories, and General Merchandise -~~ Sales of motorcycles, parts and accessories, and general merchandise are recorded when control is transferred to wholesale customers (independent dealers). This generally takes place upon shipment of the products. 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 accounts receivable in the consolidated balance sheets. The sale of products in the U.S. and Canada is financed by the purchasing dealers through HDFS and the related receivables are included in finance receivables in the consolidated balance sheets.

The Company may offer sales incentive programs to dealers and retail customers designed to promote the sale of motorcycles, parts and accessories, and 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, the 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 may offer to its dealers the right to return eligible parts and accessories and 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 amount during the three months ended April 1, 2018.~~

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 and accessories. 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.

~~Licensing~~ - The Company licenses the name “Harley-Davidson” and other trademarks owned by the Company and collects royalties from its customers (licensees). The trademark licenses are considered symbolic intellectual property, which grant the customer 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 customer 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’ subsequent sales occur. The Company applies the practical expedient in ASC 606-10-55-18 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 6 years.

~~Other Revenue~~ - Other Revenue consists primarily of revenue from Harley Ownership 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~~ - 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. Certain loan origination costs related to finance receivables, including payments made to dealers for certain retail loans, are deferred and recorded within finance receivables, and amortized over the estimated life of the contract.

~~Securitization and Servicing Income~~ - Securitization and Servicing income consists of revenue from servicing and ancillary fees associated with HDFS' off-balance sheet asset-backed securitization transaction. Refer to Note 11 of the Notes to Consolidated Financial Statements for further discussion regarding asset-backed financing.

~~Other 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 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.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 6 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~~



	Three months ended
	March 31, 2019		April 1, 2018
Motorcycles and Related Products:
Motorcycles	$	964,575	$	1,121,673
Parts & Accessories	159,703		169,075
General Merchandise	55,401		56,601
Licensing	8,577		8,358
Other	7,381		8,240
Revenue from Motorcycles and Related Products	1,195,637		1,363,947
Financial Services:
Interest income	159,804		154,041
Securitization and servicing fee income	189		352
Other income	28,750		23,781
Revenue from Financial Services	188,743		178,174
Total revenue	$	1,384,380	$	1,542,121

Deferred revenue relates 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.~~Harley Ownership Group 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 million of deferred~~Deferred revenue, ~~was~~ included in Accrued liabilities and Other long-term liabilities inon the consolidated balance ~~sheet. $4.0 million of this~~sheet, was as follows (in thousands):



	March 31, 2019		April 1, 2018
Balance, beginning of year	$	29,055	$	23,441
Balance, end of period	30,228		27,624

Previously deferred revenue recognized as revenue in the three months ended ~~April 1, 2018. At~~March 31, 2019 and April 1, 2018 ~~the unearned revenue balance~~ was ~~$27.6~~

~~million.~~$6.1 million and $4.0 million, respectively. The Company expects to recognize approximately ~~$12.7~~$16.2 million of the remaining unearned revenue ~~in 2018, $7.2 million in 2019~~over the next 12 months and ~~$7.8~~$14.0 million thereafter.

4. Restructuring Expenses

In January 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.~~Australia (Manufacturing Optimization Plan). As the U.S. 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 bythrough 2019. Approximately 90 jobs will be eliminated in Adelaide.

The Company expects to incur restructuring and other consolidation costs of ~~$170~~$152 million to ~~$200~~$162 million in the Motorcycles segment related to ~~this plan~~the Manufacturing Optimization Plan through 2019, of which approximately 70% will be cash charges. ~~This~~

The current estimate includes ~~$135~~$129 million to ~~$155~~$134 million of restructuring expense and ~~$35~~$23 million to ~~$45~~$28 million of costs related to temporary inefficiencies. The Company expects restructuring expenses to include the cost of employee termination benefits, accelerated depreciation, and other project implementation costs of ~~$50 million to $60 million, $45 million to $50 million and~~ $40 million to ~~$45~~$41 million, $51 million to $53 million, and $38 million to $40 million, respectively.

In November 2018, the Company implemented a reorganization of its workforce (Reorganization Plan). As a result, approximately 70 employees left the Company on an involuntary basis.

Restructuring expense related to these plans is recorded as a separate line item in the consolidated ~~statement~~statements of income and the accrued restructuring liability is recorded in ~~accrued~~Accrued liabilities in on the consolidated balance sheet. The Company expects the ~~plan~~plans to be completed by mid-2019. Changes in the accrued restructuring liability (in thousands) were as follows:


													Three months ended March 31, 2019
	Three months ended April 1, 2018												Manufacturing Optimization Plan												Reorganization Plan
	Employee Termination Benefits			Accelerated Depreciation			Other			Total			Employee Termination Benefits			Accelerated Depreciation			Other			Total			Employee Termination Benefits			Total
Balance, beginning of period	$	—		$	—		$	—		$	—		$	24,958		$	—		$	79		$	25,037		$	3,461		$	28,498
Restructuring expense	(40,791		)	(5,613		)	(438		)	(46,842		)
Restructuring expense (benefit)													9			8,379			5,636			14,024			(394		)	13,630
Utilized - cash	2,300			—			374			2,674			(2,600		)	—			(5,528		)	(8,128		)	(2,014		)	(10,142		)
Utilized - non cash	—			5,613			—			5,613			—			(8,379		)	—			(8,379		)	—			(8,379		)
Foreign currency changes	204			—			1			205			34			—			—			34			(2		)	32
Balance, end of period	$	(38,287	)	$	—		$	(63	)	$	(38,350	)	$	22,401		$	—		$	187		$	22,588		$	1,051		$	23,639

~~The~~



	Three months ended April 1, 2018
	Manufacturing Optimization Plan												Reorganization Plan
	Employee Termination Benefits			Accelerated Depreciation			Other			Total			Employee Termination Benefits		Total
Balance, beginning of period	$	—		$	—		$	—		$	—		$	—	$	—
Restructuring expense	40,791			5,613			438			46,842			—		46,842
Utilized - cash	(2,300		)	—			(374		)	(2,674		)	—		(2,674		)
Utilized - non cash	—			(5,613		)	—			(5,613		)	—		(5,613		)
Foreign currency changes	(204		)	—			(1		)	(205		)	—		(205		)
Balance, end of period	$	38,287		$	—		$	63		$	38,350		$	—	$	38,350

During the three months ended March 31, 2019, the restructuring liability was adjusted to reflect updated assumptions resulting in a reversal of approximately $0.4 million of previously recognized restructuring expense.

During the three months ended March 31, 2019 and April 1, 2018, the Company incurred $3.6 million and $0.7 million, respectively, of incremental cost of goods sold ~~during the three month period ended April 1, 2018~~ due to temporary inefficiencies resulting from implementing the ~~manufacturing optimization plan.~~Manufacturing Optimization Plan.

5. Income Taxes

The Company’s ~~2018~~2019 effective income tax rate for the three months ended ~~April 1, 2018~~March 31, 2019 was ~~24.1%~~24.9% compared to ~~34.5%~~24.1% for the three months ended March 26, 2017. The Company's effective income tax rate was lower in 2018 due primarily to the impact of the 2017 Tax Cuts and Jobs Act (2017 Tax Act) that was enacted in December of 2017. The 2017 Tax Act included broad and complex changes to the U.S. tax code including a reduction of the corporate income tax rate from 35% to 21%, the move toward a territorial tax system and the elimination of the domestic manufacturing deduction. During the three months ended December 31, 2017, the Company recorded a $53.1 million tax expense to recognize the initial effects of the 2017 Tax Act relating primarily to the remeasurement of deferred tax assets. The Company has deemed its income tax estimates related to the 2017 Tax Act to be provisional under SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118). The Company believes future guidance, interpretations and pronouncements will add clarity to the numerous aspects of the 2017 Tax Act that may impact the Company which may result in revisions to the Company’s provisional estimates. There were no material changes to these provisional estimates during the three month period ended April 1, 2018.

6. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):


	Three months ended				Three months ended
	April 1, 2018		March 26, 2017		March 31, 2019		April 1, 2018
Numerator:
Net income used in computing basic and diluted earnings per share	$	174,763	$	186,369	$	127,945	$	174,763
Denominator:
Denominator for basic earnings per share - weighted-average common shares	168,139		176,001		159,311		168,139
Effect of dilutive securities - employee stock compensation plan	1,035		1,069		715		1,035
Denominator for diluted earnings per share - adjusted weighted-average shares outstanding	169,174		177,070		160,026		169,174
Earnings per common share:
Basic	$	1.04	$	1.06	$	0.80	$	1.04
Diluted	$	1.03	$	1.05	$	0.80	$	1.03

Outstanding options to purchase ~~1.0~~1.2 million and ~~0.8~~1.0 million shares of common stock for the three months ended March 31, 2019 and April 1, 2018, ~~and March 26, 2017,~~ respectively, were not included in the Company’s computation of dilutive securities because the exercise price was greater than the market price, and therefore, the effect would have been anti-dilutive.

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 for the three month periods ended ~~April 1, 2018~~March 31, 2019 and ~~March 26, 2017~~April 1, 2018.

7. Acquisition

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. StaCyc produces electric-powered two-wheelers specifically designed for children and supports the Company’s plans to expand its portfolio of electric two-wheeled vehicles.

The Company has completed a provisional allocation of the purchase consideration which is subject to change upon the completion of the Company’s final valuation of acquired assets and liabilities. The primary assets acquired and included in the Motorcycles segment were goodwill of $9.5 million, which is expected to be tax deductible, and intangible assets of $5.3 million.

8. Additional Balance Sheet and Cash Flow Information

Investments in Marketable Securities

The Company’s marketable securities consisted of the following (in thousands):


	April 1, 2018		December 31, 2017		March 26, 2017		March 31, 2019		December 31, 2018		April 1, 2018
Available-for-sale corporate bonds	$	—	$	—	$	5,004
Debt securities							$	10,003	$	10,007	$	—
Mutual funds	49,402		48,006		41,674		49,896		44,243		49,402
Total marketable securities	$	49,402	$	48,006	$	46,678	$	59,899	$	54,250	$	49,402

The ~~Company’s available-for-sale corporate~~ debt securities, which are included in Marketable securities on the consolidated balance sheets, are carried at fair value with ~~any~~ unrealized gains or losses reported in other comprehensive income. ~~During the first three months of 2017, unrealized losses were not material. There were no available-for-sale debt securities outstanding at April 1, 2018.~~ The mutual fund investments are held ~~by the Company~~ to fund certain deferred compensation obligations. These investments, which are included in Other long-term assets on the consolidated balance sheets, are carried at fair value with gains and losses recorded in net ~~income and are included in other long-term assets on the consolidated balance sheets.~~income.

Inventories

Substantially all inventories located in the United States are valued using the last-in, first-out (LIFO) method. Other inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Inventories consisted of the following (in thousands):


	April 1, 2018			December 31, 2017			March 26, 2017			March 31, 2019			December 31, 2018			April 1, 2018
Raw materials and work in process	$	177,652		$	161,664		$	153,195		$	204,759		$	177,110		$	177,652
Motorcycle finished goods	289,046			289,530			263,408			304,386			301,630			289,046
Parts and accessories and general merchandise	150,228			139,363			117,140
Parts & accessories and general merchandise										145,300			136,027			150,228
Inventory at lower of FIFO cost or net realizable value	616,926			590,557			533,743			654,445			614,767			616,926
Excess of FIFO over LIFO cost	(52,355		)	(52,355		)	(48,267		)	(58,639		)	(58,639		)	(52,355		)
Total inventories, net	$	564,571		$	538,202		$	485,476		$	595,806		$	556,128		$	564,571

Operating Cash Flow

The reconciliation of net income to net cash provided by operating activities is as follows (in thousands):


	Three months ended						Three months ended
	April 1, 2018			March 26, 2017			March 31, 2019			April 1, 2018
Cash flows from operating activities:
Net income	$	174,763		$	186,369		$	127,945		$	174,763
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles	62,473			54,900			64,372			62,473
Amortization of deferred loan origination costs	20,116			20,078			18,968			20,116
Amortization of financing origination fees	2,028			2,076			2,194			2,028
Provision for long-term employee benefits	9,747			7,475			3,156			9,747
Employee benefit plan contributions and payments	(5,486		)	(29,957		)	(2,507		)	(5,486		)
Stock compensation expense	7,962			6,992			6,537			7,962
Net change in wholesale finance receivables related to sales	(239,902		)	(317,087		)	(237,569		)	(239,902		)
Provision for credit losses	30,052			43,589			34,491			30,052
Deferred income taxes	3,188			3,989			5,981			3,188
Other, net	(1,902		)	(5,334		)	2,731			(1,902		)
Changes in current assets and liabilities:
Accounts receivable, net	(17,688		)	(39,230		)	(49,746		)	(17,688		)
Finance receivables - accrued interest and other	4,758			5,142			92			4,758
Inventories	(21,542		)	23,476			(40,600		)	(21,542		)
Accounts payable and accrued liabilities	148,923			182,928			123,975			148,923
Derivative instruments	702			3,120			867			702
Other	13,402			11,413			(28,216		)	13,402
Total adjustments	16,831			(26,430		)	(95,274		)	16,831
Net cash provided by operating activities	$	191,594		$	159,939		$	32,671		$	191,594

8.9. Finance Receivables

The Company provides retail financial services to customers of the Company’s independent dealers in the United States 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.~~contracts and are primarily related to sales of motorcycles to the dealers' customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.

The Company offers wholesale financing to the Company’s independent dealers. Wholesale loans to dealers are generally secured by financed inventory or property and are originated in the U.S. and Canada. Wholesale finance receivables are related primarily to sales of motorcycles and related parts and accessories to dealers.

Finance receivables, net, consisted of the following (in thousands):


	April 1, 2018			December 31, 2017			March 26, 2017			March 31, 2019			December 31, 2018			April 1, 2018
Retail	$	6,064,192		$	6,140,600		$	6,002,550		$	6,290,036		$	6,328,201		$	6,064,192
Wholesale	1,252,600			1,016,957			1,327,602			1,339,428			1,083,615			1,252,600
Total finance receivables	7,316,792			7,157,557			7,330,152			7,629,464			7,411,816			7,316,792
Allowance for credit losses	(190,350		)	(192,471		)	(184,030		)	(190,872		)	(189,885		)	(190,350		)
Finance receivables, net	$	7,126,442		$	6,965,086		$	7,146,122		$	7,438,592		$	7,221,931		$	7,126,442

A provision for credit losses on finance receivables is charged or credited to earnings in amounts that the Company believes are sufficient to maintain the allowance for credit losses at a level that is adequate to cover losses ~~of principal~~ inherent in the existing portfolio. The allowance for credit losses represents management’s estimate of probable losses inherent in the finance receivable portfolio as of the balance sheet date. However, due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company could differ from the amounts estimated.

Changes in the allowance for credit losses on finance receivables by portfolio were as follows (in thousands):


	Three months ended April 1, 2018								Three months ended March 31, 2019
	Retail			Wholesale		Total			Retail			Wholesale		Total
Balance, beginning of period	$	186,254		$	6,217	$	192,471		$	182,098		$	7,787	$	189,885
Provision for credit losses	28,069			1,983		30,052			32,832			1,659		34,491
Charge-offs	(45,081		)	—		(45,081		)	(44,721		)	—		(44,721		)
Recoveries	12,908			—		12,908			11,217			—		11,217
Balance, end of period	$	182,150		$	8,200	$	190,350		$	181,426		$	9,446	$	190,872

	Three months ended March 26, 2017								Three months ended April 1, 2018
	Retail			Wholesale		Total			Retail			Wholesale		Total
Balance, beginning of period	$	166,810		$	6,533	$	173,343		$	186,254		$	6,217	$	192,471
Provision for credit losses	42,160			1,429		43,589			28,069			1,983		30,052
Charge-offs	(45,924		)	—		(45,924		)	(45,081		)	—		(45,081		)
Recoveries	13,022			—		13,022			12,908			—		12,908
Balance, end of period	$	176,068		$	7,962	$	184,030		$	182,150		$	8,200	$	190,350

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. Portions of the allowance for credit losses are established to cover estimated losses on finance receivables specifically identified for impairment. The unspecified portion of the allowance for credit losses covers estimated losses on finance receivables which are collectively reviewed for impairment.

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 evaluation for the wholesale allowance for credit losses 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 the 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 discounted at the loan’s original interest rate or the fair value of the collateral, if the loan is collateral-dependent. Finance receivables in the wholesale portfolio that are not considered impaired on an individual basis are segregated, based on similar risk characteristics, according

to the Company’s internal risk rating system and collectively evaluated for impairment. 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, current economic conditions, and the value of the underlying collateral.

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 finance receivables in troubled debt restructurings. Total restructured finance receivables are not significant.

The allowance for credit losses and finance receivables by portfolio, segregated by those amounts that are individually evaluated for impairment and those that are collectively evaluated for impairment, was as follows (in thousands):


	April 1, 2018						March 31, 2019
	Retail		Wholesale		Total		Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	184	$	184	$	—	$	—	$	—
Collectively evaluated for impairment	182,150		8,016		190,166		181,426		9,446		190,872
Total allowance for credit losses	$	182,150	$	8,200	$	190,350	$	181,426	$	9,446	$	190,872
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	220	$	220	$	—	$	—	$	—
Collectively evaluated for impairment	6,064,192		1,252,380		7,316,572		6,290,036		1,339,428		7,629,464
Total finance receivables	$	6,064,192	$	1,252,600	$	7,316,792	$	6,290,036	$	1,339,428	$	7,629,464

	December 31, 2017						December 31, 2018
	Retail		Wholesale		Total		Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	186,254		6,217		192,471		182,098		7,787		189,885
Total allowance for credit losses	$	186,254	$	6,217	$	192,471	$	182,098	$	7,787	$	189,885
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment	6,140,600		1,016,957		7,157,557		6,328,201		1,083,615		7,411,816
Total finance receivables	$	6,140,600	$	1,016,957	$	7,157,557	$	6,328,201	$	1,083,615	$	7,411,816

	March 26, 2017						April 1, 2018
	Retail		Wholesale		Total		Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	184	$	184
Collectively evaluated for impairment	176,068		7,962		184,030		182,150		8,016		190,166
Total allowance for credit losses	$	176,068	$	7,962	$	184,030	$	182,150	$	8,200	$	190,350
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	220	$	220
Collectively evaluated for impairment	6,002,550		1,327,602		7,330,152		6,064,192		1,252,380		7,316,572
Total finance receivables	$	6,002,550	$	1,327,602	$	7,330,152	$	6,064,192	$	1,252,600	$	7,316,792

There are no wholesale finance receivables at March 31, 2019 or December 31, 2018 that are individually deemed to be impaired under ASC Topic 310, "Receivables". Additional information related to the wholesale finance receivables that are individually deemed to be impaired ~~under ASC Topic 310, “Receivables,”~~ at April 1, 2018 includes (in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Wholesale:
No related allowance recorded	$	—	$	—	$	—	$	—	$	—
Related allowance recorded	251		220		184		251		—
Total impaired wholesale finance receivables	$	251	$	220	$	184	$	251	$	—

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables 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. All retail finance receivables accrue interest until either collected or charged-off. Accordingly, as of ~~April 1, 2018~~March 31, 2019, December 31, ~~2017~~2018 and ~~March 26, 2017~~April 1, 2018, all retail finance receivables were accounted for as interest-earning receivables, of which $~~27.9~~39.0 million, $~~40.0~~41.2 million and $~~28.5~~27.9 million, respectively, were 90 days or more past due.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once management 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 finance receivable becomes uncollectible 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. There were no wholesale receivables on non-accrual status at March 31, 2019 or December 31, 2018. The recorded investment ofin non-accrual status wholesale finance receivables at April 1, 2018 was $0.2 million. ~~There were no wholesale receivables on non-accrual status at~~At March 31, 2019, December 31, ~~2017~~2018 or ~~March 26, 2017. At~~and April 1, 2018, ~~December 31, 2017~~ ~~and~~ ~~March 26, 2017~~, $~~0.2~~0.8 million, $~~0.1~~1.1 million, and $~~0.6~~0.2 million of wholesale finance receivables were 90 days or more past due and accruing interest, respectively.

An analysis of the aging of past due finance receivables was as follows (in thousands):


	April 1, 2018												March 31, 2019
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables		Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	5,897,632	$	105,366	$	33,275	$	27,919	$	166,560	$	6,064,192	$	6,088,894	$	119,150	$	43,028	$	38,964	$	201,142	$	6,290,036
Wholesale	1,247,175		549		4,705		171		5,425		1,252,600		1,337,429		862		355		782		1,999		1,339,428
Total	$	7,144,807	$	105,915	$	37,980	$	28,090	$	171,985	$	7,316,792	$	7,426,323	$	120,012	$	43,383	$	39,746	$	203,141	$	7,629,464

	December 31, 2017												December 31, 2018
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables		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	$	6,100,186	$	136,945	$	49,825	$	41,245	$	228,015	$	6,328,201
Wholesale	1,016,000		595		245		117		957		1,016,957		1,081,729		522		273		1,091		1,886		1,083,615
Total	$	6,929,473	$	140,224	$	47,784	$	40,076	$	228,084	$	7,157,557	$	7,181,915	$	137,467	$	50,098	$	42,336	$	229,901	$	7,411,816

	March 26, 2017												April 1, 2018
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables		Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	5,840,164	$	100,471	$	33,403	$	28,512	$	162,386	$	6,002,550	$	5,897,632	$	105,366	$	33,275	$	27,919	$	166,560	$	6,064,192
Wholesale	1,325,575		1,129		273		625		2,027		1,327,602		1,247,175		549		4,705		171		5,425		1,252,600
Total	$	7,165,739	$	101,600	$	33,676	$	29,137	$	164,413	$	7,330,152	$	7,144,807	$	105,915	$	37,980	$	28,090	$	171,985	$	7,316,792

A significant part of managing the Company's finance receivable portfolios includes the assessment 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.

The Company manages retail credit risk through its credit approval policy 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. Retail loans with a FICO score of 640 or above at origination are considered prime, and loans with a FICO score below 640 are considered sub-prime. These credit quality indicators are determined at the time of loan origination and are not updated subsequent to the loan origination date.

The recorded investment in retail finance receivables, by credit quality indicator, was as follows (in thousands):


	April 1, 2018		December 31, 2017		March 26, 2017		March 31, 2019		December 31, 2018		April 1, 2018
Prime	$	4,923,237	$	4,966,193	$	4,806,730	$	5,160,942	$	5,183,754	$	4,923,237
Sub-prime	1,140,955		1,174,407		1,195,820		1,129,094		1,144,447		1,140,955
Total	$	6,064,192	$	6,140,600	$	6,002,550	$	6,290,036	$	6,328,201	$	6,064,192

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’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. 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 recorded investment in wholesale finance receivables, by internal credit quality indicator, was as follows (in thousands):


	April 1, 2018		December 31, 2017		March 26, 2017		March 31, 2019		December 31, 2018		April 1, 2018
Doubtful	$	1,582	$	688	$	1,133	$	8,679	$	2,210	$	1,582
Substandard	3,368		3,837		9,213		7,866		9,660		3,368
Special Mention	33,085		26,866		19,898		11,484		10,299		33,085
Medium Risk	10,512		9,917		14,648		917		25,802		10,512
Low Risk	1,204,053		975,649		1,282,710		1,310,482		1,035,644		1,204,053
Total	$	1,252,600	$	1,016,957	$	1,327,602	$	1,339,428	$	1,083,615	$	1,252,600

9.10. Derivative Instruments and Hedging Activities

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.

The Company sells products in foreign currencies and 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 and the Mexican peso. The foreign currency exchange contracts generally have maturities of less than one year.

The Company utilizes commodity contracts to mitigate the effects of commodity price fluctuations related to metals and fuel consumed in the Company’s motorcycle production and distribution processes. The 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 the anticipated issuance of long-term debt as well as interest rate swaps to reduce the impact of fluctuations in interest rates on long-term debt.

All derivative instruments are recognized on the balance sheet at fair value. In accordance with ASC Topic 815, ~~“Derivatives~~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~~are 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~~cash flow 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~~Derivatives not ~~qualify for hedge accounting~~designated as hedges are not speculative and are used to manage the Company’s exposure to foreign currency and commodity risks. Changes in the fair value of derivatives not designated in hedging relationships are recorded ~~at fair value, and any changes~~directly in ~~fair value are recorded in current period~~ earnings.

The Company sells its products internationally, 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 the Euro, the Australian dollar, the Japanese yen, the Brazilian real, the Canadian dollar and the Mexican peso. The foreign currency exchange contracts are entered into with banks and allow the Company to exchange a specified amount of foreign currency for U.S. dollars at a future date, based on a fixed exchange rate.

~~The Company utilizes commodity contracts to hedge portions of the cost of certain commodities consumed in the Company’s motorcycle production and distribution operations.~~

~~The Company’s foreign currency exchange contracts and commodity contracts generally have maturities of less than one year.~~

The Company has periodically utilized treasury rate lock contracts to fix the interest rate on a portion of the principal related to the issuance of long-term debt. All such treasury rate lock contracts have since settled and the loss at settlement was recorded in accumulated other comprehensive loss which is being reclassified into earnings over the life of the debt.

The following tables summarize the notional and recorded fair ~~value~~values of the Company’s derivative financial instruments (in thousands):

April 1, 2018 December 31, 2017 March 26, 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)

Notional
Value

Asset
Fair Value^(a)

Liability
Fair Value^(b)
Foreign currency contracts^(c)
$ 720,869
$ 3,442
$ 22,807
$ 675,724
$ 1,388
$ 21,239
$ 534,652
$ 12,195
$ 1,015
Commodity
contracts^(c)
728
—
11
915
—
69
1,027
23
—
Total $ 721,597
$ 3,442
$ 22,818

$ 676,639
$ 1,388
$ 21,308

$ 535,679
$ 12,218
$ 1,015

April 1, 2018 December 31, 2017 March 26, 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)

Notional
Value

Asset
Fair Value^(a)

Liability
Fair Value^(b)
Commodity contracts $ 4,577
$ 171
$ 32
$ 4,532
$ 381
$ —
$ 5,046
$ 228
$ 37
Total $ 4,577

$ 171
$ 32
$ 4,532
$ 381
$ —
$ 5,046
$ 228
$ 37



	Derivatives Designated as Cash Flow Hedging Instruments Under ASC Topic 815
	March 31, 2019						December 31, 2018						April 1, 2018
Derivative	Notional Value		Other Current Assets		Accrued Liabil-ities		Notional Value		Other Current Assets		Accrued Liabil-ities		Notional Value		Other Current Assets		Accrued Liabil-ities
Foreign currency contracts	$	480,937	$	15,576	$	646	$	442,976	$	15,071	$	313	$	720,869	$	3,442	$	22,807
Commodity contracts	589		—		6		827		—		46		728		—		11
Interest rate swaps	900,000		—		6,893		900,000		—		4,494		—		—		—
Total	$	1,381,526	$	15,576	$	7,545	$	1,343,803	$	15,071	$	4,853	$	721,597	$	3,442	$	22,818

	Derivatives Not Designated as Hedging Instruments Under ASC Topic 815
	March 31, 2019						December 31, 2018						April 1, 2018
Derivative	Notional Value		Other Current Assets		Accrued Liabil-ities		Notional Value		Other Current Assets		Accrued Liabil-ities		Notional Value		Other Current Assets		Accrued Liabil-ities
Foreign currency contracts	$	157,678	$	413	$	69	$	—	$	—	$	—	$	—	$	—	$	—
Commodity contracts	7,225		94		119		5,239		—		463		4,577		171		32
Total	$	164,903	$	507	$	188	$	5,239	$	—	$	463	$	4,577	$	171	$	32


~~(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 related to derivative financial instruments designated as cash flow hedges (in thousands):


	Amount of Gain/(Loss) Recognized in OCI, before tax						Amount of Gain/(Loss) Recognized in OCI, before tax						Amount of Gain/(Loss) Reclassified from AOCL into Income						Location of Gain/(Loss) Reclassified from AOCL into Income	Total Statement of Income Amount for Line Items in which the Effects of Cash Flow Hedges are Recorded
	Three months ended						Three months ended						Three months ended							Three months ended
Cash Flow Hedges	April 1, 2018			March 26, 2017			March 31, 2019			April 1, 2018			March 31, 2019			April 1, 2018			Income statement line item	March 31, 2019		April 1, 2018
Foreign currency contracts	$	(5,890	)	$	(11,797	)	$	4,152		$	(5,890	)	$	2,453		$	(6,709	)	Motorcycles cost of goods sold	$	848,198	$	890,174
Commodity contracts	(16		)	(106		)	30			(16		)	(10		)	(73		)	Motorcycles cost of goods sold	$	848,198	$	890,174
Treasury rate locks							—			—			(90		)	(90		)	Interest expense	$	7,731	$	7,690
Treasury rate locks							—			—			(32		)	(36		)	Financial Services interest expense	$	52,324	$	48,450
Interest rate swaps							(3,005		)	—			(606		)	—			Financial Services interest expense	$	52,324	$	48,450
Total	$	(5,906	)	$	(11,903	)	$	1,177		$	(5,906	)	$	1,715		$	(6,908	)

Amount of Gain/(Loss) Reclassified from AOCL into Income
Three months ended Expected to be Reclassified
Cash Flow Hedges April 1,
2018 March 26,
2017 Over the Next Twelve Months
Foreign currency contracts^(a)
$ (6,709 ) $ 2,516
$ (15,783 )
Commodity contracts^(a)
(73 ) 48
1
Treasury rate locks^(b)
(126 ) (90 ) (506 )
Total $ (6,908 ) $ 2,474
$ (16,288 )


~~(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~~

~~For the three months ended April 1, 2018 and March 26, 2017, the cash flow hedges were highly effective and, as a result, the~~The amount of ~~hedge ineffectiveness~~net gain included in accumulated other comprehensive loss at March 31, 2019, estimated to be reclassified into income over the next twelve months was ~~not material. No amounts were excluded from effectiveness testing.~~$11.6 million.

The following table summarizes the amount of gains and losses recognized in income related to derivative financial instruments not designated as hedging ~~instruments~~instruments. The following amounts were recorded in Motorcycles cost of goods sold (in thousands):

Amount of Gain/(Loss) Recognized in Income on Derivative
Three months ended
Derivatives Not Designated As Hedges April 1,
2018 March 26,
2017
Commodity contracts^(a)
$ 6
$ 20
Total $ 6
$ 20



	Amount of Gain Recognized in Income on Derivative
	Three months ended
Derivatives Not Designated as Hedges	March 31, 2019		April 1, 2018
Foreign currency contracts	$	887	$	—
Commodity contracts	317		6
Total	$	1,204	$	6


~~(a)~~	~~Gain/(loss) recognized in income is included in cost of goods sold~~

The Company is exposed to credit loss risk in the event of non-performance by counterparties to these derivative financial instruments. Although no assurances can be given, the Company does not expect any of the counterparties to these derivative financial instruments to fail to meet its 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 its position.

11. Leases

The Company determines if an arrangement is or contains a lease at contract inception. Right-of-use (ROU) assets related to leases are recorded in Lease assets and lease liabilities are recorded in Accrued liabilities and Lease liabilities on the consolidated balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at 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 liability includes periods covered by options to extend or terminate when the Company is reasonably certain the lease term will include these optional periods.

~~10.~~The Company has lease arrangements for sales and administrative offices, manufacturing and distribution facilities, product testing facilities, equipment and vehicles. All of the Company’s lease arrangements are accounted for as operating leases. The Company’s leases have remaining lease terms ranging from 1 to 13 years, some of which include options to extend the leases 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. Leases do not contain any material residual value guarantees or material restrictive covenants.

Operating lease expense for the three months ended March 31, 2019 was $6.3 million. This includes variable lease costs related to leases involving assets operated by a third-party of approximately $1.1 million. Other variable and short-term lease costs were not material.

Balance sheet information related to leases was as follows (in thousands):



	March 31, 2019
Lease assets	$	55,305

Accrued liabilities	$	17,391
Lease liabilities	39,516
	$	56,907

Future maturities of lease liabilities were as follows as of March 31, 2019 (in thousands):



	Operating Leases
2019	$	14,743
2020	15,023
2021	12,467
2022	8,837
2023	3,511
Thereafter	6,291
Total present value of lease payments	60,872
Less present value discount	3,965
Total lease liability	$	56,907

Other lease information is as follows:



	Three months ended
	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities (in millions):
Operating cash flows	$	5,361
Right-of-use assets obtained in exchange for lease obligations (in millions)	298



	March 31, 2019
Weighted average remaining lease term (in years)	4.61
Weighted average discount rate	3.3	%

12. Debt

Debt with a contractual term of one year or less is generally classified as short-term debt and consisted of the following (in thousands):


	April 1, 2018		December 31, 2017		March 26, 2017		March 31, 2019		December 31, 2018		April 1, 2018
Unsecured commercial paper	$	1,036,976	$	1,273,482	$	953,357	$	1,192,925	$	1,135,810	$	1,036,976
Total short-term debt	$	1,036,976	$	1,273,482	$	953,357	$	1,192,925	$	1,135,810	$	1,036,976

Debt with a contractual term greater than one year is generally classified as long-term debt and consisted of the following (in thousands):


	April 1, 2018			December 31, 2017			March 26, 2017			March 31, 2019			December 31, 2018			April 1, 2018
Secured debt (Note 11)
Secured debt (Note 13)
Asset-backed Canadian commercial paper conduit facility	$	158,162		$	174,779		$	141,013		$	142,676		$	155,951		$	158,162
Asset-backed U.S. commercial paper conduit facilities	281,311			279,457			286,205			526,947			582,717			281,311
Asset-backed securitization debt	285,130			353,085			686,396			18,712			95,216			285,130
Less: unamortized discount and debt issuance costs	(337		)	(461		)	(1,022		)	(18		)	(49		)	(337		)
Total secured debt	724,266			806,860			1,112,592			688,317			833,835			724,266

Unsecured notes (at par value)
1.55% Medium-term notes due in 2017, issued November 2014	—			—			400,000
6.80% Medium-term notes due in 2018, issued May 2008	877,488			877,488			877,488			—			—			877,488
2.25% Medium-term notes due in 2019, issued January 2016	600,000			600,000			600,000			—			600,000			600,000
Floating-rate Medium-term notes due in 2019, issued March 2017^(a)	150,000			150,000			150,000			—			150,000			150,000
2.40% Medium-term notes due in 2019, issued September 2014	600,000			600,000			600,000			600,000			600,000			600,000
2.15% Medium-term notes due in 2020, issued February 2015	600,000			600,000			600,000			600,000			600,000			600,000
Floating-rate Medium-term notes due in 2020, issued May 2018^(b)										450,000			450,000			—
2.40% Medium-term notes due in 2020, issued March 2017	350,000			350,000			350,000			350,000			350,000			350,000
2.85% Medium-term notes due in 2021, issued January 2016	600,000			600,000			600,000			600,000			600,000			600,000
Floating-rate Medium-term notes due in 2021, issued November 2018^(c)										450,000			450,000			—
3.55% Medium-term notes due in 2021, issued May 2018										350,000			350,000			—
4.05% Medium-term notes due in 2022, issued February 2019										550,000			—			—
2.55% Medium-term notes due in 2022, issued June 2017	400,000			400,000			—			400,000			400,000			400,000
3.35% Medium-term notes due in 2023, issued February 2018	350,000			—			—			350,000			350,000			350,000
3.50% Senior unsecured notes due in 2025, issued July 2015	450,000			450,000			450,000			450,000			450,000			450,000
4.625% Senior unsecured notes due in 2045, issued July 2015	300,000			300,000			300,000			300,000			300,000			300,000
Less: unamortized discount and debt issuance costs	(20,564		)	(19,821		)	(22,222		)	(21,573		)	(20,369		)	(20,564		)
Gross long-term debt	5,981,190			5,714,527			6,017,858			6,116,744			6,463,466			5,981,190
Less: current portion of long-term debt, net of unamortized discount and debt issuance costs	(1,872,679		)	(1,127,269		)	(697,061		)	(1,372,050		)	(1,575,799		)	(1,872,679		)
Total long-term debt	$	4,108,511		$	4,587,258		$	5,320,797		$	4,744,694		$	4,887,667		$	4,108,511

~~(a) Floating interest rate based on LIBOR plus 35 bps.~~


(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.

~~11.~~13. 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 (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~~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~~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 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 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 Statement~~consolidated statements of ~~Income.~~income.

The Company is not required, and does not currently intend, to provide any additional financial support to the onon- 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 tables show the assets and liabilities related to the on-balance sheet asset-backed financings included in the financial statements (in thousands):


	April 1, 2018													March 31, 2019
	Finance receivables		Allowance for credit losses			Restricted cash		Other assets		Total assets		Asset-backed debt		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	$	367,584	$	(11,387	)	$	38,207	$	1,207	$	395,611	$	284,793	$	62,771	$	(1,855	)	$	8,199	$	134	$	69,249	$	18,694
Asset-backed U.S. commercial paper conduit facilities	299,318		(9,297		)	16,933		968		307,922		281,311		567,295		(16,821		)	31,565		1,282		583,321		526,947
Unconsolidated VIEs
Asset-backed Canadian commercial paper conduit facility	183,073		(3,085		)	10,600		320		190,908		158,162		164,779		(3,003		)	9,767		282		171,825		142,676
Total on-balance sheet assets and liabilities	$	849,975	$	(23,769	)	$	65,740	$	2,495	$	894,441	$	724,266	$	794,845	$	(21,679	)	$	49,531	$	1,698	$	824,395	$	688,317

	December 31, 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 facilities	300,530		(9,392		)	13,787		888		305,813		279,457
Unconsolidated VIEs
Asset-backed Canadian commercial paper conduit facility	203,691		(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

	March 26, 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	$	772,152	$	(23,239	)	$	63,473	$	2,532	$	814,918	$	685,374
Asset-backed U.S. commercial paper conduit facilities	304,091		(9,178		)	15,781		672		311,366		286,205
Unconsolidated VIEs
Asset-backed Canadian commercial paper conduit facility	155,240		(3,048		)	11,025		382		163,599		141,013
Total on-balance sheet assets and liabilities	$	1,231,483	$	(35,465	)	$	90,279	$	3,586	$	1,289,883	$	1,112,592



	December 31, 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 facilities	631,588		(18,733		)	30,012		1,234		644,101		582,717
Unconsolidated VIEs
Asset-backed Canadian commercial paper conduit facility	181,774		(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

	April 1, 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	$	367,584	$	(11,387	)	$	38,207	$	1,207	$	395,611	$	284,793
Asset-backed U.S. commercial paper conduit facilities	299,318		(9,297		)	16,933		968		307,922		281,311
Unconsolidated VIEs
Asset-backed Canadian commercial paper conduit facility	183,073		(3,085		)	10,600		320		190,908		158,162
Total on-balance sheet assets and liabilities	$	849,975	$	(23,769	)	$	65,740	$	2,495	$	894,441	$	724,266

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 transaction 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’~~notes have a contractual ~~lives have various maturities ranging from 2020 to~~life maturing in 2022.

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 no on-balance sheet asset-backed securitization transactions during the first quarter of ~~2018~~2019 or ~~2017.~~2018.

On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE

~~In December 2017, the~~The Company ~~renewed its existing $300.0 million and $600.0 million revolving facility~~has agreements with a third-party bank-sponsored asset-backed U.S. commercial paper ~~conduit.~~conduits under which it 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. In November 2018, the Company renewed its existing $600.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits. Also at that time, 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 initial commitment to $600.0 million. The aggregate commitment under this agreement is reduced monthly as collections on the related finance receivables are applied 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 revolving facilities (together, the U.S. Conduit Facilities) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the ~~relevant~~ SPE as collateral.

Under the U.S. Conduit Facilities, the ~~Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to the third party bank-sponsored asset-backed commercial paper conduit. 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 to the extent the advance is not funded by a conduit lender through the issuance of commercial paper plus, in each case, a program fee based on outstanding principal. The U.S. Conduit Facilities also provide for an unused commitment fee based on the unused portion of the total aggregate ~~commitment of $900.0 million.~~commitment. There is no amortization schedule; however, the debt ~~will be~~is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facilities, any outstanding principal will continue to be reduced monthly through available collections. The ~~contractual maturity~~expected remaining term of the ~~debt~~related receivables held by the SPE is approximately 5 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of ~~April 1, 2018,~~March 31, 2019, the U.S. Conduit Facilities have an expiration date of ~~December 12, 2018.~~November 29, 2019.

The Company is the primary beneficiary of its U.S. Conduit Facilities 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~~There were no finance receivable transfers under the U.S. Conduit Facilities during the first quarter of 2019. During the first quarter of 2018, the Company transferred $32.9 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $29.3 million of debt under the U.S. Conduit ~~and the respective proceeds (in thousands):~~

2018 2017
Transfers Proceeds Transfers Proceeds
First quarter $ 32,900
$ 29,300
$ 333,400
$ 300,000

Facilities.

On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility

In June ~~2017,~~2018, the Company ~~amended~~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 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 ~~contractual maturity~~expected remaining term of the ~~debt~~related receivables is approximately 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of ~~April 1, 2018,~~March 31, 2019, the Canadian Conduit has an expiration date of June ~~30, 2018.~~28, 2019.

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, was ~~$32.7~~$29.1 million at ~~April 1, 2018.~~March 31, 2019. The maximum exposure is not an indication of the Company's expected loss exposure.

~~The following table includes quarterly~~There were no finance receivable transfers under the Canadian Conduit Facilities during the first quarter of 2019. During the first quarter of 2018, the Company transferred $7.6 million of Canadian retail motorcycle finance receivables to the Canadian Conduit ~~and the respective~~for proceeds ~~(in thousands):~~

2018 2017
Transfers Proceeds Transfers Proceeds
First quarter $ 7,600
$ 6,200
$ 6,300
$ 5,500
of $6.2 million.

Off-Balance Sheet Asset-Backed Securitization VIE

There were no off-balance sheet asset-backed securitization transactions during the first quarter of ~~2018~~2019 or ~~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. 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 is a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitization are only available for payment of the secured debt and other obligations arising from the asset-backed securitization transaction and are 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 is not the primary beneficiary of the off-balance sheet asset-backed securitization VIE because it only retained servicing rights and does 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, the retail motorcycle finance receivables were removed from the Company’s balance sheet 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~~consolidated statements of ~~Income.~~income.

At ~~April 1, 2018,~~March 31, 2019, the assets of this off-balance sheet asset-backed securitization VIE were ~~$127.6~~$67.1 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 ~~April 1, 2018.~~March 31, 2019. 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 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 ~~Consolidated Statement~~consolidated statements of ~~Income.~~income. The fees the Company is paid for servicing represent adequate compensation, and consequently, the Company does not recognize a servicing asset or liability. The Company recognized servicing fee income of ~~$0.4~~$0.2 million and ~~$0.6~~$0.4 million during the first quarter of 2019 and 2018, ~~and 2017,~~ respectively.

The unpaid principal balance of retail motorcycle finance receivables serviced by the Company was as follows (in thousands):


	April 1, 2018		December 31, 2017		March 26, 2017		March 31, 2019		December 31, 2018		April 1, 2018
On-balance sheet retail motorcycle finance receivables	$	5,923,564	$	5,993,185	$	5,867,143	$	6,159,058	$	6,185,350	$	5,923,564
Off-balance sheet retail motorcycle finance receivables	127,643		146,425		212,764		67,062		79,613		127,643
Total serviced retail motorcycle finance receivables	$	6,051,207	$	6,139,610	$	6,079,907	$	6,226,120	$	6,264,963	$	6,051,207

The unpaid principal balance of retail motorcycle finance receivables serviced by the Company 30 days or more delinquent was as follows (in thousands):


	Amount 30 days or more past due:						Amount 30 days or more past due:
	April 1, 2018		December 31, 2017		March 26, 2017		March 31, 2019		December 31, 2018		April 1, 2018
On-balance sheet retail motorcycle finance receivables	$	166,560	$	227,127	$	162,386	$	201,142	$	228,015	$	166,560
Off-balance sheet retail motorcycle finance receivables	1,652		2,106		1,476		1,194		1,658		1,652
Total serviced retail motorcycle finance receivables	$	168,212	$	229,233	$	163,862	$	202,336	$	229,673	$	168,212

Credit losses, net of recoveries for the retail motorcycle finance receivables serviced by the Company were as follows (in thousands):


	Three months ended				Three months ended
	April 1, 2018		March 26, 2017		March 31, 2019		April 1, 2018
On-balance sheet retail motorcycle finance receivables	$	32,173	$	32,902	$	33,504	$	32,173
Off-balance sheet retail motorcycle finance receivables	361		414		231		361
Total serviced retail motorcycle finance receivables	$	32,534	$	33,316	$	33,735	$	32,534

~~12.~~14. 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 ~~commodity prices.~~yield curves. The Company uses the market approach to derive the fair value for its Level 2 fair value measurements. Forward contracts for foreign currency, commodities, and ~~commodities~~treasury rate locks are valued using ~~current~~ quoted forward rates and prices; interest rate swaps are valued using quoted interest rates and yield curves; investments in marketable securities and cash equivalents are valued using ~~publicly~~ quoted prices.

Level 3 inputs are not observable in the market and include management’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 (in thousands):


	April 1, 2018								March 31, 2019
	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	653,124	$	326,324	$	326,800	$	—	$	498,207	$	321,300	$	176,907	$	—
Marketable securities	49,402		49,402		—		—		59,899		49,896		10,003		—
Derivatives	3,613		—		3,613		—		16,083		—		16,083		—
Total	$	706,139	$	375,726	$	330,413	$	—	$	574,189	$	371,196	$	202,993	$	—
Liabilities:
Derivatives	$	22,850	$	—	$	22,850	$	—	$	7,733	$	—	$	7,733	$	—

	December 31, 2017								December 31, 2018
	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance		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	$	—	$	998,601	$	728,800	$	269,801	$	—
Marketable securities	48,006		48,006		—		—		54,250		44,243		10,007		—
Derivatives	1,769		—		1,769		—		15,071		—		15,071		—
Total	$	538,207	$	406,506	$	131,701	$	—	$	1,067,922	$	773,043	$	294,879	$	—
Liabilities:
Derivatives	$	21,308	$	—	$	21,308	$	—	$	5,316	$	—	$	5,316	$	—

	March 26, 2017
	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	628,895	$	370,084	$	258,811	$	—
Marketable securities	46,678		41,674		5,004		—
Derivatives	12,446		—		12,446		—
Total	$	688,019	$	411,758	$	276,261	$	—
Liabilities:
Derivatives	$	1,052	$	—	$	1,052	$	—



	April 1, 2018
	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	653,124	$	326,324	$	326,800	$	—
Marketable securities	49,402		49,402		—		—
Derivatives	3,613		—		3,613		—
Total	$	706,139	$	375,726	$	330,413	$	—
Liabilities:
Derivatives	$	22,850	$	—	$	22,850	$	—

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 $21.4 million, $20.2 million and $23.8 million ~~$19.6 million~~at March 31, 2019, December 31, 2018 and ~~$20.1 million at~~ April 1, 2018, ~~December 31, 2017 and March 26, 2017,~~ respectively, for which the fair value adjustment was ~~$8.3~~$9.3 million, ~~$9.0~~$9.7 million and ~~$6.3~~$8.3 million, 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 cash and cash equivalents and restricted 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 (in thousands):


	April 1, 2018				December 31, 2017				March 26, 2017				March 31, 2019				December 31, 2018				April 1, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value
Assets:
Finance receivables, net	$	7,195,908	$	7,126,442	$	7,021,549	$	6,965,086	$	7,225,210	$	7,146,122	$	7,520,418	$	7,438,592	$	7,304,334	$	7,221,931	$	7,195,908	$	7,126,442
Liabilities:
Unsecured commercial paper	$	1,036,976	$	1,036,976	$	1,273,482	$	1,273,482	$	953,357	$	953,357	$	1,192,925	$	1,192,925	$	1,135,810	$	1,135,810	$	1,036,976	$	1,036,976
Asset-backed U.S. commercial paper conduit facilities	$	281,311	$	281,311	$	279,457	$	279,457	$	286,205	$	286,205	$	526,947	$	526,947	$	582,717	$	582,717	$	281,311	$	281,311
Asset-backed Canadian commercial paper conduit facility	$	158,162	$	158,162	$	174,779	$	174,779	$	141,013	$	141,013	$	142,676	$	142,676	$	155,951	$	155,951	$	158,162	$	158,162
Medium-term notes	$	4,486,399	$	4,514,798	$	4,189,092	$	4,165,706	$	4,234,664	$	4,163,797	$	4,675,767	$	4,685,636	$	4,829,671	$	4,887,007	$	4,486,399	$	4,514,798
Senior unsecured notes	$	750,440	$	742,126	$	784,433	$	741,961	$	755,646	$	741,469	$	719,544	$	742,791	$	707,198	$	742,624	$	750,440	$	742,126
Asset-backed securitization debt	$	283,591	$	284,793	$	351,767	$	352,624	$	685,953	$	685,374	$	18,674	$	18,694	$	94,974	$	95,167	$	283,591	$	284,793

Finance Receivables, Net – 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 either are short-term or have interest rates that adjust with changes in market interest rates.

Debt – The carrying value of debt in the financial statements is generally amortized cost, net of discounts and debt issuance costs. The carrying value of unsecured commercial paper calculated using Level 2 inputs approximates fair value due to its short maturity. The carrying value of debt provided under the U.S. ~~conduit facilities~~Conduit Facilities and Canadian ~~conduit facility~~Conduit Facility calculated using Level 2 inputs approximates fair value since the interest rates charged under the facility 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 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).

~~13.~~15. Product Warranty and Recall Campaigns

The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except for Japan, where the Company currently provides a standard three-year limited warranty on all new motorcycles sold. In addition, the Company provides 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):


	Three months ended						Three months ended
	April 1, 2018			March 26, 2017			March 31, 2019			April 1, 2018
Balance, beginning of period	$	94,202		$	79,482		$	131,740		$	94,202
Warranties issued during the period	14,606			16,752			11,617			14,606
Settlements made during the period	(16,638		)	(19,333		)	(19,617		)	(16,638		)
Recalls and changes to pre-existing warranty liabilities	2,905			1,310			(1,353		)	2,905
Balance, end of period	$	95,075		$	78,211		$	122,387		$	95,075

The liability for recall campaigns was $~~32.3~~64.1 million, $~~35.3~~73.3 million and $~~10.3~~32.3 million as of ~~April 1, 2018~~March 31, 2019, December 31, ~~2017~~2018 and ~~March 26, 2017~~April 1, 2018, respectively. The Company recorded supplier recoveries within operating expenses separate from the amounts disclosed above of $28.0 million for the three months ended March 31, 2019.

~~14.~~16. Employee Benefit Plans

The Company has a defined benefit qualified pension plan and postretirement healthcare benefit plans that cover certain employees 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. Service cost is allocated among ~~selling,~~Selling, administrative and engineering expense, ~~cost~~Cost of goods sold and ~~inventory.~~ Inventory. Amounts capitalized in inventory are not significant. Non-service cost components of net periodic benefit cost are presented in ~~other~~Other income (expense), ~~net. Refer to Note 2 regarding the adoption of ASU 2017-07 for further discussion of the impact on~~ net ~~periodic benefit costs.~~. Components of net periodic benefit ~~costs~~cost were as follows (in thousands):


	Three months ended						Three months ended
	April 1, 2018			March 26, 2017			March 31, 2019			April 1, 2018
Pension and SERPA Benefits
Service cost	$	8,155		$	7,896		$	6,632		$	8,155
Interest cost	20,590			21,269			21,371			20,590
Expected return on plan assets	(36,891		)	(35,345		)	(35,581		)	(36,891		)
Amortization of unrecognized:
Prior service (credit) cost	(106		)	254
Prior service credit							(483		)	(106		)
Net loss	15,819			10,998			11,128			15,819
Curtailment loss	1,018			—			—			1,018
Net periodic benefit cost	$	8,585		$	5,072		$	3,067		$	8,585
Postretirement Healthcare Benefits
Service cost	$	1,812		$	1,875		$	1,184		$	1,812
Interest cost	2,897			3,412			2,938			2,897
Expected return on plan assets	(3,541		)	(3,156		)	(3,507		)	(3,541		)
Amortization of unrecognized:
Prior service credit	(460		)	(543		)	(595		)	(460		)
Net loss	454			815			69			454
Net periodic benefit cost	$	1,162		$	2,403		$	89		$	1,162

During the three months ended April 1, 2018, the qualified pension plan and certain postretirement healthcare plan assets and obligations were remeasured as a result of a curtailment of benefits related to the planned closure of the Company's motorcycle assembly plant in Kansas City, Missouri, discussed further in Note 4. As a result of the remeasurement, the Company recorded a benefit of $96.4 million before income taxes in other comprehensive income during the three months ended April 1, 2018.

There are no required or planned qualified pension plan contributions for ~~2018~~2019. The Company expects it will continue to make ongoing benefit payments under the SERPA and postretirement healthcare plans.

~~15.~~17. Commitments and Contingencies

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 Department of Justice (DOJ), on behalf of 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~~DOJ each filed separate response briefs. The Company ~~anticipates~~is awaiting the ~~court will make a~~court's decision on whether or not to finalize the Settlement, inand on February 8, 2019 the ~~following months.~~DOJ filed a status update reminding the court of the current status of the outstanding matter. The Company has an accrual associated with this matter which is included in ~~accrued~~Accrued liabilities in on the ~~Consolidated Balance Sheets,~~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. ~~Although the~~The Company ~~is not certain as to the full extent of the environmental contamination at the York facility, it~~ 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~~Other long-term liabilities in on the ~~Consolidated Balance Sheets.~~consolidated balance sheets. While ~~much of~~ the work on the RI/FS is now complete and the final remedy was proposed in late 2018, it ~~is still under agency review~~has not yet been approved, and given the uncertainty that exists concerning the nature and scope of additional environmental ~~investigation and~~ remediation that may ultimately be required under the ~~RI/FS that is finally~~ approved ~~or otherwise at the York facility,~~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.

~~National Highway Traffic Safety Administration Matters:~~

In July 2016, the National Highway Traffic Safety Administration (NHTSA) began an investigation into certain of the Company's motorcycles equipped with anti-lock braking systems (ABS). NHTSA’s investigation is in response to rider complaints related to brake failures and applies to model-year 2008-2013 Touring and model-year 2008-2017 V-ROD^®motorcycles. NHTSA noted that Harley-Davidson has a two-year brake fluid replacement interval that owners either are unaware of or ignore. During 2017, the Company estimated and recorded a $29.4 million accrual associated with the NHTSA matter. On January 30, 2018, the Company announced a voluntary recall which offers a free brake fluid flush for model-year

~~2008-2011 Touring and V-ROD~~^® motorcycles. In late April 2018, the Company received the closing resume from NHTSA which officially closes the investigation. The Company believes the accrued liability it has recorded will adequately cover the cost of the recall.

~~16.~~18. Accumulated Other Comprehensive Loss

The following tables set forth the changes in accumulated other comprehensive loss (AOCL) (in thousands):

Three months ended April 1, 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 income (loss) before reclassifications 6,915
—
(5,906 ) 96,374
97,383
Income tax benefit (expense) —
—
1,387
(22,629 ) (21,242 )
Net other comprehensive income (loss) before reclassifications 6,915
—
(4,519 ) 73,745
76,141
Reclassifications:
Realized (gains) losses - foreign currency contracts^(a)
—
—
6,709
—
6,709
Realized (gains) losses - commodity contracts^(a)
—
—
73
—
73
Realized (gains) losses - treasury rate locks^(b)
—
—
126
—
126
Prior service credits^(c)
—
—
—
(566 ) (566 )
Actuarial losses^(c)
—
—
—
16,273
16,273
Total reclassifications before tax —
—
6,908
15,707
22,615
Income tax expense —
—
(1,624 ) (3,687 ) (5,311 )
Net reclassifications —
—
5,284
12,020
17,304
Other comprehensive income 6,915
—
765
85,765
93,445
Balance, end of period $ (14,937 ) $ —
$ (16,489 ) $ (375,178 ) $ (406,604 )



	Three months ended March 31, 2019
	Foreign currency translation adjustments			Derivative financial instruments			Pension and postretirement benefit plans			Total
Balance, beginning of period	$	(49,608	)	$	1,785		$	(581,861	)	$	(629,684	)
Other comprehensive income before reclassifications	606			1,177			—			1,783
Income tax expense	(275		)	(314		)	—			(589		)
Net other comprehensive income before reclassifications	331			863			—			1,194
Reclassifications:
Realized gains - foreign currency contracts^(a)	—			(2,453		)	—			(2,453		)
Realized losses - commodity contracts^(a)	—			10			—			10
Realized losses - treasury rate locks^(b)	—			122			—			122
Realized losses - interest rate swap^(b)	—			606			—			606
Prior service credits^(c)	—			—			(1,078		)	(1,078		)
Actuarial losses^(c)	—			—			11,197			11,197
Total reclassifications before tax	—			(1,715		)	10,119			8,404
Income tax benefit (expense)	—			411			(2,376		)	(1,965		)
Net reclassifications	—			(1,304		)	7,743			6,439
Other comprehensive income (loss)	331			(441		)	7,743			7,633
Balance, end of period	$	(49,277	)	$	1,344		$	(574,118	)	$	(622,051	)


	Three months ended April 1, 2018
	Foreign currency translation adjustments			Derivative financial instruments			Pension and postretirement benefit plans			Total
Balance, beginning of period	$	(21,852	)	$	(17,254	)	$	(460,943	)	$	(500,049	)
Other comprehensive income (loss) before reclassifications	6,915			(5,906		)	96,374			97,383
Income tax benefit (expense)	—			1,387			(22,629		)	(21,242		)
Net other comprehensive income (loss) before reclassifications	6,915			(4,519		)	73,745			76,141
Reclassifications:
Realized losses - foreign currency contracts^(a)	—			6,709			—			6,709
Realized losses - commodity contracts^(a)	—			73			—			73
Realized losses - treasury rate locks^(b)	—			126			—			126
Prior service credits^(c)	—			—			(566		)	(566		)
Actuarial losses^(c)	—			—			16,273			16,273
Total reclassifications before tax	—			6,908			15,707			22,615
Income tax expense	—			(1,624		)	(3,687		)	(5,311		)
Net reclassifications	—			5,284			12,020			17,304
Other comprehensive income	6,915			765			85,765			93,445
Balance, end of period	$	(14,937	)	$	(16,489	)	$	(375,178	)	$	(406,604	)

Three months ended March 26, 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 15,633
(16 ) (11,903 ) —
3,714
Income tax (expense) benefit (76 ) 6
4,409
—
4,339
Net other comprehensive income (loss) before reclassifications 15,557
(10 ) (7,494 ) —
8,053
Reclassifications:
Realized (gains) losses - foreign currency contracts^(a)
—
—
(2,516 ) —
(2,516 )
Realized (gains) losses - commodity contracts^(a)
—
—
(48 ) —
(48 )
Realized (gains) losses - treasury rate locks^(b)
—
—
90
—
90
Prior service credits^(c)
—
—
—
(289 ) (289 )
Actuarial losses^(c)
—
—
—
11,813
11,813
Total reclassifications before tax —
—
(2,474 ) 11,524
9,050
Income tax benefit (expense) —
—
916
(4,268 ) (3,352 )
Net reclassifications —
—
(1,558 ) 7,256
5,698
Other comprehensive income (loss) 15,557
(10 ) (9,052 ) 7,256
13,751
Balance, end of period $ (52,575 ) $ (1,204 ) $ 3,472
$ (501,323 ) $ (551,630 )


(a)	Amounts reclassified to net income are included in Motorcycles and Related Products cost of goods ~~sold.~~sold


(b)	Amounts reclassified to net income are included in Interest expense and Financial Services interest ~~expense.~~expense


(c)	Amounts reclassified are included in the computation of net periodic benefit ~~cost. See~~cost; see Note 1416 for information related to pension and postretirement benefit ~~plans.~~plans

~~17.~~19. Business Segments

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 operates in two segments: the Motorcycles &and Related Products (Motorcycles) segment and the Financial Services segment. 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. Selected segment information is set forth below (in thousands):


	Three months ended				Three months ended
	April 1, 2018		March 26, 2017		March 31, 2019		April 1, 2018
Motorcycles net revenue	$	1,363,947	$	1,328,711	$	1,195,637	$	1,363,947
Gross profit	473,773		474,823		347,439		473,773
Selling, administrative and engineering expense	254,093		238,277		225,428		254,093
Restructuring expense	46,842		—		13,630		46,842
Operating income from Motorcycles	172,838		236,546		108,381		172,838
Financial Services revenue	178,174		173,221		188,743		178,174
Financial Services expense	114,595		120,585		130,012		114,595
Operating income from Financial Services	63,579		52,636		58,731		63,579
Operating income	$	236,417	$	289,182	$	167,112	$	236,417

As discussed in Note 2, 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 plan costs in non-operating income on a prospective and retrospective basis. As a result, operating income from Motorcycles excludes these costs for all periods presented.

~~18.~~20. Supplemental Consolidating Data

The supplemental consolidating data for the periods noted is presented for informational purposes. The supplemental consolidating data may be different than segment information presented elsewhere due to the allocation of intercompany eliminations to the reportable segments. All supplemental data is presented in thousands.


	Three months ended April 1, 2018									Three months ended March 31, 2019
	HDMC Entities		HDFS Entities		Eliminations			Consolidated		HDMC Entities		HDFS Entities		Eliminations			Consolidated
Revenue:
Motorcycles and Related Products	$	1,366,246	$	—	$	(2,299	)	$	1,363,947	$	1,200,009	$	—	$	(4,372	)	$	1,195,637
Financial Services	—		178,460		(286		)	178,174		—		186,753		1,990			188,743
Total revenue	1,366,246		178,460		(2,585		)	1,542,121		1,200,009		186,753		(2,382		)	1,384,380
Costs and expenses:
Motorcycles and Related Products cost of goods sold	890,174		—		—			890,174		848,703		—		(505		)	848,198
Financial Services interest expense	—		48,450		—			48,450		—		52,324		—			52,324
Financial Services provision for credit losses	—		30,052		—			30,052		—		34,491		—			34,491
Selling, administrative and engineering expense	254,401		38,391		(2,606		)	290,186		227,992		42,588		(1,955		)	268,625
Restructuring expense	46,842		—		—			46,842		13,630		—		—			13,630
Total costs and expenses	1,191,417		116,893		(2,606		)	1,305,704		1,090,325		129,403		(2,460		)	1,217,268
Operating income	174,829		61,567		21			236,417		109,684		57,350		78			167,112
Other income (expense), net	220		—		—			220		4,660		—		—			4,660
Investment income	111,203		—		(110,000		)	1,203		51,358		—		(45,000		)	6,358
Interest expense	7,690		—		—			7,690		7,731		—		—			7,731
Income before provision for income taxes	278,562		61,567		(109,979		)	230,150		157,971		57,350		(44,922		)	170,399
Provision for income taxes	40,233		15,154		—			55,387		28,557		13,897		—			42,454
Net income	$	238,329	$	46,413	$	(109,979	)	$	174,763	$	129,414	$	43,453	$	(44,922	)	$	127,945


	Three months ended March 26, 2017									Three months ended April 1, 2018
	HDMC Entities		HDFS Entities		Eliminations			Consolidated		HDMC Entities		HDFS Entities		Eliminations			Consolidated
Revenue:
Motorcycles and Related Products	$	1,330,618	$	—	$	(1,907	)	$	1,328,711	$	1,366,246	$	—	$	(2,299	)	$	1,363,947
Financial Services	—		173,557		(336		)	173,221		—		178,460		(286		)	178,174
Total revenue	1,330,618		173,557		(2,243		)	1,501,932		1,366,246		178,460		(2,585		)	1,542,121
Costs and expenses:
Motorcycles and Related Products cost of goods sold	853,888		—		—			853,888		890,174		—		—			890,174
Financial Services interest expense	—		43,289		—			43,289		—		48,450		—			48,450
Financial Services provision for credit losses	—		43,589		—			43,589		—		30,052		—			30,052
Selling, administrative and engineering expense	238,630		35,614		(2,260		)	271,984		254,401		38,391		(2,606		)	290,186
Restructuring expense										46,842		—		—			46,842
Total costs and expenses	1,092,518		122,492		(2,260		)	1,212,750		1,191,417		116,893		(2,606		)	1,305,704
Operating income	238,100		51,065		17			289,182		174,829		61,567		21			236,417
Other income (expense), net	2,296		—		—			2,296		220		—		—			220
Investment income	106,879		—		(106,000		)	879		111,203		—		(110,000		)	1,203
Interest expense	7,673		—		—			7,673		7,690		—		—			7,690
Income before provision for income taxes	339,602		51,065		(105,983		)	284,684		278,562		61,567		(109,979		)	230,150
Provision for income taxes	79,157		19,158		—			98,315		40,233		15,154		—			55,387
Net income	$	260,445	$	31,907	$	(105,983	)	$	186,369	$	238,329	$	46,413	$	(109,979	)	$	174,763


	April 1, 2018									March 31, 2019
	HDMC Entities		HDFS Entities		Eliminations			Consolidated		HDMC Entities		HDFS Entities		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	403,009	$	350,508	$	—		$	753,517	$	384,390	$	365,210	$	—		$	749,600
Marketable securities										10,003		—		—			10,003
Accounts receivable, net	686,265		—		(331,158		)	355,107		666,782		—		(313,241		)	353,541
Finance receivables, net	—		2,341,918		—			2,341,918		—		2,443,899		—			2,443,899
Inventories	564,571		—		—			564,571		595,806		—		—			595,806
Restricted cash	—		54,569		—			54,569		—		43,471		—			43,471
Other current assets	108,613		44,724		(2,865		)	150,472		137,167		40,594		—			177,761
Total current assets	1,762,458		2,791,719		(334,023		)	4,220,154		1,794,148		2,893,174		(313,241		)	4,374,081
Finance receivables, net	—		4,784,524		—			4,784,524		—		4,994,693		—			4,994,693
Property, plant and equipment, net	887,522		47,123		—			934,645		820,634		55,369					876,003
Prepaid pension costs	122,230		—		—			122,230
Goodwill	56,524		—		—			56,524		64,131		—					64,131
Deferred income taxes	36,140		42,543		(1,059		)	77,624		96,500		37,487		(999		)	132,988
Lease assets										48,513		6,792		—			55,305
Other long-term assets	145,344		23,514		(86,938		)	81,920		154,687		19,149		(90,424		)	83,412
	$	3,010,218	$	7,689,423	$	(422,020	)	$	10,277,621	$	2,978,613	$	8,006,664	$	(404,664	)	$	10,580,613
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	297,162	$	353,036	$	(331,158	)	$	319,040	$	351,831	$	342,328	$	(313,241	)	$	380,918
Accrued liabilities	462,279		106,149		(2,020		)	566,408		544,560		98,778		833			644,171
Short-term debt	—		1,036,976		—			1,036,976		—		1,192,925		—			1,192,925
Current portion of long-term debt, net	—		1,872,679		—			1,872,679		—		1,372,050		—			1,372,050
Total current liabilities	759,441		3,368,840		(333,178		)	3,795,103		896,391		3,006,081		(312,408		)	3,590,064
Long-term debt, net	742,126		3,366,385		—			4,108,511		742,791		4,001,903		—			4,744,694
Lease liabilities										32,520		6,996		—			39,516
Pension liability	54,921		—		—			54,921		98,862		—		—			98,862
Postretirement healthcare liability	113,031		—		—			113,031		93,897		—		—			93,897
Other long-term liabilities	171,389		35,899		2,818			210,106		174,150		39,070		2,749			215,969
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 17)
Shareholders’ equity	1,169,310		918,299		(91,660		)	1,995,949		940,002		952,614		(95,005		)	1,797,611
	$	3,010,218	$	7,689,423	$	(422,020	)	$	10,277,621	$	2,978,613	$	8,006,664	$	(404,664	)	$	10,580,613


	December 31, 2017									December 31, 2018
	HDMC Entities		HDFS Entities		Eliminations			Consolidated		HDMC Entities		HDFS Entities		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	338,186	$	349,335	$	—		$	687,521	$	544,548	$	659,218	$	—		$	1,203,766
Marketable securities										10,007		—		—			10,007
Accounts receivable, net	483,709		—		(153,723		)	329,986		425,727		—		(119,253		)	306,474
Finance receivables, net	—		2,105,662		—			2,105,662		—		2,214,424		—			2,214,424
Inventories	538,202		—		—			538,202		556,128		—		—			556,128
Restricted cash	—		47,518		—			47,518		—		49,275		—			49,275
Other current assets	132,999		48,521		(5,667		)	175,853		91,172		59,070		(5,874		)	144,368
Total current assets	1,493,096		2,551,036		(159,390		)	3,884,742		1,627,582		2,981,987		(125,127		)	4,484,442
Finance receivables, net	—		4,859,424		—			4,859,424		—		5,007,507		—			5,007,507
Property, plant and equipment, net	922,280		45,501		—			967,781		847,176		56,956		—			904,132
Prepaid pension costs	19,816		—		—			19,816
Goodwill	55,947		—		—			55,947		55,048		—		—			55,048
Deferred income taxes	66,877		43,515		(1,319		)	109,073		105,388		37,603		(1,527		)	141,464
Other long-term assets	138,344		23,593		(86,048		)	75,889		144,122		18,680		(89,731		)	73,071
	$	2,696,360	$	7,523,069	$	(246,757	)	$	9,972,672	$	2,779,316	$	8,102,733	$	(216,385	)	$	10,665,664
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	214,263	$	167,057	$	(153,723	)	$	227,597	$	258,587	$	145,527	$	(119,253	)	$	284,861
Accrued liabilities	444,028		90,942		(5,148		)	529,822		496,643		110,063		(5,576		)	601,130
Short-term debt	—		1,273,482		—			1,273,482		—		1,135,810		—			1,135,810
Current portion of long-term debt, net	—		1,127,269		—			1,127,269		—		1,575,799		—			1,575,799
Total current liabilities	658,291		2,658,750		(158,871		)	3,158,170		755,230		2,967,199		(124,829		)	3,597,600
Long-term debt, net	741,961		3,845,297		—			4,587,258		742,624		4,145,043		—			4,887,667
Pension liability	54,606		—		—			54,606		107,776		—		—			107,776
Postretirement healthcare liability	118,753		—		—			118,753		94,453		—		—			94,453
Other long-term liabilities	171,200		35,503		2,905			209,608		164,243		37,142		2,834			204,219
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 17)
Shareholders’ equity	951,549		983,519		(90,791		)	1,844,277		914,990		953,349		(94,390		)	1,773,949
	$	2,696,360	$	7,523,069	$	(246,757	)	$	9,972,672	$	2,779,316	$	8,102,733	$	(216,385	)	$	10,665,664


	March 26, 2017									April 1, 2018
	HDMC Entities		HDFS Entities		Eliminations			Consolidated		HDMC Entities		HDFS Entities		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	479,439	$	360,261	$	—		$	839,700	$	403,009	$	350,508	$	—		$	753,517
Marketable securities	5,004		—		—			5,004
Accounts receivable, net	740,231		—		(404,653		)	335,578		686,265		—		(331,158		)	355,107
Finance receivables, net	—		2,354,095		—			2,354,095		—		2,341,918		—			2,341,918
Inventories	485,476		—		—			485,476		564,571		—		—			564,571
Restricted cash	—		75,705		—			75,705		—		54,569		—			54,569
Other current assets	102,298		40,064		—			142,362		108,613		44,724		(2,865		)	150,472
Total current assets	1,812,448		2,830,125		(404,653		)	4,237,920		1,762,458		2,791,719		(334,023		)	4,220,154
Finance receivables, net	—		4,792,027		—			4,792,027		—		4,784,524		—			4,784,524
Property, plant and equipment, net	913,462		39,582		—			953,044		887,522		47,123		—			934,645
Prepaid pension costs										122,230		—		—			122,230
Goodwill	53,967		—		—			53,967		56,524		—		—			56,524
Deferred income taxes	98,291		68,306		(1,401		)	165,196		36,140		42,543		(1,059		)	77,624
Other long-term assets	137,712		25,790		(83,801		)	79,701		145,344		23,514		(86,938		)	81,920
	$	3,015,880	$	7,755,830	$	(489,855	)	$	10,281,855	$	3,010,218	$	7,689,423	$	(422,020	)	$	10,277,621
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	333,227	$	430,110	$	(404,653	)	$	358,684	$	297,162	$	353,036	$	(331,158	)	$	319,040
Accrued liabilities	442,181		105,060		396			547,637		462,279		106,149		(2,020		)	566,408
Short-term debt	—		953,357		—			953,357		—		1,036,976		—			1,036,976
Current portion of long-term debt, net	—		697,061		—			697,061		—		1,872,679		—			1,872,679
Total current liabilities	775,408		2,185,588		(404,257		)	2,556,739		759,441		3,368,840		(333,178		)	3,795,103
Long-term debt, net	741,469		4,579,328		—			5,320,797		742,126		3,366,385		—			4,108,511
Pension liability	52,559		—		—			52,559		54,921		—		—			54,921
Postretirement healthcare liability	171,143		—		—			171,143		113,031		—		—			113,031
Other long-term liabilities	152,974		31,506		2,728			187,208		171,389		35,899		2,818			210,106
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 17)
Shareholders’ equity	1,122,327		959,408		(88,326		)	1,993,409		1,169,310		918,299		(91,660		)	1,995,949
	$	3,015,880	$	7,755,830	$	(489,855	)	$	10,281,855	$	3,010,218	$	7,689,423	$	(422,020	)	$	10,277,621



	Three months ended March 31, 2019
	HDMC Entities			HDFS Entities		Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	129,414		$	43,453	$	(44,922	)	$	127,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles	62,187			2,185		—			64,372
Amortization of deferred loan origination costs	—			18,968		—			18,968
Amortization of financing origination fees	167			2,027		—			2,194
Provision for long-term employee benefits	3,156			—		—			3,156
Employee benefit plan contributions and payments	(2,507		)	—		—			(2,507		)
Stock compensation expense	5,845			692		—			6,537
Net change in wholesale finance receivables related to sales	—			—		(237,569		)	(237,569		)
Provision for credit losses	—			34,491		—			34,491
Deferred income taxes	6,195			314		(528		)	5,981
Other, net	1,886			922		(77		)	2,731
Changes in current assets and liabilities:
Accounts receivable, net	(243,734		)	—		193,988			(49,746		)
Finance receivables - accrued interest and other	—			92		—			92
Inventories	(40,600		)	—		—			(40,600		)
Accounts payable and accrued liabilities	122,462			180,980		(179,467		)	123,975
Derivative instruments	834			33		—			867
Other	(41,339		)	18,997		(5,874		)	(28,216		)
Total adjustments	(125,448		)	259,701		(229,527		)	(95,274		)
Net cash provided by operating activities	3,966			303,154		(274,449		)	32,671



	Three months ended March 31, 2019
	HDMC Entities			HDFS Entities			Eliminations			Consolidated
Cash flows from investing activities:
Capital expenditures	(34,657		)	(598		)	—			(35,255		)
Origination of finance receivables	—			(1,691,416		)	840,044			(851,372		)
Collections on finance receivables	—			1,426,419			(610,595		)	815,824
Acquisition of business	(7,000		)	—			—			(7,000		)
Other	603			—			—			603
Net cash used by investing activities	(41,054		)	(265,595		)	229,449			(77,200		)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	—			546,655			—			546,655
Repayments of medium-term notes	—			(750,000		)	—			(750,000		)
Repayments of securitization debt	—			(76,505		)	—			(76,505		)
Repayments of asset-backed commercial paper	—			(72,401		)	—			(72,401		)
Net increase in credit facilities and unsecured commercial paper	—			58,527			—			58,527
Dividends paid	(60,859		)	(45,000		)	45,000			(60,859		)
Purchase of common stock for treasury	(61,712		)	—			—			(61,712		)
Issuance of common stock under employee stock option plans	616			—			—			616
Net cash used by financing activities	(121,955		)	(338,724		)	45,000			(415,679		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,115		)	706			—			(409		)
Net decrease in cash, cash equivalents and restricted cash	$	(160,158	)	$	(300,459	)	$	—		$	(460,617	)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash—beginning of period	$	544,548		$	715,200		$	—		$	1,259,748
Net decrease in cash, cash equivalents and restricted cash	(160,158		)	(300,459		)	—			(460,617		)
Cash, cash equivalents and restricted cash—end of period	$	384,390		$	414,741		$	—		$	799,131



	Three months ended April 1, 2018
	HDMC Entities			HDFS Entities		Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	238,329		$	46,413	$	(109,979	)	$	174,763
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles	61,405			1,068		—			62,473
Amortization of deferred loan origination costs	—			20,116		—			20,116
Amortization of financing origination fees	165			1,863		—			2,028
Provision for long-term employee benefits	9,747			—		—			9,747
Employee benefit plan contributions and payments	(5,486		)	—		—			(5,486		)
Stock compensation expense	7,072			890		—			7,962
Net change in wholesale finance receivables related to sales	—			—		(239,902		)	(239,902		)
Provision for credit losses	—			30,052		—			30,052
Deferred income taxes	2,469			979		(260		)	3,188
Other, net	(2,081		)	200		(21		)	(1,902		)
Changes in current assets and liabilities:
Accounts receivable, net	(195,123		)	—		177,435			(17,688		)
Finance receivables - accrued interest and other	—			4,758		—			4,758
Inventories	(21,542		)	—		—			(21,542		)
Accounts payable and accrued liabilities	121,833			201,056		(173,966		)	148,923
Derivative instruments	666			36		—			702
Other	9,935			6,269		(2,802		)	13,402
Total adjustments	(10,940		)	267,287		(239,516		)	16,831
Net cash provided by operating activities	227,389			313,700		(349,495		)	191,594



	Three months ended April 1, 2018
	HDMC Entities			HDFS Entities			Eliminations			Consolidated
Cash flows from investing activities:
Capital expenditures	(25,746		)	(2,690		)	—			(28,436		)
Origination of finance receivables	—			(1,786,309		)	988,242			(798,067		)
Collections on finance receivables	—			1,558,547			(748,747		)	809,800
Other	(4,948		)	—			—			(4,948		)
Net cash used by investing activities	(30,694		)	(230,452		)	239,495			(21,651		)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	—			347,553			—			347,553
Repayments of securitization debt	—			(67,955		)	—			(67,955		)
Borrowings of asset-backed commercial paper	—			35,504			—			35,504
Repayments of asset-backed commercial paper	—			(45,907		)	—			(45,907		)
Net decrease in credit facilities and unsecured commercial paper	—			(234,145		)	—			(234,145		)
Dividends paid	(62,731		)	(110,000		)	110,000			(62,731		)
Purchase of common stock for treasury	(72,968		)	—			—			(72,968		)
Issuance of common stock under employee stock option plans	1,719			—			—			1,719
Net cash used by financing activities	(133,980		)	(74,950		)	110,000			(98,930		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	2,108			(74		)	—			2,034
Net increase in cash, cash equivalents and restricted cash	$	64,823		$	8,224		$	—		$	73,047
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	64,823			8,224			—			73,047
Cash, cash equivalents and restricted cash—end of period	$	403,009		$	416,248		$	—		$	819,257

Three months ended March 26, 2017
HDMC Entities HDFS Entities Eliminations Consolidated
Cash flows from operating activities:
Net income $ 260,445
$ 31,907
$ (105,983 ) $ 186,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles 53,241
1,659
—
54,900
Amortization of deferred loan origination costs —
20,078
—
20,078
Amortization of financing origination fees 163
1,913
—
2,076
Provision for long-term employee benefits 7,475
—
—
7,475
Employee benefit plan contributions and payments (29,957 ) —
—
(29,957 )
Stock compensation expense 6,317
675
—
6,992
Net change in wholesale finance receivables related to sales —
—
(317,087 ) (317,087 )
Provision for credit losses —
43,589
—
43,589
Deferred income taxes 6,728
(2,230 ) (509 ) 3,989
Other, net (6,728 ) 1,411
(17 ) (5,334 )
Changes in current assets and liabilities:
Accounts receivable, net (278,803 ) —
239,573
(39,230 )
Finance receivables - accrued interest and other —
5,142
—
5,142
Inventories 23,476
—
—
23,476
Accounts payable and accrued liabilities 154,372
263,011
(234,455 ) 182,928
Derivative instruments 3,120
—
—
3,120
Other 5,537
5,925
(49 ) 11,413
Total adjustments (55,059 ) 341,173
(312,544 ) (26,430 )
Net cash provided by operating activities 205,386
373,080
(418,527 ) 159,939
Cash flows from investing activities:
Capital expenditures (21,686 ) (2,281 ) —
(23,967 )
Origination of finance receivables —
(1,932,599 ) 1,087,907
(844,692 )
Collections on finance receivables —
1,556,534
(775,380 ) 781,154
Other 52
—
—
52
Net cash used by investing activities (21,634 ) (378,346 ) 312,527
(87,453 )
Cash flows from financing activities:
Proceeds from issuance of medium-term notes —
497,406
—
497,406
Repayments of medium-term notes —
(400,000 ) —
(400,000 )
Repayments of securitization debt —
(111,359 ) —
(111,359 )
Borrowings of asset-backed commercial paper —
305,209
—
305,209
Repayments of asset-backed commercial paper —
(29,383 ) —
(29,383 )
Net decrease in credit facilities and unsecured commercial paper —
(101,702 ) —
(101,702 )
Dividends paid (64,611 ) (106,000 ) 106,000
(64,611 )
Purchase of common stock for treasury (79,753 ) —
—
(79,753 )
Issuance of common stock under employee stock option plans 7,336
—
—
7,336
Net cash (used) provided by financing activities (137,028 ) 54,171
106,000
23,143
Effect of exchange rate changes on cash, cash equivalents and restricted cash 7,175
44
—
7,219
Net increase in cash, cash equivalents and restricted cash $ 53,899
$ 48,949
$ —
$ 102,848
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash—beginning of period $ 425,540
$ 401,591
$ —
$ 827,131
Net increase in cash, cash equivalents and restricted cash 53,899
48,949
—
102,848
Cash, cash equivalents and restricted cash—end of period $ 479,439
$ 450,540
$ —
$ 929,979

Item 2. 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 segments: Motorcycles &and Related Products (Motorcycles) 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.

The Motorcycles segment consists of HDMC which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles as well as a line of motorcycle parts, accessories, general merchandise and related services. The Company's products are sold to retail customers through a network of independent dealers. The Company conducts business on a global basis, with sales in the United States, Canada, Latin America, Europe/Middle East/Africa (EMEA) and the Asia Pacific region.

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 United States and Canada.

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.

(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” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance 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 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 “Cautionary Statements” and in Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. 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 the Overview and Outlook ~~section~~sections are only made as of April ~~24, 2018,~~23, 2019 and the remaining forward-looking statements in this report are made as of the date of the filing of this report (May ~~10, 2018)~~9, 2019), 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 was ~~$174.8~~$127.9 million, or ~~$1.03~~$0.80 per diluted share, for the first quarter of ~~2018~~2019 compared to ~~$186.4~~$174.8 million, or ~~$1.05~~$1.03 per diluted share, in the first quarter of ~~2017.~~2018. Operating income from the Motorcycles segment decreased ~~$63.7~~$64.5 million ~~or 26.9%~~ compared to last year’s first quarter ~~primarily due to restructuring expenses of $46.8 million~~ and ~~higher selling, administrative~~was impacted by lower shipments, unfavorable mix and ~~engineering~~incremental tariffs, partially offset by lower operating expenses. Motorcycle segment revenue in the first quarter of 2018 was up over the prior year, despite lower motorcycle shipments, due to favorable product mix, favorable foreign currency exchange rates and model-year price increases. Operating income from the Financial Services segment in the first quarter of ~~2018~~2019 was ~~$63.6~~$58.7 million, ~~up 20.8%~~down 7.6% compared to the year-ago quarter ~~due primarily to~~on a ~~lower~~higher provision for credit ~~losses.~~

losses and higher operating expenses.

Worldwide dealer retail sales of new Harley-Davidson motorcycles in the first quarter of ~~2018~~2019 were down ~~7.2%~~3.8% compared to the first quarter of ~~2017. In the U.S., retail~~2018. Retail sales were down ~~12.0%, while retail sales~~4.2% in the U.S. and down 3.3% in international markets ~~were up 0.2%,~~ compared to the prior year first quarter. InRetail sales results in the first quarter improved significantly from recent trends despite limited availability of ~~2018, U.S. retail sales continued to be adversely impacted by very weak U.S. industry sales. In international markets, retail sales grew behind strong performance in Europe and Latin America.~~

Street motorcycles. During the first quarter of 2019, retail sales of Street motorcycles were adversely impacted by limited availability following a recent recall. Excluding retail sales of Street motorcycles from both 2018 ~~the Company continued to focus on its 2027 objectives of building two million new riders~~and 2019, worldwide retail sales were up 0.4% in the ~~U.S., growing~~first quarter of 2019 compared to the same period last year. Retail sales of Street motorcycles resumed in late March 2019.

The Company was encouraged by first quarter retail sales performance, but remains cautious as it moves into the height of its ~~international~~selling season. The Company expects its business to ~~50 percent of annual volume, launching 100 new high impact motorcycles and doing so profitably and sustainably. In addition, considering the prolonged softness~~remain under pressure in 2019 driven by continuing challenges in the U.S. ~~industry~~motorcycle industry. The Company will continue to aggressively manage supply in line with demand and ~~given what~~execute marketing efforts to encourage trial, create new riders and increase conversion to sale. In addition, the Company ~~believes is untapped potential in international markets and in certain high-growth spaces globally,~~continues work to accelerate its strategy to build the ~~Company is crafting strategy accelerants to deliver value~~next generation of Harley-Davidson riders through 2022 through its More Roads to Harley-Davidson (More Roads) plan.

Finally, unionized workers at the Company’s operations in the Milwaukee area and ~~beyond.~~Tomahawk, Wisconsin ratified new five-year labor agreements in April 2019. The Company ~~plans~~believes the new contracts will enable it to ~~leverage~~compete in a challenging business environment and advance its ~~core business more fully and expand in new directions~~strategy to ~~accelerate value creation as it pursues its long-term objectives. The~~

~~Company is currently refining its plans and, in~~build the ~~summer~~next generation of ~~2018, intends to reveal significant additional steps to improve performance and value creation through 2022 and beyond.~~riders globally.

Outlook⁽¹⁾

On April ~~24, 2018,~~23, 2019, the Company provided the following information concerning its expectations for the ~~Company for 2018:~~remainder of 2019:

Motorcycles and Related Products Segment - Full Year

The Company ~~continues~~expects the U.S. industry to ~~expect~~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, the Company expects to ship ~~231,000 to 236,000~~between 217,000 and 222,000 motorcycles to dealers ~~worldwide~~ in ~~2018,~~2019 which is down approximately 2%3% to 4%5% from ~~2017.~~2018. The ~~Company's shipment expectation assumes that~~Company also expects year-end U.S. dealer ~~retail sales will~~inventory of new motorcycles to be down ~~partially offset by growth in international retail sales as~~ compared to ~~the prior year.~~ 2018.

The Company expects ~~2018 year-end U.S. retail inventory to be flat to 2017 and flat to up in international markets as it continues to add new dealers.~~

~~Operating income~~Motorcycles segment gross margin as a percent of revenue ~~for the Motorcycles segment is expected~~ to be ~~approximately 9.5%~~lower than 2018 driven by a significant increase in the impact of incremental tariffs, lower shipment volumes and unfavorable product mix, partially offset by aggressive cost reductions, including the benefit of $25 million to ~~10.5% for~~$30 million of savings from the ~~full year 2018. This reduction of approximately 2 to 3 percentage points compared to 2017, is primarily due to expected manufacturing optimization plan costs of $120 to $140 million.~~Company's Manufacturing Optimization plan. Refer to ~~"Manufacturing Optimization~~"Restructuring Plan Costs and Savings" below for further ~~information.~~information regarding the Manufacturing Optimization Plan.

Gross margin as a percent of revenue in 2018 is expected to benefit from pricing on model-year 2018 and 2019 motorcycles, a more favorable foreign currency exchange environment throughout the year and positive mix. However, the Company expects these positive impacts to be more than offset by rising steel and aluminum costs and increased manufacturing expense. Recently announced U.S. tariffs may also put additional pressure on the Company's steel and aluminum costs for the remainder of 2018; however, based on its current estimates of these incremental costs, the Company expects it will be able to mitigate these costs. Manufacturing expense is expected to be higher than in 2017, due to $20 to $25 million of temporary inefficiencies related to the manufacturing optimization plan and higher depreciation.

~~The Company continues to expect selling, administrative and engineering expense to be higher in 2018 compared to 2017, but largely flat to 2017 when expressed as a percent of revenue.~~ The Company expects selling, administrative and engineering ~~expense to be up behind increased investments in marketing and product development as the Company works to grow ridership globally.~~

~~Given strong first quarter 2018 results, the Company now expects operating income~~expenses for the ~~Financial Services~~Motorcycles segment to be ~~flat to down modestly~~lower in ~~2018~~2019 behind aggressive cost management and lower recall costs.

Incremental tariffs include incremental European Union and China tariffs imposed on the Company's products shipped from the U.S., as ~~compared to 2017. The~~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 ~~continues to~~does expect ~~2018 results~~higher metals cost which are included in the 2019 gross margin guidance above.

As previously disclosed, the Company expects the impact of incremental tariff costs to be ~~impacted by lower net interest income offset by a lower provision for credit losses.~~

~~As described~~approximately $100 million to $120 million in ~~Note 2 of~~2019. While the ~~Notes~~Company's preference has always been to serve the ~~Financial Statements,~~EU market from its U.S. manufacturing operations, the Company ~~adopted ASU 2017-07 in 2018 which requires the Company~~plans to record the non-service cost components of net periodic retirement plan costs in non-operating income and to recast prior periods to reflect the new classification. The Company expects 2018 full year non-operating income related to net periodic retirement plan costs of approximately $2 million in 2018 compared to $9.2 million in 2017. The reduction is due to an increase in the amortization of actuarial losses following the 2018 first-quarter remeasurement of the Company's qualified pension plan. The remeasurement was required as a result of the curtailment of qualified pension plan benefits associated with the manufacturing optimization plan.

~~The Company continues to expect its full year effective tax rate will be approximately 23.5% to 25.0%, down approximately 10 percentage points from the rate that would have been expected excluding~~mitigate the impact of the ~~2017 Tax Cuts~~incremental European Union and ~~Jobs Act (2017 Tax Act). This guidance excludes~~China tariffs by the ~~effect~~end of ~~potential future adjustments associated~~2019 by serving those markets with ~~revisions to the tax expense recorded in the fourth quarter of 2017 related to the enactment of the 2017 Tax Act, other new tax legislation or audit settlements. The Company continues to regard~~motorcycles from its income tax estimates related to the 2017 Tax Act as provisional under SAB 118. The Company believes future guidance, interpretations and pronouncements will add clarity to the numerous aspects of the 2017 Tax Act that may impact the Company which may result in revisions to the Company’s provisional estimates.Thailand facility.

The Company ~~continues~~is pursuing regulatory approval in the European Union to ~~estimate capital expenditures for 2018~~that end; however, there is material risk that regulatory approval will not be granted. 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.

For 2019, the Motorcycles segment operating margin as a percent of revenue is expected to be between ~~$250~~8.0% and 9.0%. Based on its current plans, the Company expects Motorcycles segment operating income in 2020 to improve by approximately $170 to $200 million compared to 2019. This expectation assumes that the Company will complete its Manufacturing Optimization Plan and ~~$270~~successfully execute its plan to mitigate the impact of incremental tariffs by the end of 2019.

Motorcycles and Related Products Segment - Second Quarter

In the second quarter of 2019, the Company expects to ship between 65,500 and 70,500 motorcycles, which is down approximately 3% to 10% compared to the second quarter of 2018. Motorcycles segment operating margin as a percent of revenue is expected to be down approximately 4 percentage points compared to the second quarter of 2018 driven in part by the impact of incremental tariffs, lower planned shipments and unfavorable mix.

Financial Services Segment

The Company expects Financial Services segment operating income in 2019 to be down compared to 2018 driven by a higher cost of debt and higher depreciation associated with its 2018 investment in a new loan management system which went into service in January 2019.

Harley-Davidson, Inc.

Capital expenditures in 2019 are expected to be $225 million to $245 million, which includes approximately ~~$50~~$20 million to support the ~~manufacturing optimization plan.~~Manufacturing Optimization Plan. The Company anticipates it will have the ability to fund all capital expenditures in ~~2018~~2019 with cash flows generated by operations.

~~In the second quarter of 2018, the~~The Company expects its 2019 full year effective tax rate will be approximately 24% to ~~ship approximately 67,500 to 72,500 motorcycles, which is down 11% to 18% compared to 2017. Given actual 2018 first-quarter shipments and~~25%. This guidance excludes the Company's expectations for shipments in the second quarter, first-half shipments in 2018 are expected to be down 11% to 14% compared to 2017. Consequently, to achieve the 2018 full-year shipment guidance, the Company expects shipments in the second halfeffect of ~~2018 to be up approximately 12% over 2017. The Company believes this shipment cadence will result in tight U.S retail inventories through the 2018 selling~~

season and an improved level of model year 2018 carry-over inventory. The timing of 2018 shipments is also expected to result in flat year-end retail inventory in the U.S. in support of the Company's disciplined supply strategy which it believes is delivering the intended results. Finally, the Company expects this shipment cadence will also impact the timing of operating margin in each of the remaining quarters of 2018.

In the second quarter of 2018, the Company expects operating margin for the Motorcycles segment to be down approximately 5 percentage points versus 2017 and to be impacted by an unfavorable shipment mix, approximately $20 million of manufacturing optimization plan costs, higher fixed costs per unit on lower production and shipments (which the Company expects to recover in the third quarter of 2018) and higher marketing and product development expense as compared to 2017.

potential future adjustments, including items associated with any potential new tax legislation or audit settlements.

~~Manufacturing Optimization~~Restructuring Plan Costs and Savings⁽¹⁾

In January 2018, the Company commenced a significant, multi-year ~~manufacturing optimization plan~~Manufacturing Optimization Plan anchored by the consolidation of its final assembly plant in Kansas City, Missouri into its plant in York, ~~Pennsylvania.~~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 ~~by 2019.~~through 2019 (Manufacturing Optimization Plan). As part of ~~this manufacturing optimization plan,~~the Manufacturing Optimization Plan, the Company will also close its wheel operations in Adelaide, Australia resulting in the elimination of approximately 90 jobs.

In November 2018, the Company implemented a workforce reorganization plan (Reorganization Plan). As a result, approximately 70 employees left the Company on an involuntary basis.

The following table summarizes the expected costs and savings associated with ~~the manufacturing optimization plan.~~these plans as of April 23, 2019:


(in millions)	2018	2019	2020	Total	2018 Actual	2019 Estimated	2020 Estimated	Total

Manufacturing Optimization Plan
Cost related to temporary inefficiencies	$ 20 - $ 25	$15 - $20	n/a	$ 35 - $ 45	$ 12.9	$10 - $15	n/a	$ 23 - $ 28
Restructuring expenses	$100 - $115	$35 - $40	n/a	$135 - $155	$ 89.5	$40 - $45	n/a	$129 - $134
	$120 - $140	$50 - $60		$170 - $200	$102.4	$50 - $60		$152 - $162
% cash	70%	75%		70%	70%	70%		70%
Reorganization Plan - restructuring expenses					$3.9	$1		$5
% cash					100%	100%		100%
	2018	2019	2020	Annual Ongoing
Annual cash savings	-	$25 - $30	$45 - $50	$65 - $75		2019 Estimated	2020 Estimated	Annual Ongoing
Manufacturing Optimization Plan						$25 - $30	$45 - $50	$65 - $75
Reorganization Plan						$7	$7	$7

The ~~Company expects~~expected restructuring expenses to include the estimated cost of employee termination benefits, accelerated depreciation, and other project implementation costs of ~~$50~~$40 million to ~~$60~~$41 million, ~~$45~~$51 million to ~~$50~~$53 million and ~~$40~~$38 million to ~~$45~~$40 million, respectively. The timing of cash payments for restructuring costs may not occur in the same fiscal period asthat the Company records the expense.

~~During the first quarter of 2018, the Company recorded restructuring expenses totaling $46.8 million and costs related to temporary inefficiencies of $0.7 million.~~ Refer to Note 4 of the Notes to ~~the~~ Consolidated Financial Statements for additional information concerning restructuring expenses. The Company expects total capital expenditures of ~~$75~~$65 million associated with the ~~manufacturing optimization plan~~Manufacturing Optimization Plan through 2019, including ~~$50~~$20 million in ~~2018.~~2019.

Results of Operations for the Three Months Ended ~~April 1, 2018~~March 31, 2019

Compared to the Three Months Ended ~~March 26, 2017~~April 1, 2018

Consolidated Results


	Three months ended									Three months ended
(in thousands, except earnings per share)	April 1, 2018		March 26, 2017		(Decrease) Increase			% Change		March 31, 2019		April 1, 2018		(Decrease) Increase			% Change
Operating income from Motorcycles	$	172,838	$	236,546	$	(63,708	)	(26.9	)%
Operating income from Motorcycles and Related Products										$	108,381	$	172,838	$	(64,457	)	(37.3	)%
Operating income from Financial Services	63,579		52,636		10,943			20.8		58,731		63,579		(4,848		)	(7.6	)
Operating income	236,417		289,182		(52,765		)	(18.2	)	167,112		236,417		(69,305		)	(29.3	)
Other income (expense), net	220		2,296		(2,076		)	(90.4	)	4,660		220		4,440			2,018.2
Investment income	1,203		879		324			36.9		6,358		1,203		5,155			428.5
Interest expense	7,690		7,673		17			0.2		7,731		7,690		41			0.5
Income before income taxes	230,150		284,684		(54,534		)	(19.2	)
Income before provision for income taxes										170,399		230,150		(59,751		)	(26.0	)
Provision for income taxes	55,387		98,315		(42,928		)	(43.7	)	42,454		55,387		(12,933		)	(23.4	)
Net income	$	174,763	$	186,369	$	(11,606	)	(6.2	)%	$	127,945	$	174,763	$	(46,818	)	(26.8	)%
Diluted earnings per share	$	1.03	$	1.05	$	(0.02	)	(1.9	)%	$	0.80	$	1.03	$	(0.23	)	(22.3	)%

Consolidated operating income was down ~~18.2%~~29.3% in the first ~~quarter~~three months of ~~2018~~2019 due to a decrease in operating income from the Motorcycles segment of ~~$63.7~~$64.5 million~~, or~~ ~~26.9%, compared to the first quarter of~~ ~~2017. Operating~~ and a $4.8 million decrease in operating income from ~~the~~ Financial Services, ~~segment improved by $10.9 million in the first quarter of~~ ~~2018~~ compared to the same period last year. Please refer to the “Motorcycles &and Related Products Segment” and “Financial Services Segment” discussions following for a more detailed ~~discussion~~analysis of the factors affecting operating income.

Other income in the first quarter of 2019 was ~~adversely~~favorably impacted by ~~higher~~lower amortization of actuarial losses related to the Company's defined benefit plans. Investment income was up in the first quarter of 2019 compared to the same period last year driven by higher income from investments in marketable securities and ~~pension curtailment expense following a 2018 first-quarter remeasurement of the qualified pension plan.~~cash equivalents.

The Company's effective income tax rate for the first ~~quarter~~three months of ~~2018~~2019 was 24.9% up slightly from 24.1% ~~compared to 34.5% for~~in the same period in ~~2017. The lower effective~~2018 due to slightly higher discrete income tax ~~rate was primarily due to~~amounts recorded during the ~~impact~~first quarter of ~~the 2017 Tax Act enacted in December 2017. The 2017 Tax Act reduced the federal corporate income tax rate beginning in 2018 from 35% to 21%.~~2019.

Diluted earnings per share were ~~$1.03~~$0.80 in the first quarter of ~~2018~~,2019, down ~~1.9%~~22.3% from the same period ~~in the prior~~last year on lower net income ~~partially offset by the positive impact of~~and lower diluted weighted average shares outstanding. Diluted weighted average shares outstanding decreased from ~~177.1~~169.2 million in the first quarter of ~~2017~~2018 to ~~169.2~~160.0 million in the first quarter of ~~2018,~~2019, driven by the Company's repurchases of common stock. Please refer to "Liquidity and Capital Resources" for additional information concerning the Company's share repurchase activity.

Motorcycles Retail Sales and Registration Data

Harley-Davidson Motorcycle Retail Sales^(a)

The following table includes retail unit sales of Harley-Davidson motorcycles:


	Three months ended						Three months ended
	March 31, 2018	March 31, 2017	(Decrease) Increase		% Change		March 31, 2019	March 31, 2018	(Decrease) Increase		% Change
United States	29,309	33,316	(4,007	)	(12.0	)%	28,091	29,309	(1,218	)	(4.2	)%

Europe^(b)	9,716	8,984	732		8.1		9,508	9,716	(208	)	(2.1	)
EMEA - Other	1,146	1,183	(37	)	(3.1	)	1,289	1,146	143		12.5
Total EMEA	10,862	10,167	695		6.8		10,797	10,862	(65	)	(0.6	)

Asia Pacific^(c)	4,452	4,897	(445	)	(9.1	)	3,786	4,452	(666	)	(15.0	)
Asia Pacific - Other	1,877	1,966	(89	)	(4.5	)	2,288	1,877	411		21.9
Total Asia Pacific	6,329	6,863	(534	)	(7.8	)	6,074	6,329	(255	)	(4.0	)

Latin America	2,506	2,342	164		7.0		2,241	2,506	(265	)	(10.6	)
Canada	2,080	2,361	(281	)	(11.9	)	1,948	2,080	(132	)	(6.3	)
Total International Retail Sales	21,777	21,733	44		0.2		21,060	21,777	(717	)	(3.3	)
Total Worldwide Retail Sales	51,086	55,049	(3,963	)	(7.2	)%	49,151	51,086	(1,935	)	(3.8	)%


(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 ~~12.0%~~4.2% in the first quarter of ~~2018, which was within the Company's range of expectations, but at the less favorable end of the range. The Company's retail sales were adversely impacted by~~2019 on a ~~continued~~ weak U.S. industry, ~~which~~partially offset by an increase in market share. The first quarter retail sales decline of 4.2% represents the lowest rate of decline for retail sales of new Harley-Davidson motorcycles in the U.S. over the last nine quarters. The U.S. industry was down ~~11.1%~~4.7% percent in the first quarter asof 2019, which also represented an improvement compared to ~~the first quarter of 2017.~~recent industry sales trends. The Company believes ~~that~~the U.S. industry ~~sales of~~for new motorcycles ~~continued~~continues to be ~~adversely impacted~~challenged by soft used motorcycle ~~prices. Retail~~prices and that the improvement in the U.S. industry sales trend was due in part to a highly competitive and promotional marketplace.

Prices for used Harley-Davidson motorcycles in the U.S. remained at near historical low levels compared to new; however, the Company is encouraged by the firming of used motorcycle prices over the past several quarters. Prices of used Harley-Davidson motorcycles in the ~~U.S. through February 2018~~Company's dealer network were ~~down compared~~

~~to prior year, but continued to outperform sales of new motorcycles despite increased used motorcycle prices for the third straight quarter~~higher in ~~dealerships and the broader market. The Company believes used sales are an important indicator of overall demand for the Company's motorcycles.~~

~~In addition, wholesale prices of used Harley-Davidson motorcycles at auction during~~ the first quarter of ~~2018 increased above year-ago levels, and third-party pricing services continued to publish higher retail values year-over-year~~2019 than the prior year quarter for ~~used Harley-Davidson motorcycles. Stronger used bike prices reinforce~~ the ~~Company's disciplined focus on driving premium value for its riders, dealers and the brand.~~seventh consecutive quarter.

The Company's U.S. market share of new 601+cc motorcycles for the first quarter of ~~2018~~2019 was ~~50.4%~~51.1%, ~~down 0.9~~up 0.6 percentage points compared to the same period last ~~year (Source:~~year. The Company believes its U.S. market share gains were due in part to the execution of its "stronger dealer" growth catalyst under its More Roads plan which included increased marketing and sales support. The Company believes its share gains were partially offset by increased competitive promotional activity and stronger performance in segments in which it does not currently compete. In the Touring and Cruiser segments, which represent approximately 70% of the 601+cc market, the Company's market share was up 2.5 percentage points in the first quarter of 2019 compared to the same quarter last year. (Market share source: Motorcycle Industry Council) on

International retail sales of new Harley-Davidson motorcycles were down 3.3% in the first quarter of 2019. In the first quarter of 2019 international retail sales were down in developed markets, partially offset by increases in emerging markets. Overall, international retail sales were adversely impacted by the limited availability of ~~new~~Street motorcycles ~~and a highly competitive marketplace. While market share remains a key focus, the slight contraction~~ during the first quarter of 2019. Excluding Street motorcycles from both 2018 ~~came with a more profitable mix of motorcycles~~ and ~~less promotional support than in the prior year quarter.~~

~~In EMEA,~~2019, first quarter international retail sales ~~during~~were up 4.7% in 2019 compared to the same quarter last year.

During the first quarter of ~~2018 grew across most western European markets, partially offset by slightly lower~~2019, international emerging market retail sales were up 5.2% driven by growth in ~~emerging~~numerous markets. Retail sales in developed international markets ~~as compared~~were down 6.2% in the first quarter. Retail sales in Japan and Australia continued to ~~last year.~~ be weak in the first quarter of 2019 behind contracting industry sales and competitive new product introductions in segments outside of touring and cruisers. The Company continues to support its dealers in these markets with incentives and a strong focus on national test ride campaigns.

The Company's 2019 market share of new 601+cc motorcycles in Europe was ~~10.4%~~8.8% through March, ~~up 1.3 percentage points~~ compared to 10.4% for the ~~prior~~same period last year ~~quarter~~ (Source: Association des Constructeurs Europeens de Motocycles). ~~Harley-Davidson retail sales~~

The Company remains confident in, and ~~market share gains in Europe were driven by strong retail sales~~committed to, the great potential that international markets offer Harley-Davidson. Furthermore, with its Thailand facility up and running, the Company is excited about the growth ~~of the Company's new Softail motorcycles.~~

~~Retail sales~~opportunities in the ~~Asia Pacific~~ASEAN (Association of Southeast Asian Nations) region ~~continued to be soft~~now that it can offer more competitive pricing. The Company believes its brand, products and distribution will drive sustainable growth in the first quarter of 2018; however, the year over year rate of decline decreased compared to the fourth quarter of 2017. During the first quarter of 2018, Asia Pacific retail sales were adversely impacted by lower sales in Australia and Japan.

During the first quarter of 2018, retail sales in Latin America were up over prior year driven by higher sales in Brazil. In Canada, retail sales during the first quarter of 2018 declined 11.9% compared to the prior year quarter.

international markets.⁽¹⁾

Motorcycle Registration Data^(a)

The following table includes industry retail motorcycle registration data:


	Three months ended						Three months ended
	March 31, 2018	March 31, 2017	Decrease		% Change		March 31, 2019	March 31, 2018	(Decrease) Increase		% Change
United States^(b)	57,100	64,220	(7,120	)	(11.1	)%	54,324	57,026	(2,702	)	(4.7	)%
Europe^(c)	93,217	100,533	(7,316	)	(7.3	)%	111,317	93,217	18,100		19.4	%


(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 wholesale motorcycle unit shipments for the Motorcycles segment:


	Three months ended										Three months ended
	April 1, 2018			March 26, 2017							March 31, 2019			April 1, 2018
	Units	Mix %		Units	Mix %		Unit (Decrease) Increase		Unit % Change		Units	Mix %		Units	Mix %		Unit (Decrease) Increase		Unit % Change
United States	38,797	60.7	%	45,784	64.6	%	(6,987	)	(15.3	)%	34,505	58.6	%	38,797	60.7	%	(4,292	)	(11.1	)%
International	25,147	39.3	%	25,047	35.4	%	100		0.4		24,386	41.4	%	25,147	39.3	%	(761	)	(3.0	)
Harley-Davidson motorcycle units	63,944	100.0	%	70,831	100.0	%	(6,887	)	(9.7	)%	58,891	100.0	%	63,944	100.0	%	(5,053	)	(7.9	)%
Touring motorcycle units	30,857	48.3	%	29,068	41.0	%	1,789		6.2	%	25,043	42.5	%	30,857	48.3	%	(5,814	)	(18.8	)%
Cruiser motorcycle units	21,554	33.7	%	25,154	35.5	%	(3,600	)	(14.3	)	20,451	34.7	%	21,554	33.7	%	(1,103	)	(5.1	)
Sportster^® / Street motorcycle units	11,533	18.0	%	16,609	23.5	%	(5,076	)	(30.6	)	13,397	22.8	%	11,533	18.0	%	1,864		16.2
Harley-Davidson motorcycle units	63,944	100.0	%	70,831	100.0	%	(6,887	)	(9.7	)%	58,891	100.0	%	63,944	100.0	%	(5,053	)	(7.9	)%

The Company shipped ~~63,944~~58,891 Harley-Davidson motorcycles worldwide during the first quarter of ~~2018,~~2019, which was ~~9.7%~~7.9% lower than the same period in ~~2017. Shipments~~2018. The mix of Touring motorcycles decreased as a percent of total shipments while the mix of Cruiser and Sportster^®/Street motorcycles increased compared to the same period last year. The mix of Touring motorcycles in 2019 was down compared to 2018 due to the relatively high shipment mix of Touring motorcycles in the first quarter of 2018. In addition, during the first quarter of 2019, Sportster shipments as a percent of total shipments were ~~significantly higher~~up behind an improved retail sales rate compared to the same period last year’s first quarter when the Company limited Touring shipments to allow dealers to focus on selling through the model year 2016 Touring motorcycles ahead of the 2017 models which featured the new Milwaukee-Eight engine. In the second quarter of 2018, the Company expects Touring as a percent of total shipments to be down compared to prior year as the overall product mix returns to a more normal allocation.⁽¹⁾year.

U.S. retail inventory of new Harley-Davidson motorcycles at the end of the first quarter of ~~2018, U.S. dealer retail inventory of new motorcycles~~2019 was down approximately ~~9,100~~3,450 motorcycles compared to the ~~prior year quarter.~~end of the first quarter of 2018. The Company is very pleased with dealer inventory levels and the mix of products in the field as it moves into the height of the selling season. The Company believes its market discipline ~~to reduce supply~~is important in maintaining customer and ~~improve model-year mix~~dealer value and will ultimately result in ~~the U.S.~~stronger retail ~~channel has delivered the intended results and retail inventory is well-positioned as dealers move into the selling season.~~sales of new motorcycles.⁽¹⁾

Segment Results

The following table includes the condensed statements of operations for the Motorcycles segment (in thousands):


	Three months ended									Three months ended
	April 1, 2018		March 26, 2017		Increase (Decrease)			% Change		March 31, 2019		April 1, 2018		(Decrease) Increase			% Change
Revenue^(a):
Revenue:
Motorcycles	$	1,121,673	$	1,083,639	$	38,034		3.5	%	$	964,575	$	1,121,673	$	(157,098	)	(14.0	)%
Parts & Accessories	169,075		168,023		1,052			0.6		159,703		169,075		(9,372		)	(5.5	)
General Merchandise	56,601		55,836		765			1.4		55,401		56,601		(1,200		)	(2.1	)
Licensing	8,358		9,275		(917		)	(9.9	)	8,577		8,358		219			2.6
Other	8,240		11,938		(3,698		)	(31.0	)	7,381		8,240		(859		)	(10.4	)
Total revenue	1,363,947		1,328,711		35,236			2.7		1,195,637		1,363,947		(168,310		)	(12.3	)
Cost of goods sold	890,174		853,888		36,286			4.2		848,198		890,174		(41,976		)	(4.7	)
Gross profit	473,773		474,823		(1,050		)	(0.2	)	347,439		473,773		(126,334		)	(26.7	)
Operating expenses:
Selling & administrative expense	207,544		200,016		7,528			3.8		176,544		207,544		(31,000		)	(14.9	)
Engineering expense	46,549		38,261		8,288			21.7		48,884		46,549		2,335			5.0
Restructuring expense	46,842		—		46,842			—		13,630		46,842		(33,212		)	(70.9	)
Operating expense	300,935		238,277		62,658			26.3		239,058		300,935		(61,877		)	(20.6	)
Operating income from Motorcycles	$	172,838	$	236,546	$	(63,708	)	(26.9	)%	$	108,381	$	172,838	$	(64,457	)	(37.3	)%


~~(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 reclassified 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 the first quarter of ~~2017~~2018 to the first quarter of ~~2018~~2019 (in millions):


	Net Revenue			Cost of Goods Sold			Gross Profit			Net Revenue			Cost of Goods Sold			Gross Profit
Three months ended March 26, 2017	$	1,328.7		$	853.9		$	474.8
Three months ended April 1, 2018										$	1,363.9		$	890.1		$	473.8
Volume	(119.2		)	(75.7		)	(43.5		)	(108.1		)	(66.7		)	(41.4		)
Price, net of related costs	29.0			20.2			8.8			23.2			6.8			16.4
Foreign currency exchange rates and hedging	39.6			24.1			15.5			(29.8		)	(14.7		)	(15.1		)
Shipment mix	85.8			49.4			36.4			(53.6		)	(14.3		)	(39.3		)
Raw material prices	—			4.2			(4.2		)	—			3.1			(3.1		)
Manufacturing and other costs	—			14.0			(14.0		)	—			43.9			(43.9		)
Total	35.2			36.2			(1.0		)	(168.3		)	(41.9		)	(126.4		)
Three months ended April 1, 2018	$	1,363.9		$	890.1		$	473.8
Three months ended March 31, 2019										$	1,195.6		$	848.2		$	347.4

The following factors affected the comparability of net revenue, cost of goods sold and gross profit from the first quarter of ~~2017~~2018 to the first quarter of ~~2018:~~

2019:

The decrease in revenue and gross profit related to volume was due primarily to lower wholesale motorcycle ~~shipments.~~shipments, lower P&A sales and an increased level of motorcycle sales support.

On average, wholesale prices for motorcycles shipped in the current period were higher than in the same period last 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 the current period as compared to the same period last year.

Revenue was ~~positively~~adversely impacted by ~~stronger weighted-average~~weaker foreign currency exchange rates, relative to the U.S. dollar, as compared to the same period last year. The ~~favorable~~unfavorable revenue impact was partially offset by higher ~~costs associated with unfavorable losses on~~net foreign currency gains due primarily to foreign currency hedging, ~~and the remeasurement of foreign-denominated balance sheet accounts,~~ as compared to the prior ~~year quarter.~~year.

~~Shipment~~

Changes in the shipment mix ~~changes resulted in a positive impact on gross profit resulting from favorable changes in~~of motorcycle families, as well as the mix of models within motorcycle ~~families.~~families, had an adverse impact on revenue and gross profit during the quarter.

Raw material prices were higher primarily due to increased steel ~~and aluminum~~ costs.

Manufacturing and other costs were negatively impacted by lower fixed cost absorption due to lower production, ~~higher depreciation and~~ temporary inefficiencies and the cost of incremental tariffs. Costs associated with ~~the manufacturing optimization plan.~~

~~The increase~~incremental tariffs implemented in ~~operating expenses~~mid-2018 were $21.0 million during the first quarter of 2019. Temporary inefficiencies associated with the Manufacturing Optimization Plan were $3.6 million and $0.7 million in the first quarters of 2019 and 2018, ~~was due to higher selling, administrative and engineering~~respectively.

Operating expenses ~~on increased investments~~were lower in ~~marketing and product development and a $46.8 million restructuring expense related~~the first quarter of 2019 compared to the ~~Company's manufacturing optimization plan.~~prior year driven by lower restructuring expenses and favorable net warranty and recall costs. In the first quarter of 2019, net warranty and recall costs were approximately $35 million lower than prior year, driven by higher than normal recoveries and lower warranty costs.

Financial Services Segment

Segment Results

The following table includes the condensed statements of operations for the Financial Services segment (in thousands):


	Three months ended									Three months ended
	April 1, 2018		March 26, 2017		Increase (Decrease)			% Change		March 31, 2019		April 1, 2018		Increase (Decrease)			% Change
Interest income	$	154,041	$	150,728	$	3,313		2.2	%	$	159,804	$	154,041	$	5,763		3.7	%
Securitization and servicing income	352		574		(222		)	(38.7	)
Other income	23,781		21,919		1,862			8.5		28,750		23,781		4,969			20.9
Securitization and servicing fee income										189		352		(163		)	(46.3	)
Financial Services revenue	178,174		173,221		4,953			2.9		188,743		178,174		10,569			5.9
Interest expense	48,450		43,289		5,161			11.9		52,324		48,450		3,874			8.0
Provision for credit losses	30,052		43,589		(13,537		)	(31.1	)	34,491		30,052		4,439			14.8
Operating expenses	36,093		33,707		2,386			7.1		43,197		36,093		7,104			19.7
Financial Services expense	114,595		120,585		(5,990		)	(5.0	)	130,012		114,595		15,417			13.5
Operating income from Financial Services	$	63,579	$	52,636	$	10,943		20.8	%	$	58,731	$	63,579	$	(4,848	)	(7.6	)%

Interest income was favorable in the first quarter of ~~2018~~2019 primarily due to higher average retail receivables at a higher average yield. Other income was favorable primarily due to ~~increased licensing revenue~~higher investment income and ~~investment income.~~insurance related revenue.

Interest expense increased due to higher average outstanding debt and a higher cost of ~~funds and higher average outstanding debt.~~funds.

The provision for credit losses ~~decreased $13.5~~increased $4.4 million compared to the first quarter of ~~2017.~~2018. The retail motorcycle provision ~~decreased $14.2~~increased $4.9 million driven by ~~lower~~higher retail credit losses, ~~and~~ a ~~decrease in the~~flat retail reserve rate as compared to ~~an increase~~a decrease in the reserve rate during the first quarter of ~~2017. The wholesale provision increased $0.6 million due to~~2018, and a ~~slight increase~~smaller decrease in ~~the reserve rate~~retail receivables as compared to the first quarter of ~~2017.~~2018.

Annualized credit losses for the Company's retail motorcycle loans were 2.22% through March 31, 2019 compared to 2.15% through April 1, ~~2018 compared to 2.31% through March 26, 2017.~~2018. The 30-day delinquency rate for retail motorcycle loans at March 31, 2019 was 3.73% compared to 3.31% at April 1, ~~2018~~ ~~was 3.31%~~2018. The Company believes inefficiencies resulting from the implementation of a new loan management system were a driver for the higher delinquency rate. The Company expects these inefficiencies to be temporary.

Operating expenses increased $7.1 million compared to ~~3.17% at~~ ~~March 26, 2017~~.the first quarter of 2018 driven by higher depreciation associated with the implementation of a new loan management system as well as higher consulting expenses.

Changes in the allowance for credit losses on finance receivables were as follows (in thousands):

Three months ended
April 1,
2018 March 26,
2017
Balance, beginning of period $ 192,471
$ 173,343
Provision for credit losses 30,052
43,589
Charge-offs, net of recoveries (32,173 ) (32,902 )
Balance, end of period $ 190,350
$ 184,030



	Three months ended
	March 31, 2019			April 1, 2018
Balance, beginning of period	$	189,885		$	192,471
Provision for credit losses	34,491			30,052
Charge-offs, net of recoveries	(33,504		)	(32,173		)
Balance, end of period	$	190,872		$	190,350

Other Matters

Contractual Obligations

The Company has updated the contractual obligations table under the caption “Contractual Obligations” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 as of ~~April 1, 2018~~March 31, 2019 to reflect the new projected principal and interest payments for the remainder of ~~2018~~2019 and beyond as follows (in thousands):


	2018		2019-2020		2021-2022		Thereafter		Total		2019		2020-2021		2022-2023		Thereafter		Total
Principal payments on debt	$	2,088,427	$	2,682,631	$	1,168,009	$	1,100,000	$	7,039,067	$	1,912,597	$	3,104,227	$	1,564,436	$	750,000	$	7,331,260
Interest payments on debt	148,330		205,800		102,764		367,841		824,735		142,180		272,995		112,046		336,750		863,971
	$	2,236,757	$	2,888,431	$	1,270,773	$	1,467,841	$	7,863,802	$	2,054,777	$	3,377,222	$	1,676,482	$	1,086,750	$	8,195,231

Interest obligations for floating rate instruments, as calculated above, assume rates in effect at ~~April 1, 2018~~March 31, 2019 remain constant. For purposes of the above, the principal payment balances for medium-term notes, on-balance sheet asset-backed securitizations, and senior unsecured notes are shown without reduction for debt issuance costs. Refer to Note 1012 for a breakout of the finance costs consistent with ASU No. 2015-03.

As of ~~April 1, 2018,~~March 31, 2019, there have been no other material changes to the Company’s summary of expected payments for significant contractual obligations in the contractual obligations table in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

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 Department of Justice (DOJ), on behalf of 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~~DOJ each filed separate response briefs. The Company ~~anticipates~~is awaiting the ~~court will make a~~court's decision on whether or not to finalize the Settlement, inand on February 8, 2019, the ~~following months.~~DOJ filed a status update reminding the court of the current status of the outstanding matter. The Company has an accrual associated with this matter which is included in ~~accrued~~Accrued liabilities in on the ~~Consolidated Balance Sheets,~~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:

~~investigation and~~ remediation that may ultimately be required under the ~~RI/FS that is finally~~ approved ~~or otherwise at the York facility,~~final remedy, the Company is unable to make a reasonable estimate of those additional costs, if any, that may result.

Product Liability Matters:

~~National Highway Traffic Safety Administration Matters:~~

Off-Balance Sheet Arrangements

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 ~~11.~~13.

Liquidity and Capital Resources as of ~~April 1, 2018~~March 31, 2019⁽¹⁾

Over the long-term, the Company expects that its business model will continue to generate cash that will allow it to invest in the business, fund future growth opportunities, and return value to shareholders.⁽¹⁾ The Company will evaluate opportunities to return cash to its shareholders through increasing dividends and repurchasing shares. The Company believes the Motorcycles operations will continue to be primarily funded through cash flows generated by operations.⁽¹⁾ The Company expects the Financial Services operations ~~have been~~to continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, and asset-backed securitizations.

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 credit facilities. The following table summarizes the Company’s cash and availability under credit and conduit facilities (in thousands):


	April 1, 2018		March 31, 2019
Cash and cash equivalents	$	753,517	$	749,600
Current marketable securities			10,003
Total cash and cash equivalents and marketable securities			759,603

Credit facilities	528,024		352,075
Asset-backed U.S. commercial paper conduit facilities^(a)	618,689		600,000
Asset-backed Canadian commercial paper conduit facility^(a)	12,534		22,111
Total availability under credit and conduit facilities	1,159,247		974,186
Total	$	1,912,764	$	1,733,789


(a)	Includes facilities expiring in the next twelve months which the Company expects to renew prior to expiration.⁽¹⁾

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. The Financial Services operations could be negatively affected by higher costs of funding and increased difficulty of raising, or potential unsuccessful 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.

Cash Flow Activity

The following table summarizes the cash flow activity for the periods indicated (in thousands):


	Three months ended						Three months ended
	April 1, 2018			March 26, 2017			March 31, 2019			April 1, 2018
Net cash provided by operating activities	$	191,594		$	159,939		$	32,671		$	191,594
Net cash used by investing activities	(21,651		)	(87,453		)	(77,200		)	(21,651		)
Net cash (used) provided by financing activities	(98,930		)	23,143
Net cash used by financing activities							(415,679		)	(98,930		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	2,034			7,219			(409		)	2,034
Net increase in cash, cash equivalents and restricted cash	$	73,047		$	102,848
Net (decrease) increase in cash, cash equivalents and restricted cash							$	(460,617	)	$	73,047

Operating Activities

The ~~increase~~decrease in cash provided by operating activities for the first quarter of ~~2018~~2019 compared to the same period in ~~2017~~2018 was primarily due to ~~a decrease in cash outflows related to wholesale financing~~lower sales and ~~lower cash outflows for retirement plans offset by less favorable~~unfavorable changes in working capital. ~~During the first quarter of 2017, the Company made a $25.0 million~~There were no voluntary ~~contribution to its~~ qualified pension ~~plan. There was no comparable voluntary contribution~~plan contributions in the first quarter of 2018 or 2019 and ~~there are none~~no contributions are planned for the remainder of ~~2018.~~2019.⁽¹⁾

Investing Activities

The Company’s most significant investing activities consist ~~primarily~~ of capital expenditures and ~~net changes in~~retail finance ~~receivables.~~originations and collections. Capital expenditures were ~~$28.4~~$35.3 million in the first quarter of ~~2018~~2019 compared to ~~$24.0~~$28.4 million in the same period last year. Net cash ~~flows~~outflows for finance receivables for the first quarter of ~~2018~~2019 were ~~$75.3~~$47.3 million ~~favorable compared to~~higher than the same period last ~~year due primarily to a decrease in retail lending activity.~~year.

Financing Activities

The Company’s financing activities consist primarily of share repurchases, dividend payments, and debt activity. Cash outflows for share repurchases were ~~$73.0~~$61.7 million in the first quarter of ~~2018~~2019 compared to ~~$79.8~~$73.0 million in the same period last year. Share repurchases during the first three months of ~~2018 totaled 1.4~~2019 included 1.5 million shares of common stock related to discretionary share repurchases and 0.2 million shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units. As of ~~April 1, 2018,~~March 31, 2019, there were ~~24.2~~14.9 million shares remaining on a board-approved share repurchase ~~authorizations.~~authorization. The Company paid dividends of ~~$0.370~~$0.375 and ~~$0.365~~$0.370 per share totaling ~~$62.7~~$60.9 million and ~~$64.6~~$62.7 million during the first ~~quarters~~quarter of ~~2018~~2019 and ~~2017,~~2018, respectively.

Financing cash flows related to debt activity resulted in net cash outflows of $293.7 million in the first three months of 2019 compared to net cash inflows of $35.1 million in the first three months of ~~2018 compared to net cash inflows of $160.2 million in the first three months of 2017.~~2018. The Company’s total outstanding debt consisted of the following (in thousands):


	April 1, 2018		March 26, 2017		March 31, 2019		April 1, 2018
Unsecured commercial paper	$	1,036,976	$	953,357	$	1,192,925	$	1,036,976
Asset-backed Canadian commercial paper conduit facility	158,162		141,013		142,676		158,162
Asset-backed U.S. commercial paper conduit facilities	281,311		286,205		526,947		281,311
Medium-term notes, net	4,514,798		4,163,797		4,685,636		4,514,798
Senior unsecured notes, net	742,126		741,469		742,791		742,126
Asset-backed securitization debt, net	284,793		685,374		18,694		284,793
Total debt	$	7,018,166	$	6,971,215	$	7,309,669	$	7,018,166

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 April ~~1, 2018~~5, 2019 were as follows:



	Short-Term	Long-Term	Outlook
Moody’s	P2	A3	Stable
Standard & Poor’s	A2	A-BBB+	Negative
Fitch	F1	A	~~Stable~~Negative

Credit Facilities – OnIn April 6, 2018, the Company entered into a $780.0 million five-year credit facility to replace the $675.0 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. The new five-year credit facility matures in April 2023. The Company also has a $765.0 million five-year credit facility which matures in April 2021. The two five-year credit facilities (together, the Global Credit Facilities) bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments under the Global Credit Facilities. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program. ~~During the second quarter of 2017,~~In February 2019, the Company ~~renewed~~terminated its 364-day $25.0 million credit facility ~~which had expired~~that was due to mature in May 2017. 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 expires in May 2018.2019.

Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to ~~$1.54~~$1.55 billion as of ~~April 1, 2018~~March 31, 2019 supported by the Global Credit Facilities, as discussed above. 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, borrowing under its asset-backed U.S. commercial paper conduit ~~facility~~facilities or through the use of operating cash flow and cash on hand.⁽¹⁾

Medium-Term Notes – The Company had the following medium-term notes (collectively, the Notes) issued and outstanding at ~~April 1, 2018~~March 31, 2019 (in thousands):

Principal Amount

Rate

Issue Date

Maturity Date

Rate

Issue Date

Maturity Date

$877,488

6.80%

May 2008

June 2018

$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

2.40%

September 2014

September 2019

$600,000

2.15%

February 2015

February 2020

2.15%

February 2015

February 2020

$450,000

Floating-rate ^(a)

May 2018

May 2020

$350,000

2.40%

March 2017

June 2020

2.40%

March 2017

June 2020

$600,000

2.85%

January 2016

January 2021

2.85%

January 2016

January 2021

$450,000

Floating-rate^(b)

November 2018

March 2021

$350,000

3.55%

May 2018

May 2021

$550,000

4.05%

February 2019

February 2022

$400,000

2.55%

June 2017

June 2022

2.55%

June 2017

June 2022

$350,000

3.35%

February 2018

February 2023

3.35%

February 2018

February 2023


(a)	Floating interest rate based on LIBOR plus 3550 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.


(b)	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~~fixed-rate Notes provide for semi-annual interest payments and the ~~floating rate Note provides~~floating-rate Notes provide for quarterly interest payments. Principal on the Notes is due at maturity. Unamortized discount and debt issuance costs on the Notes reduced the outstanding balance by $14.4 million and $12.7 million at March 31, 2019 and ~~$13.7 million at~~ April 1, 2018, ~~and March 26, 2017,~~ respectively. ~~There were no medium-term note maturities during the first quarter of 2018.~~ During the first quarter of ~~2017, $400.0~~2019, $600.0 million of ~~2.70%~~2.25% and $150.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full.

There were no medium-term note maturities during the first quarter of 2018.

Senior Unsecured Notes – In July 2015, the Company issued $750.0 million of 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 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 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of ~~April 1, 2018,~~March 31, 2019, the Canadian Conduit has an expiration date of June ~~30, 2018.~~28, 2019.

2018 2017
Transfers Proceeds Transfers Proceeds
First quarter $ 7,600
$ 6,200
$ 6,300
$ 5,500

of $6.2 million.

On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – ~~In December 2017, the~~The Company ~~renewed its existing $300.0 million and $600.0 million revolving facility~~has agreements with a third-party bank-sponsored asset-backed U.S. commercial paper ~~conduit.~~conduits under which it 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. In November 2018, the Company renewed its existing $600.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits. Also at that time, 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 initial commitment to $600.0 million. The aggregate commitment under this agreement is reduced

monthly as collections on the related finance receivables are applied 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 revolving facilities (together, the U.S. Conduit Facilities) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the ~~relevant~~ SPE as collateral.

2018 2017
Transfers Proceeds Transfers Proceeds
First quarter $ 32,900
$ 29,300
$ 333,400
$ 300,000

Facilities.

The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates or LIBOR to the extent the advance is not funded by a conduit lender through the issuance of commercial paper plus, in each case, a program fee based on outstanding principal. The U.S. Conduit Facilities also provide for an unused commitment fee based on the unused portion of the total aggregate ~~commitment of $900.0 million.~~commitment. There is no amortization schedule; however, the debt ~~will be~~is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facilities, 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 5 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of ~~April 1, 2018,~~March 31, 2019, the U.S. Conduit Facilities have an expiration date of ~~December 12, 2018.~~November 29, 2019.

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 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’s 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’~~notes have a contractual ~~lives have various maturities ranging from 2020 to~~life maturing in 2022.

There were no on or off-balance sheet asset-backed securitization transactions during the first quarter of ~~2018~~2019 or ~~2017.~~2018.

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 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.

Under the current financial covenants of the Global Credit Facilities, the ratio of ~~HDFS’s~~HDFS’ consolidated debt, excluding secured debt, to ~~HDFS’s~~HDFS’ consolidated ~~shareholder's~~shareholders' equity, excluding accumulated other comprehensive income ~~(or loss)~~(loss), 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 ~~(or loss)~~(loss)), cannot exceed ~~0.70~~0.7 to ~~1.00~~1.0 as of the end of any fiscal quarter. No financial covenants are required under the Notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.

At ~~April 1, 2018~~March 31, 2019, HDFS and the Company remained in compliance with all of the then existing covenants.

Cautionary Statements

The Company's ability to meet the targets and expectations noted above depends upon, among other factors, the Company's ability to (i) ~~develop and~~ execute its business ~~strategy,~~plans and strategies, including the elements of the More Roads to Harley-Davidson plan for growth that the Company disclosed on July 30, 2018, and strengthen its existing business while enabling growth, (ii) ~~execute its strategy of growing ridership, globally, (iii) effectively execute its manufacturing optimization initiative within expected costs~~manage and ~~timing, (iv) develop and introduce products, services and experiences that are successful in the marketplace, (v) manage~~predict the impact that new or adjusted tariffs may have on our ability to sell product internationally, and the cost of raw materials and components, ~~and our ability to sell product internationally, (vi) manage the impact that prices for and supply~~(iii) execute its strategy of used motorcycles may have on its business, including on retail sales of new motorcycles, (vii) balance production volumes for its new motorcycles with consumer demand, including in circumstances where competitors may be supplying new

motorcycles to the market in excess of demand at reduced prices, (viii) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment, (ix) manage risks that arise through expanding international manufacturing, operations and sales, (x) successfullygrowing ridership, globally, (iv) effectively execute the Company’s manufacturing ~~strategy, including~~optimization initiative within expected costs and timing and successfully carry out its ~~flexible production strategy, (xi)~~global manufacturing and assembly operations, (v) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests, (vi) negotiate and successfully implement a strategic alliance relationship with a local partner in Asia, (vii) 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) 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) prevent, detect, and ~~detect~~remediate any issues with its motorcycles or any issues associated with 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) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xii) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles, (xiii) reduce other costs to offset costs of 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) 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, ~~(xiii)~~(xviii) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices, (xiv) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (xv) retain and attract talented employees, (xvi) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding data security, (xvii)(xix) 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, ~~(xviii)~~(xx) retain and attract talented employees, (xxi) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding data security, (xxii) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio, (xxiii) 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, ~~(xix)~~(xxiv) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles, ~~(xx) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters, (xxi)~~(xxv) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities, ~~(xxii)~~(xxvi) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations, ~~(xxiii)~~(xxvii) manage its exposure to product liability claims and commercial or contractual disputes, ~~and (xxiv)~~(xxviii) successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the Company and within its ~~expectations.~~expectations, (xxix) conduct its operations in Thailand in a manner that sufficiently mitigates certain international tariffs and lowers prices of its motorcycles in certain markets, (xxx) accurately and successfully determine, implement, and maintain a manner in which to sell motorcycles in the E.U., China, and ASEAN countries that is not subject to tariffs; (xxxi) have its application to mitigate E.U. tariffs approved, or the appeal of a denied application acted on in a manner favorable to the Company, and (xxxii) accurately predict the margins of its Motorcycles and Related Products segment in light of, among other things, tariffs, the cost associated with the More Roads to Harley-Davidson plan, the Company's Manufacturing Optimization Plan, and the Company's global supply chain.

~~In addition, the~~The Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Further, actual foreign currency exchange rates may vary from underlying assumptions. Other factors are described in risk factors that the Company has disclosed in documents previously filed with the Securities and Exchange Commission. 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’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’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’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 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.

Refer to “Risk Factors” under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.

Item 3. Quantitative and Qualitative Disclosures ~~about~~About Market Risk

The ~~Company’s earnings related~~Company is exposed to ~~its operations outside the U.S. are impacted by~~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 exchange and interest rate risk.

The ~~majority~~Company sells its products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, the Company’s earnings are affected by fluctuations in the value of the U.S. dollar relative to foreign currency. The Company’s ~~exposure~~most significant foreign currency risk relates to the Euro, the Australian dollar, the Japanese yen, the Brazilian real, the Canadian dollar, ~~Mexican peso~~ and the Brazilian real. A weakening in foreign currencies relative to the U.S. dollar will generally have an adverse effect on revenue related to sales made in those foreign currencies offset by a corresponding positive impact from natural hedges created by the operating costs incurred in those same foreign currencies. As the majority of the Company’s manufacturing occurs in the U.S., the Company’s operating expenses paid in foreign currencies generally include limited manufacturing costs and the selling and administrative costs incurred at the Company’s international locations. In addition, to the extent theMexican peso. The Company ~~carries foreign-denominated cash, receivables or accounts payable, those amounts are also exposed to~~utilizes foreign currency ~~remeasurements that can impact~~contracts to mitigate the ~~Company’s~~effect of certain currencies' fluctuations on earnings.

The Company also uses derivative financial instruments to hedge a portion of the forecasted cash flows in its key foreign currencies. These instruments generally have terms of up to 12 months and are purchased over time so that at any point in time

~~some portion of the next 12 months of expected~~ foreign currency ~~exposure is hedged. The hedging instruments~~contracts are entered into with banks and allow the Company to ~~lock~~exchange a specified amount of foreign currency for U.S. dollars at a future date, based on a fixed exchange rate.

The Company's earnings are affected by changes in the ~~exchange rate~~prices of commodities used in the production of motorcycles. The Company uses derivative instruments on ~~future foreign currency cash flows based on~~a limited basis to hedge the ~~forward rates available at the time~~prices of ~~purchase. The level of gain or loss on these instruments will depend on the spread between the forward rate and the corresponding spot rate at the date the instruments are settled.~~certain commodities.

HDFS’ earnings are affected by changes in interest rates. HDFS’ interest-rate sensitive financial instruments include finance receivables, debt and ~~debt. With~~interest rate derivatives. HDFS utilizes interest rate swaps to reduce the ~~exception~~impact of ~~short-term commercial paper and debt issued through the commercial paper~~

~~conduit facilities, the majority of HDFS' debt instruments have fixed~~fluctuations in interest ~~rates.~~rates on its debt.

Refer to the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 for further information concerning the Company's market risk. There have been no material changes to the market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Item 4. 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 Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q 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 Senior Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Changes in Internal Controls

There were no changes in the Company's internal control over financial reporting during the quarter ended ~~April 1, 2018~~March 31, 2019 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

The information required under this Item 1 of Part II is contained in Item 1 of Part I of this Quarterly Report on Form 10-Q in Note 1517 of the Notes to Consolidated Financial Statements, and such information is incorporated herein by reference in this Item 1 of Part II.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

The following table contains detail related to the Company's repurchase of its common stock based on the date of trade during the quarter ended ~~April 1, 2018:~~March 31, 2019:

2018 Fiscal Month Total Number of
Shares Purchased (a) 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
January 1 to February 4 1,141
$ 51
1,141
10,594,144
February 5 to March 4 767,624
$ 47
767,624
24,988,413
March 5 to April 1 834,536
$ 44
834,536
24,155,467
Total 1,603,301
$ 46
1,603,301



2019 Fiscal Month	Total Number of Shares Purchased (a)	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
January 1 to February 3	457,779	$	34	457,779	15,952,906
February 4 to March 3	1,254,645	$	37	1,254,645	14,943,706
March 4 to March 31	1,588	$	37	1,588	14,943,706
Total	1,714,012	$	36	1,714,012


(a)	Includes discretionary share repurchases and shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units

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 which superseded the share repurchase authority granted by the Board of Directors in December 1997. The Company repurchased 1.4 million shares on a discretionary basis during the quarter ended ~~April 1, 2018~~March 31, 2019 exhausting the remaining shares under this authorization. In February 2018, the Company's Board of Directors authorized the Company to repurchase up to 15.0 million additional shares of its common stock with no dollar limit or expiration date. The Company repurchased 56,294 shares on a discretionary basis during the quarter ended March 31, 2019 under this authorization. As of ~~April 1, 2018, 24.2~~March 31, 2019, 14.9 million shares remained under ~~these authorizations.~~this authorization.

Under the share repurchase authorizations, 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. 2014 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 first quarter of ~~2018~~2019, the Company acquired ~~164,624~~247,408 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock units.

Item 6 – Exhibits

Refer to the Exhibit Index immediately following this page.

Harley-Davidson, Inc.

Exhibit Index to Form 10-Q



Exhibit No.		Description
4.1		Officers' Certificate, dated February ~~9, 2018,~~4, 2019, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of ~~3.350%~~4.05% Medium-Term Notes due ~~2023~~
2022 10.1*		~~Form of Transition Agreement between the Registrant and Ms. Kumbier dated February 1, 2018~~
31.1		Chief Executive Officer Certification pursuant to Rule 13a-14(a)
31.2		Chief Financial Officer Certification pursuant to Rule 13a-14(a)
32.1		Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


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

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	HARLEY-DAVIDSON, INC.

Date: May ~~10, 2018~~9, 2019	/s/ John A. Olin
	John A. Olin
	Senior Vice President and
	Chief Financial Officer
	(Principal financial officer)



Date: May ~~10, 2018~~9, 2019	/s/ Mark R. Kornetzke
	Mark R. Kornetzke
	Chief Accounting Officer
	(Principal accounting officer)

5960



Part I	Financial Information	3

Item 1.	Financial Statements	3
	Consolidated Statements of Income	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Shareholders' Equity	8
	Notes to Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4142

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5557

Item 4.	Controls and Procedures	5657

Part II	Other Information	5758

Item 1.	Legal Proceedings	5758

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5758

Item 6.	Exhibits	5758

Signatures		5960



	As Reported		Without Adoption of ASC 606		Effect of Change
Revenue:
Motorcycles and Related Products	$	1,363,947	$	1,367,984	$	(4,037	)
Costs and expenses:
Motorcycles and Related Products cost of goods sold	$	890,174	$	890,238	$	(64	)
Operating income	$	236,417	$	240,390	$	(3,973	)
Income before provision for income taxes	$	230,150	$	234,123	$	(3,973	)
Provision for income taxes	$	55,387	$	56,350	$	(963	)
Net income	$	174,763	$	177,773	$	(3,010	)



	Amount of Gain/(Loss) Reclassified from AOCL into Income
	Three months ended						Expected to be Reclassified
Cash Flow Hedges	April 1, 2018			March 26, 2017			Over the Next Twelve Months
Foreign currency contracts^(a)	$	(6,709	)	$	2,516		$	(15,783	)
Commodity contracts^(a)	(73		)	48			1
Treasury rate locks^(b)	(126		)	(90		)	(506		)
Total	$	(6,908	)	$	2,474		$	(16,288	)



	2018				2017
	Transfers		Proceeds		Transfers		Proceeds
First quarter	$	32,900	$	29,300	$	333,400	$	300,000



2018 Fiscal Month	Total Number of Shares Purchased (a)	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
January 1 to February 4	1,141	$	51	1,141	10,594,144
February 5 to March 4	767,624	$	47	767,624	24,988,413
March 5 to April 1	834,536	$	44	834,536	24,155,467
Total	1,603,301	$	46	1,603,301