UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March ~~28, 2021~~27, 2022


☐			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)

Registrant's telephone number, including area code: (414) 342-4680

None

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

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

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ 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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had outstanding ~~153,665,546~~147,378,290 shares of common stock as of April 30, ~~2021.~~2022.

HARLEY-DAVIDSON, INC.

Form 10-Q

For The Quarter Ended March ~~28, 2021~~27, 2022


Part I	Financial Information	3
Item 1.	Financial Statements	3
	Consolidated Statements of Operations	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	9
	1. Basis of Presentation and Use of Estimates	9
	2. New Accounting Standards	9
	3. Revenue	109
	4. Restructuring Activities	10
	5. Income Taxes	11
	6. Earnings Per Share	11
	7. Additional Balance Sheet and Cash Flow Information	12
	8. Finance Receivables	13

	9. Derivative Financial Instruments and Hedging Activities	18
	10. Leases	21
	11. Debt	22
	12. Asset-Backed Financing	24
	13. Fair Value	27
	14. Product Warranty and Recall Campaigns	2928
	15. Employee Benefit Plans	3029
	16. Commitments and Contingencies	3130
	17. Accumulated Other Comprehensive Loss	3130
	18. ~~Business~~Reportable Segments	3231
	19. Supplemental Consolidating Data	3332
	20. Subsequent Event	3639
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3740
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5053
Item 4.	Controls and Procedures	5154
Part II	Other Information	5255
Item 1.	Legal Proceedings	5255
Item 1A.	Risk Factors	5255
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5356

Item 6.	Exhibits	5356
Signatures		5458

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three months ended
March 28,
2021 March 29,
2020
Revenue:
Motorcycles and Related Products $ 1,232,107 $ 1,099,788
Financial Services 190,400 198,456
1,422,507 1,298,244
Costs and expenses:
Motorcycles and Related Products cost of goods sold 811,622 780,868
Financial Services interest expense 55,707 52,473
Financial Services provision for credit losses (22,474) 79,419
Selling, administrative and engineering expense 231,844 277,971
Restructuring benefit (366) 0
1,076,333 1,190,731
Operating income 346,174 107,513
Other income, net 277 155
Investment income (loss) 1,402 (5,347)
Interest expense 7,708 7,755
Income before provision for income taxes 340,145 94,566
Provision for income taxes 81,001 24,871
Net income $ 259,144 $ 69,695
Earnings per share:
Basic $ 1.69 $ 0.46
Diluted $ 1.68 $ 0.45
Cash dividends per share $ 0.15 $ 0.38


	Three months ended
		March 27, 2022		March 28, 2021
Revenue:
Motorcycles and Related Products		$	1,303,171	$	1,232,107
Financial Services		192,015		190,400
		1,495,186		1,422,507
Costs and expenses:
Motorcycles and Related Products cost of goods sold		895,536		811,622
Financial Services interest expense		42,099		55,707
Financial Services provision for credit losses		28,822		(22,474)
Selling, administrative and engineering expense		239,625		231,844
Restructuring benefit		(128)		(366)
		1,205,954		1,076,333
Operating income		289,232		346,174
Other income, net		11,030		277
Investment (loss) income		(1,979)		1,402
Interest expense		7,711		7,708
Income before provision for income taxes		290,572		340,145
Provision for income taxes		68,070		81,001
Net income		$	222,502	$	259,144
Earnings per share:
Basic		$	1.46	$	1.69
Diluted		$	1.45	$	1.68
Cash dividends per share		$	0.1575	$	0.1500

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

Three months ended
March 28,
2021 March 29,
2020
Net income $ 259,144 $ 69,695
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (17,338) (34,455)
Derivative financial instruments 17,530 (19,845)
Pension and postretirement benefit plans 13,588 11,959
13,780 (42,341)
Comprehensive income $ 272,924 $ 27,354


	Three months ended
		March 27, 2022		March 28, 2021
Net income		$	222,502	$	259,144
Other comprehensive income, net of tax:
Foreign currency translation adjustments		(4,121)		(17,338)
Derivative financial instruments		9,928		17,530

Pension and postretirement benefit plans		5,502		13,588
		11,309		13,780
Comprehensive income		$	233,811	$	272,924

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited) (Unaudited)
March 28,
2021 December 31,
2020 March 29,
2020
ASSETS
Current assets:
Cash and cash equivalents $ 2,320,645 $ 3,257,203 $ 1,465,061
Accounts receivable, net 216,569 143,082 299,148
Finance receivables, net of allowance of $64,139, $72,632, and $63,881 1,798,194 1,509,539 2,358,989
Inventories, net 470,997 523,497 610,924
Restricted cash 185,374 131,642 99,903
Other current assets 195,356 280,470 142,357
5,187,135 5,845,433 4,976,382
Finance receivables, net of allowance of $282,094, $318,304, and $271,615 4,958,583 4,933,469 4,933,418
Property, plant and equipment, net 718,968 743,784 826,845
Pension and postretirement assets 105,910 95,711 64,802
Goodwill 65,157 65,976 64,063
Deferred income taxes 135,387 158,538 127,856
Lease assets 44,765 45,203 56,496
Other long-term assets 123,083 122,487 90,085
$ 11,338,988 $ 12,010,601 $ 11,139,947
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 402,764 $ 290,904 $ 333,411
Accrued liabilities 570,440 557,214 584,535
Short-term deposits, net 93,887 79,965 0
Short-term debt 765,263 1,014,274 1,335,664
Current portion of long-term debt, net 1,622,243 2,039,597 2,326,460
3,454,597 3,981,954 4,580,070
Long-term deposits, net 58,766 0 0
Long-term debt, net 5,478,091 5,932,933 4,478,078
Lease liabilities 30,061 30,115 40,053
Pension and postretirement liabilities 103,854 114,206 128,054
Deferred income taxes 8,682 8,607 6,219
Other long-term liabilities 228,551 220,001 215,490
Commitments and contingencies (Note 16) 0 0 0
Shareholders’ equity:
Common stock 1,690 1,685 1,834
Additional paid-in-capital 1,517,129 1,507,706 1,495,141
Retained earnings 1,520,862 1,284,823 2,126,646
Accumulated other comprehensive loss (469,637) (483,417) (579,290)
Treasury stock, at cost (593,658) (588,012) (1,352,348)
1,976,386 1,722,785 1,691,983
$ 11,338,988 $ 12,010,601 $ 11,139,947


	(Unaudited)				(Unaudited)
	March 27, 2022		December 31, 2021		March 28, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,393,731	$	1,874,745	$	2,320,645

Accounts receivable, net	254,286		182,148		216,569
Finance receivables, net of allowance of $60,889, $60,734, and $64,139	1,699,642		1,465,544		1,798,194
Inventories, net	714,259		712,942		470,997
Restricted cash	142,812		128,935		185,374
Other current assets	182,527		185,777		195,356
	4,387,257		4,550,091		5,187,135
Finance receivables, net of allowance of $279,584, $278,645, and $282,094	5,121,911		5,106,377		4,958,583
Property, plant and equipment, net	663,807		683,984		718,968
Pension and postretirement assets	399,029		386,152		105,910
Goodwill	62,607		63,177		65,157
Deferred income taxes	71,926		82,922		135,387
Lease assets	45,073		49,625		44,765
Other long-term assets	143,030		128,727		123,083
	$	10,894,640	$	11,051,055	$	11,338,988
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	476,917	$	374,978	$	402,764
Accrued liabilities	597,924		601,981		570,440
Short-term deposits, net	65,049		72,146		93,887
Short-term debt	816,016		751,286		765,263
Current portion of long-term debt, net	1,327,357		1,542,496		1,622,243
	3,283,263		3,342,887		3,454,597
Long-term deposits, net	283,034		218,180		58,766
Long-term debt, net	4,470,086		4,595,617		5,478,091
Lease liabilities	27,633		29,904		30,061
Pension and postretirement liabilities	93,792		95,299		103,854
Deferred income taxes	9,578		9,261		8,682
Other long-term liabilities	218,153		206,663		228,551
Commitments and contingencies (Note 16)	0		0		0
Shareholders’ equity:

Common stock	1,704		1,694		1,690
Additional paid-in-capital	1,554,840		1,547,011		1,517,129
Retained earnings	2,040,867		1,842,421		1,520,862
Accumulated other comprehensive loss	(229,610)		(240,919)		(469,637)
Treasury stock, at cost	(858,700)		(596,963)		(593,658)
	2,509,101		2,553,244		1,976,386
	$	10,894,640	$	11,051,055	$	11,338,988

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands)

(Unaudited) (Unaudited)
March 28,
2021 December 31,
2020 March 29,
2020
Balances held by consolidated variable interest entities (Note 12):
Finance receivables, net - current $ 567,887 $ 530,882 $ 381,904
Other assets $ 4,027 $ 3,753 $ 2,262
Finance receivables, net - non-current $ 2,113,344 $ 1,889,472 $ 1,435,832
Restricted cash - current and non-current $ 196,946 $ 142,892 $ 99,235
Current portion of long-term debt, net $ 692,903 $ 608,987 $ 437,488
Long-term debt, net $ 1,757,003 $ 1,585,174 $ 1,319,357


	(Unaudited)				(Unaudited)
	March 27, 2022		December 31, 2021		March 28, 2021
Balances held by consolidated variable interest entities (Note 12):
Finance receivables, net - current	$	455,638	$	493,543	$	567,887
Other assets	$	4,373	$	2,982	$	4,027
Finance receivables, net - non-current	$	1,487,650	$	1,734,428	$	2,113,344
Restricted cash - current and non-current	$	156,297	$	144,284	$	196,946
Current portion of long-term debt, net	$	551,305	$	569,145	$	692,903
Long-term debt, net	$	1,075,787	$	1,330,586	$	1,757,003

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months ended
March 28,
2021 March 29,
2020
Net cash provided (used) by operating activities (Note 7) $ 162,781 $ (8,582)
Cash flows from investing activities:
Capital expenditures (18,813) (32,928)
Origination of finance receivables (909,138) (780,061)
Collections on finance receivables 900,485 841,261
Other investing activities 733 16
Net cash (used) provided by investing activities (26,733) 28,288
Cash flows from financing activities:
Repayments of medium-term notes (1,050,000) (600,000)
Proceeds from securitization debt 597,411 522,694
Repayments of securitization debt (291,346) (130,918)
Borrowings of asset-backed commercial paper 0 225,187
Repayments of asset-backed commercial paper (66,894) (67,809)
Net (decrease) increase in unsecured commercial paper (262,517) 772,208
Net increase in credit facilities 15,629 0
Net increase in deposits 72,664 0
Dividends paid (23,105) (58,817)
Repurchase of common stock (5,646) (7,071)
Issuance of common stock under share-based plans 1,085 34
Net cash (used) provided by financing activities (1,012,719) 655,508
Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,163) (5,732)
Net (decrease) increase in cash, cash equivalents and restricted cash $ (881,834) $ 669,482
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period $ 3,409,168 $ 905,366
Net (decrease) increase in cash, cash equivalents and restricted cash (881,834) 669,482
Cash, cash equivalents and restricted cash, end of period $ 2,527,334 $ 1,574,848
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents $ 2,320,645 $ 1,465,061
Restricted cash 185,374 99,903
Restricted cash included in Other long-term assets 21,315 9,884
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows $ 2,527,334 $ 1,574,848


	Three months ended
	March 27, 2022		March 28, 2021
Net cash provided by operating activities (Note 7)	$	139,321	$	162,781
Cash flows from investing activities:
Capital expenditures	(27,999)		(18,813)
Origination of finance receivables	(1,058,461)		(909,138)
Collections on finance receivables	965,190		900,485




Other investing activities	135		733
Net cash used by investing activities	(121,135)		(26,733)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	495,785		—
Repayments of medium-term notes	(550,000)		(1,050,000)


Proceeds from securitization debt	—		597,411
Repayments of securitization debt	(271,499)		(291,346)
Borrowings of asset-backed commercial paper	62,455		—
Repayments of asset-backed commercial paper	(56,634)		(66,894)
Net increase (decrease) in unsecured commercial paper	64,521		(262,517)
Net increase in credit facilities	—		15,629
Net increase in deposits	57,660		72,664
Dividends paid	(24,056)		(23,105)
Repurchase of common stock	(261,737)		(5,646)
Other financing activities	—		1,085
Net cash used by financing activities	(483,505)		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,743)		(5,163)
Net decrease in cash, cash equivalents and restricted cash	$	(467,062)	$	(881,834)

Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	$	2,025,219	$	3,409,168
Net decrease in cash, cash equivalents and restricted cash	(467,062)		(881,834)
Cash, cash equivalents and restricted cash, end of period	$	1,558,157	$	2,527,334

Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents	$	1,393,731	$	2,320,645
Restricted cash	142,812		185,374
Restricted cash included in Other long-term assets	21,614		21,315
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows	$	1,558,157	$	2,527,334

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except share and per share amounts)

(Unaudited)


																Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
																Issued Shares	Balance
Balance, December 31, 2021															Balance, December 31, 2021	169,364,686	$	1,694	$	1,547,011	$	1,842,421	$	(240,919)	$	(596,963)	$	2,553,244
Net income															Net income	—	—		—		222,502		—		—		222,502
Other comprehensive income, net of tax (Note 17)															Other comprehensive income, net of tax (Note 17)	—	—		—		—		11,309		—		11,309
Dividends ($0.1575 per share)															Dividends ($0.1575 per share)	—	—		—		(24,056)		—		—		(24,056)
Repurchase of common stock															Repurchase of common stock	—	—		—		—		—		(261,737)		(261,737)
Share-based compensation															Share-based compensation	976,062	10		7,829		—		—		—		7,839

Balance, March 27, 2022															Balance, March 27, 2022	170,340,748	1,704		1,554,840		2,040,867		(229,610)		(858,700)		2,509,101

		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total			Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
		Issued Shares	Balance													Issued Shares	Balance
Balance, December 31, 2020	Balance, December 31, 2020	168,503,526	$	1,685	$	1,507,706	$	1,284,823	$	(483,417)	$	(588,012)	$	1,722,785	Balance, December 31, 2020	168,503,526	$	1,685	$	1,507,706	$	1,284,823	$	(483,417)	$	(588,012)	$	1,722,785
Net income	Net income	—	—		—		259,144		—		—		259,144		Net income	—	—		—		259,144		—		—		259,144
Other comprehensive income, net of tax (Note 17)	Other comprehensive income, net of tax (Note 17)	—	—		—		—		13,780		—		13,780		Other comprehensive income, net of tax (Note 17)	—	—		—		—		13,780		—		13,780
Dividends ($0.15 per share)		—	—		—		(23,105)		—		—		(23,105)
Dividends ($0.1500 per share)															Dividends ($0.1500 per share)	—	—		—		(23,105)		—		—		(23,105)
Repurchase of common stock	Repurchase of common stock	—	—		—		—		—		(5,646)		(5,646)		Repurchase of common stock	—	—		—		—		—		(5,646)		(5,646)
Share-based compensation	Share-based compensation	483,326	5		9,423		—		—		—		9,428		Share-based compensation	483,326	5		9,423		—		—		—		9,428

Balance, March 28, 2021	Balance, March 28, 2021	168,986,852	$	1,690	$	1,517,129	$	1,520,862	$	(469,637)	$	(593,658)	$	1,976,386	Balance, March 28, 2021	168,986,852	1,690		1,517,129		1,520,862		(469,637)		(593,658)		1,976,386

		Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
		Issued Shares	Balance
Balance, December 31, 2019		182,816,536	$	1,828	$	1,491,004	$	2,193,997	$	(536,949)	$	(1,345,881)	$	1,803,999
Net income		—	—		—		69,695		—		—		69,695
Other comprehensive loss, net of tax (Note 17)		—	—		—		—		(42,341)		—		(42,341)
Dividends ($0.38 per share)		—	—		—		(58,817)		—		—		(58,817)
Repurchase of common stock		—	—		—		—		—		(7,071)		(7,071)
Share-based compensation		585,053	6		4,137		—		—		604		4,747
Cumulative effect of change in accounting		—	—		—		(78,229)		—		—		(78,229)
Balance, March 29, 2020		183,401,589	$	1,834	$	1,495,141	$	2,126,646	$	(579,290)	$	(1,352,348)	$	1,691,983

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Use of Estimates

Principles of Consolidation and Basis of Presentation – The consolidated financial statements include the accounts of Harley-Davidson, Inc. and its subsidiaries, all of which are wholly-owned (the Company), including the accounts of the groups of companies referred to as Harley-Davidson Motor Company ~~(HDMC)~~ and Harley-Davidson Financial ~~Services (HDFS).~~Services. 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 have been eliminated.

The Company operates in 2 reportable segments: Motorcycles and Related Products (Motorcycles) and Financial Services.

In the opinion of the Company's 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 March ~~28, 2021~~27, 2022 and March ~~29, 2020,~~28, 2021, the Consolidated statements of operations for the three month periods then ended, the Consolidated statements of comprehensive income for the three month periods then ended, 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 disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and U.S. generally accepted accounting principles (U.S. GAAP) for interim financial reporting. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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

During the first quarter of 2020, the outbreak of a novel strain of coronavirus (COVID-19) spread throughout the world, and it was recognized as a pandemic in March 2020. The COVID-19 pandemic has restricted the level of economic activity in the U.S. and around the world and the full extent of its impact is not yet known. Certain estimates used in the preparation of financial results for the period ending March 28, 2021 could be impacted in future periods as a result of the COVID-19 pandemic.

2. New Accounting Standards

Accounting Standards ~~Recently~~Not Yet Adopted

In ~~December 2019,~~March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. ~~2019-12, Simplifying~~2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (ASU 2022-02). ASU 2022-02 addresses areas identified by the ~~Accounting~~FASB as part of its post-implementation review of its previously issued credit losses standard (ASU 2016-13) that introduced the CECL model. ASU 2022-02 eliminates the accounting guidance for ~~Income Taxes (ASU No. 2019-12). The~~troubled debt restructurings by creditors that have adopted the CECL model and enhances disclosure requirements for certain loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, ASU 2022-02 requires a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. As the Company has already adopted ASU 2016-13, the new guidance ~~eliminates certain exceptions related to~~is effective for the ~~approach~~fiscal years beginning after December 15, 2022 and for ~~intraperiod tax allocation, the methodology for calculating income taxes in an~~ interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted ASU 2019-12 on January 1, 2021 on a prospective basis.periods within those fiscal years. Early adoption is permitted. The adoption of ASU ~~2019-12 did~~2022-02 is not expected to have a material impact on the Company's consolidated financial statements.

~~Table of Contents~~

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.

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Disaggregated revenue by major source was as follows (in thousands):

Three months ended
March 28,
2021 March 29,
2020
Motorcycles and Related Products Revenue:
Motorcycles $ 1,016,334 $ 899,365
Parts & Accessories 149,859 134,685
General Merchandise 50,323 49,160
Licensing 5,512 8,029
Other 10,079 8,549
1,232,107 1,099,788
Financial Services Revenue:
Interest income 159,814 170,001
Other 30,586 28,455
190,400 198,456
$ 1,422,507 $ 1,298,244


	Three months ended
		March 27, 2022		March 28, 2021
Motorcycles and Related Products Revenue:
Motorcycles		$	1,059,113	$	1,016,334
Parts and accessories		165,525		149,859
Apparel		51,407		50,323
Licensing		6,497		5,512
Other		20,629		10,079
		1,303,171		1,232,107
Financial Services Revenue:
Interest income		161,734		159,814
Other		30,281		30,586
		192,015		190,400
		$	1,495,186	$	1,422,507

The Company maintains certain deferred revenue balances related to payments received at contract inception in advance of the Company’s performance under the contract and generally relates to the sale of Harley Owners Group® memberships and extended service plan contracts. Deferred revenue is recognized as revenue as the Company performs under the contract. Deferred revenue, included in Accrued liabilities and Other long-term liabilities on the Consolidated balance sheets, was as follows (in thousands):


		March 28, 2021		March 29, 2020			March 27, 2022		March 28, 2021
Balance, beginning of period	Balance, beginning of period	$	36,614	$	29,745	Balance, beginning of period	$	40,092	$	36,614
Balance, end of period	Balance, end of period	$	36,266	$	29,434	Balance, end of period	$	38,842	$	36,266

Previously deferred revenue recognized as revenue in the three months ended March 27, 2022 and March 28, 2021 ~~and March 29, 2020~~ was ~~$6.2~~$7.7 million and ~~$6.9~~$6.2 million, respectively. The Company expects to recognize approximately ~~$14.9~~$17.5 million of the remaining unearned revenue over the next 12 months and $21.4 million thereafter.

4. Restructuring Activities

The Company's restructuring activities are included in Restructuring benefit on the Consolidated statements of operations.

In 2020, the Company initiated restructuring activities including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global ~~independent~~ dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. The workforce reduction resulted in the termination of approximately 500 employees. In addition, the India action resulted in the termination of approximately 70 employees. These restructuring activities are essentially complete, and the Company does not expect restructuring expenses of any significance in 2022.

Since the inception of the restructuring activities in 2020 through the three months ended March 27, 2022, the Company has incurred cumulative restructuring expenses of $133.2 million, including $121.7 million and $11.5 million in the Motorcycles and Financial Services segments, respectively. This includes restructuring (benefit) expense for the three months ended March 27, 2022 and March 28, 2021 by segment as follows (in thousands):


	Three months ended
		March 27, 2022		March 28, 2021
Motorcycles and Related Products		$	(128)	$	(593)
Financial Services		—		227
		$	(128)	$	(366)

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Since the inception of these restructuring activities in 2020 through the three months ended March 28, 2021, the Company has incurred cumulative restructuring expenses of $129.6 million. This includes a restructuring benefit during the three months ended March 28, 2021 of $0.4 million, consisting of a $0.6 million benefit in the Motorcycles segment and expense of $0.2 millionin the Financial Services segment. The Company expects total estimated restructuring expenses of approximately $150 million, including approximately $139 million and $11 million expected to be in incurred in the Motorcycles and Financial Services segments, respectively. Total expected restructuring expenses include approximately $30 million related to employee termination benefits, $90 million related to contract termination and other costs and $30 million related to non-current asset adjustments, including accelerated depreciation and other adjustments to the carrying value of non-current assets. The Company expects to incur the remaining estimated restructuring expenses of approximately $20 million in 2021.

Changes in accrued restructuring expenses, which are included in Accrued liabilities on the Consolidated balance sheets, were as follows (in thousands)~~. There were no restructuring activities during the three months ended March 29, 2020.~~:


												Three months ended March 27, 2022
												Employee Termination Benefits		Contract Terminations & Other		Non-Current Asset Adjustments		Total
Balance, beginning of period											Balance, beginning of period	$	121	$	2,874	$	—	$	2,995
Restructuring benefit											Restructuring benefit	—		(128)		—		(128)
Utilized – cash											Utilized – cash	(18)		(1,614)		—		(1,632)

Foreign currency changes											Foreign currency changes	(3)		1		—		(2)
Balance, end of period											Balance, end of period	$	100	$	1,133	$	—	$	1,233

		Three months ended March 28, 2021								Three months ended March 28, 2021
		Employee Termination Benefits		Contract Terminations & Other		Non-Current Asset Adjustments		Total				Employee Termination Benefits		Contract Terminations & Other		Non-Current Asset Adjustments		Total
Balance, beginning of period	Balance, beginning of period	$	7,724	$	16,196	$	0	$	23,920		Balance, beginning of period	$	7,724	$	16,196	$	—	$	23,920
Restructuring (benefit) expense	Restructuring (benefit) expense	(944)		1,106		(528)		(366)			Restructuring (benefit) expense	(944)		1,106		(528)		(366)
Utilized – cash	Utilized – cash	(3,661)		(12,781)		0		(16,442)			Utilized – cash	(3,661)		(12,781)		—		(16,442)
Utilized – non cash	Utilized – non cash	0		0		528		528			Utilized – non cash	—		—		528		528
Foreign currency changes	Foreign currency changes	(112)		(54)		0		(166)			Foreign currency changes	(112)		(54)		—		(166)
Balance, end of period	Balance, end of period	$	3,007	$	4,467	$	0	$	7,474		Balance, end of period	$	3,007	$	4,467	$	—	$	7,474

5. Income Taxes

The Company’s effective income tax rate for the three months ended March ~~28, 2021~~27, 2022 was ~~23.8%~~23.4% compared to ~~26.3% for the three months ended March 29, 2020. The decrease in the first quarter 2021 effective income tax rate from 2020 was due to the increase in~~ ~~Income before provision for income taxes, resulting in discrete income tax adjustments having a reduced impact on the effective income tax rate for the quarter. The effective income tax rate~~23.8% for the three months ended March 28, ~~2021 was determined based on the Company's current projections for full-year 2021 financial results.~~2021.

6. Earnings Per Share

The computation of basic and diluted earnings per share was as follows (in thousands, except per share amounts):

Three months ended
March 28,
2021 March 29,
2020
Net income $ 259,144 $ 69,695
Basic weighted-average shares outstanding 153,478 153,004
Effect of dilutive securities – employee stock compensation plan
1,012 740
Diluted weighted-average shares outstanding 154,490 153,744
Net earnings per share:
Basic $ 1.69 $ 0.46
Diluted $ 1.68 $ 0.45


	Three months ended
		March 27, 2022		March 28, 2021
Net income		$	222,502	$	259,144

Basic weighted-average shares outstanding		152,820		153,478
Effect of dilutive securities – employee stock compensation plan		1,104		1,012
Diluted weighted-average shares outstanding		153,924		154,490
Net earnings per share:
Basic		$	1.46	$	1.69
Diluted		$	1.45	$	1.68

Shares of common stock related to share-based compensation that were not included in the effect of dilutive securities because the effect would have been anti-dilutive include ~~0.6~~0.5 million and ~~1.7~~0.6 million shares for the three months ended March ~~28, 2021~~27, 2022 and March ~~29, 2020,~~28, 2021, respectively.

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7. Additional Balance Sheet and Cash Flow Information

Investments in Marketable Securities – The Company’s investments in marketable securities consisted of the following (in thousands):

March 28,
2021 December 31,
2020 March 29,
2020
Mutual funds $ 50,239 $ 52,061 $ 44,144


	March 27, 2022		December 31, 2021		March 28, 2021

Mutual funds	$	45,189	$	49,650	$	50,239

Mutual funds, included in Other long-term assets on the Consolidated balance sheets, are carried at fair value with gains and losses recorded in income. Mutual funds are held to support certain deferred compensation obligations.

Inventories, net – Substantially all inventories located in the U.S. 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. Motorcycle finished goods inventories include motorcycles that are ready for sale and motorcycles that are substantially complete, but awaiting installation of certain components affected by global supply chain constraints. Inventories, net consisted of the following (in thousands):


		March 28, 2021		December 31, 2020		March 29, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Raw materials and work in process	Raw materials and work in process	$	251,199	$	211,979	$	245,384	Raw materials and work in process	$	376,600	$	347,915	$	251,199
Motorcycle finished goods	Motorcycle finished goods	185,590		281,132		272,648		Motorcycle finished goods	291,623		345,956		185,590
Parts & Accessories and General Merchandise		88,291		84,469		149,318
Parts and accessories and apparel								Parts and accessories and apparel	130,156		103,191		88,291
Inventory at lower of FIFO cost or net realizable value	Inventory at lower of FIFO cost or net realizable value	525,080		577,580		667,350		Inventory at lower of FIFO cost or net realizable value	798,379		797,062		525,080
Excess of FIFO over LIFO cost	Excess of FIFO over LIFO cost	(54,083)		(54,083)		(56,426)		Excess of FIFO over LIFO cost	(84,120)		(84,120)		(54,083)
		$	470,997	$	523,497	$	610,924		$	714,259	$	712,942	$	470,997

Deposits – ~~Beginning in 2020, HDFS began offering~~Harley-Davidson Financial Services offers brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. The Company had ~~$152.7~~$348.1 million, $290.3 million and ~~$80.0~~$152.7 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of March 27, 2022, December 31, 2021, and March 28, 2021, ~~and December 31, 2020,~~ respectively. ~~There were 0 deposits as of March 29, 2020.~~ The liabilities for deposits are included in Short-term deposits, net or Long-term deposits, net on the Consolidated balance sheets based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.

Future maturities of the Company's certificates of deposit as of March ~~28, 2021~~27, 2022 were as follows (in thousands):

2021 $ 80,000
2022 14,000
2023 7,000
2024 22,000
2025 0
Thereafter 30,000
Unamortized fees (347)
$ 152,653


2022	$	58,475
2023	74,304
2024	71,696
2025	19,053
2026	79,742
Thereafter	46,060
Future maturities	349,330
Unamortized fees	(1,247)
	$	348,083

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Operating Cash Flow – The reconciliation of Net income to Net cash provided ~~(used)~~ by operating activities was as follows (in thousands):

Three months ended
March 28,
2021 March 29,
2020
Cash flows from operating activities:
Net income $ 259,144 $ 69,695
Adjustments to reconcile Net income to Net cash provided (used) by operating activities:
Depreciation and amortization 40,221 47,427
Amortization of deferred loan origination costs 19,200 16,739
Amortization of financing origination fees 3,614 2,999
Provision for long-term employee benefits 7,090 7,852
Employee benefit plan contributions and payments (9,885) (1,608)
Stock compensation expense 8,968 3,896
Net change in wholesale finance receivables related to sales (308,532) (208,183)
Provision for credit losses (22,474) 79,419
Deferred income taxes 13,192 (3,803)
Other, net 1,171 3,579
Changes in current assets and liabilities:
Accounts receivable, net (79,012) (47,272)
Finance receivables – accrued interest and other
8,947 4,007
Inventories, net 45,086 (23,943)
Accounts payable and accrued liabilities 153,597 10,562
Derivative financial instruments (3,309) 2,812
Other 25,763 27,240
(96,363) (78,277)
Net cash provided (used) by operating activities $ 162,781 $ (8,582)


	Three months ended
	March 27, 2022		March 28, 2021
Cash flows from operating activities:
Net income	$	222,502	$	259,144
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization	39,258		40,221
Amortization of deferred loan origination costs	22,995		19,200
Amortization of financing origination fees	3,701		3,614
Provision for long-term employee benefits	(5,050)		7,090
Employee benefit plan contributions and payments	(2,143)		(9,885)
Stock compensation expense	8,903		8,968
Net change in wholesale finance receivables related to sales	(205,727)		(308,532)
Provision for credit losses	28,822		(22,474)



Deferred income taxes	6,307		13,192

Other, net	(5,408)		(2,138)
Changes in current assets and liabilities:
Accounts receivable, net	(74,993)		(79,012)
Finance receivables – accrued interest and other	3,115		8,947
Inventories, net	(2,630)		45,086
Accounts payable and accrued liabilities	106,969		153,597

Other current assets	(7,300)		25,763
	(83,181)		(96,363)
Net cash provided by operating activities	$	139,321	$	162,781

8. Finance Receivables

The Company provides retail financial services to customers of its ~~independent~~ dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to ~~independent~~ dealer sales of motorcycles to retail 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 its ~~independent~~ dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles and related parts and accessories to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.

Finance receivables, net were as follows (in thousands):


		March 28, 2021		December 31, 2020		March 29, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Retail finance receivables	Retail finance receivables	$	6,310,982	$	6,344,195	$	6,269,247	Retail finance receivables	$	6,511,845	$	6,493,519	$	6,310,982
Wholesale finance receivables	Wholesale finance receivables	792,028		489,749		1,358,656		Wholesale finance receivables	650,181		417,781		792,028
		7,103,010		6,833,944		7,627,903			7,162,026		6,911,300		7,103,010
Allowance for credit losses	Allowance for credit losses	(346,233)		(390,936)		(335,496)		Allowance for credit losses	(340,473)		(339,379)		(346,233)
		$	6,756,777	$	6,443,008	$	7,292,407		$	6,821,553	$	6,571,921	$	6,756,777

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On January 1, 2020, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires an entity to recognize expected lifetime losses on finance receivables upon origination. Under ASU 2016-13, theThe Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. The Company's allowance for credit losses reflects expected lifetime credit losses on its finance receivables. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for ~~loan~~credit losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. 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~~credit loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.

The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Changes in the Company’s outlook on economic conditions impacted the Company's retail and wholesale estimates for expected credit losses at March ~~28, 2021.~~27, 2022. During the first quarter of ~~2021,~~2022, the U.S. economy and the Company’s outlook on economic conditions ~~improved~~remained largely unchanged from the ~~fourth quarter~~end of ~~2020; however, there is uncertainty surrounding the~~2021. The pace of economic recovery remained uncertain as demonstrated by ~~unemployment levels above those experienced prior to~~rising inflation, muted consumer confidence, continued global supply chain disruptions, and the ~~COVID-19 pandemic and continuing COVID-19 pandemic-related challenges across the U.S.,~~conflict in Ukraine, among other factors. As such, at the end of the first quarter of ~~2021,~~2022, the Company’s ~~economic~~ outlook on economic conditions included slow economic ~~improvement; however, given the uncertainty surrounding the pace of economic recovery, the Company also included some adverse economic conditions~~improvement in its economic scenario weighting.

Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance for credit losses balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and others, as appropriate.

Due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and the ~~Company's management’s~~Company’s expectations surrounding the economic forecasts. The ~~Company’s expectations~~Company will continue to monitor future economic trends and conditions. Expectations surrounding ~~its~~the Company's economic forecasts may change in future periods as additional information becomes available.

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

Three months ended March 28, 2021
Retail Wholesale Total
Balance, beginning of period $ 371,738 $ 19,198 $ 390,936
Provision for credit losses (22,449) (25) (22,474)
Charge-offs (34,589) 0 (34,589)
Recoveries 12,360 0 12,360
Balance, end of period $ 327,060 $ 19,173 $ 346,233
Three months ended March 29, 2020
Retail Wholesale Total
Balance, beginning of period $ 188,501 $ 10,080 $ 198,581
Cumulative effect of change in accounting(a)
95,558 5,046 100,604
Provision for credit losses 70,417 9,002 79,419
Charge-offs (55,215) 0 (55,215)
Recoveries 12,107 0 12,107
Balance, end of period $ 311,368 $ 24,128 $ 335,496

~~(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the allowance for loan loss through~~ ~~Retained earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolios at date of adoption.~~


	Three months ended March 27, 2022
		Retail		Wholesale		Total
Balance, beginning of period		$	326,320	$	13,059	$	339,379
Provision for credit losses		28,614		208		28,822
Charge-offs		(41,804)		—		(41,804)
Recoveries		14,076		—		14,076
Balance, end of period		$	327,206	$	13,267	$	340,473
	Three months ended March 28, 2021
		Retail		Wholesale		Total
Balance, beginning of period		$	371,738	$	19,198	$	390,936
Provision for credit losses		(22,449)		(25)		(22,474)
Charge-offs		(34,589)		—		(34,589)
Recoveries		12,360		—		12,360
Balance, end of period		$	327,060	$	19,173	$	346,233

The Company manages retail credit risk through its credit approval process 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. For the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.

As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the ~~two~~2 portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.

The amortized cost of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator was as follows (in thousands):

March 28, 2021
2021 2020 2019 2018 2017 2016 & Prior Total
U.S. Retail:
Super prime $ 260,359 $ 725,383 $ 502,847 $ 301,839 $ 134,213 $ 74,086 $ 1,998,727
Prime 349,662 1,026,080 706,940 445,201 249,327 183,217 2,960,427
Sub-prime 130,389 395,495 263,203 156,368 96,998 100,827 1,143,280
740,410 2,146,958 1,472,990 903,408 480,538 358,130 6,102,434
Canadian Retail:
Super prime 13,938 48,309 42,993 24,549 11,116 4,831 145,736
Prime 4,245 17,350 13,055 9,263 5,808 4,178 53,899
Sub-prime 601 2,949 2,227 1,407 951 778 8,913
18,784 68,608 58,275 35,219 17,875 9,787 208,548
$ 759,194 $ 2,215,566 $ 1,531,265 $ 938,627 $ 498,413 $ 367,917 $ 6,310,982


	March 27, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
U.S. Retail:
Super prime	$	311,114	$	890,413	$	422,454	$	268,692	$	139,540	$	68,682	$	2,100,895
Prime	394,793		1,247,764		627,102		407,242		233,630		176,018		3,086,549
Sub-prime	125,280		427,813		240,999		159,968		91,444		91,610		1,137,114
	831,187		2,565,990		1,290,555		835,902		464,614		336,310		6,324,558
Canadian Retail:
Super prime	14,015		47,025		29,382		23,367		11,524		4,515		129,828
Prime	4,228		15,842		11,513		8,349		5,454		4,391		49,777
Sub-prime	506		2,180		1,961		1,401		861		773		7,682
	18,749		65,047		42,856		33,117		17,839		9,679		187,287
	$	849,936	$	2,631,037	$	1,333,411	$	869,019	$	482,453	$	345,989	$	6,511,845

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		December 31, 2020															December 31, 2021
		2020		2019		2018		2017		2016		2015 & Prior		Total			2021		2020		2019		2018		2017		2016 & Prior		Total
U.S. Retail:	U.S. Retail:															U.S. Retail:
Super prime	Super prime	$	822,631	$	575,977	$	355,529	$	165,436	$	71,360	$	29,181	$	2,020,114	Super prime	$	1,010,636	$	484,479	$	316,390	$	171,763	$	65,753	$	27,424	$	2,076,445
Prime	Prime	1,133,637		794,058		508,713		293,358		156,688		77,046		2,963,500		Prime	1,391,385		712,858		470,177		277,206		142,288		82,169		3,076,083
Sub-prime	Sub-prime	435,875		295,403		177,598		111,163		72,556		52,060		1,144,655		Sub-prime	476,688		273,787		182,002		105,330		61,923		51,035		1,150,765
		2,392,143		1,665,438		1,041,840		569,957		300,604		158,287		6,128,269			2,878,709		1,471,124		968,569		554,299		269,964		160,628		6,303,293
Canadian Retail:	Canadian Retail:															Canadian Retail:
Super prime	Super prime	53,465		48,692		28,581		13,818		5,018		2,011		151,585		Super prime	51,779		32,724		27,073		13,984		4,619		1,614		131,793
Prime	Prime	18,568		14,257		10,269		6,727		3,198		2,025		55,044		Prime	16,882		12,675		9,244		6,230		3,628		1,779		50,438
Sub-prime	Sub-prime	3,172		2,498		1,560		1,095		607		365		9,297		Sub-prime	2,356		2,134		1,571		947		606		381		7,995
		75,205		65,447		40,410		21,640		8,823		4,401		215,926			71,017		47,533		37,888		21,161		8,853		3,774		190,226
		$	2,467,348	$	1,730,885	$	1,082,250	$	591,597	$	309,427	$	162,688	$	6,344,195		$	2,949,726	$	1,518,657	$	1,006,457	$	575,460	$	278,817	$	164,402	$	6,493,519


		March 29, 2020															March 28, 2021
		2020		2019		2018		2017		2016		2015 & Prior		Total			2021		2020		2019		2018		2017		2016 & Prior		Total
U.S. Retail:	U.S. Retail:															U.S. Retail:
Super prime	Super prime	$	204,937	$	825,176	$	539,296	$	275,621	$	140,284	$	62,924	$	2,048,238	Super prime	$	260,359	$	725,383	$	502,847	$	301,839	$	134,213	$	74,086	$	1,998,727
Prime	Prime	265,365		1,065,132		717,234		441,284		262,421		155,338		2,906,774		Prime	349,662		1,026,080		706,940		445,201		249,327		183,217		2,960,427
Sub-prime	Sub-prime	108,068		394,291		239,571		155,391		108,531		98,124		1,103,976		Sub-prime	130,389		395,495		263,203		156,368		96,998		100,827		1,143,280
		578,370		2,284,599		1,496,101		872,296		511,236		316,386		6,058,988			740,410		2,146,958		1,472,990		903,408		480,538		358,130		6,102,434
Canadian Retail:	Canadian Retail:															Canadian Retail:
Super prime	Super prime	12,819		61,889		39,516		22,186		10,565		4,989		151,964		Super prime	13,938		48,309		42,993		24,549		11,116		4,831		145,736
Prime	Prime	3,968		16,479		12,389		8,441		4,549		3,929		49,755		Prime	4,245		17,350		13,055		9,263		5,808		4,178		53,899
Sub-prime	Sub-prime	768		2,827		1,919		1,348		921		757		8,540		Sub-prime	601		2,949		2,227		1,407		951		778		8,913
		17,555		81,195		53,824		31,975		16,035		9,675		210,259			18,784		68,608		58,275		35,219		17,875		9,787		208,548
		$	595,925	$	2,365,794	$	1,549,925	$	904,271	$	527,271	$	326,061	$	6,269,247		$	759,194	$	2,215,566	$	1,531,265	$	938,627	$	498,413	$	367,917	$	6,310,982

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 the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated by the Company on a quarterly basis.

Table of Contents

The amortized cost of the Company's wholesale financial receivables, by vintage and credit quality indicator, was as follows (in thousands):


	March 27, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—
Medium Risk	—		—		—		—		—		—		—
Low Risk	489,283		127,797		9,108		11,147		9,893		2,953		650,181
	$	489,283	$	127,797	$	9,108	$	11,147	$	9,893	$	2,953	$	650,181


		March 28, 2021															December 31, 2021
		2021		2020		2019		2018		2017		2016 & Prior		Total			2021		2020		2019		2018		2017		2016 & Prior		Total
Non-Performing	Non-Performing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	Doubtful	0		0		0		0		0		0		0		Doubtful	—		—		—		—		—		—		—
Substandard	Substandard	0		0		0		0		0		0		0		Substandard	—		—		—		—		—		—		—
Special Mention	Special Mention	567		530		262		17		0		0		1,376		Special Mention	—		—		—		—		—		—		—
Medium Risk	Medium Risk	0		728		417		0		0		0		1,145		Medium Risk	—		—		—		—		—		—		—
Low Risk	Low Risk	600,144		122,970		44,614		12,568		6,392		2,819		789,507		Low Risk	380,211		11,379		11,047		10,565		3,662		917		417,781
		$	600,711	$	124,228	$	45,293	$	12,585	$	6,392	$	2,819	$	792,028		$	380,211	$	11,379	$	11,047	$	10,565	$	3,662	$	917	$	417,781

December 31, 2020
2020 2019 2018 2017 2016 2015 & Prior Total
Non-Performing $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Doubtful 0 0 0 0 0 0 0
Substandard 0 0 0 0 0 0 0
Special Mention 658 365 31 0 0 0 1,054
Medium Risk 1,925 242 0 0 0 0 2,167
Low Risk 388,568 71,441 13,412 7,887 2,297 2,923 486,528
$ 391,151 $ 72,048 $ 13,443 $ 7,887 $ 2,297 $ 2,923 $ 489,749


		March 29, 2020															March 28, 2021
		2020		2019		2018		2017		2016		2015 & Prior		Total			2021		2020		2019		2018		2017		2016 & Prior		Total
Non-Performing	Non-Performing	$	0	$	2,376	$	1,774	$	107	$	25	$	43	$	4,325	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	Doubtful	478		4,169		529		51		0		726		5,953		Doubtful	—		—		—		—		—		—		—
Substandard	Substandard	5,375		6,374		391		131		0		0		12,271		Substandard	—		—		—		—		—		—		—
Special Mention	Special Mention	5,239		8,001		977		6		0		1,268		15,491		Special Mention	567		530		262		17		—		—		1,376
Medium Risk	Medium Risk	8,307		10,996		1,091		23		0		826		21,243		Medium Risk	—		728		417		—		—		—		1,145
Low Risk	Low Risk	658,137		574,401		47,101		10,997		6,323		2,414		1,299,373		Low Risk	600,144		122,970		44,614		12,568		6,392		2,819		789,507
		$	677,536	$	606,317	$	51,863	$	11,315	$	6,348	$	5,277	$	1,358,656		$	600,711	$	124,228	$	45,293	$	12,585	$	6,392	$	2,819	$	792,028

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. The Company reverses accrued interest related to charged-off accounts against Financial Services interest income when the account is charged-off. The Company reversed $4.9 million and $5.2 million ~~and $6.4 million~~ of accrued interest against Financial Services interest income during the three months ended March ~~28, 2021~~27, 2022 and March ~~29, 2020,~~28, 2021, respectively. All retail finance receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses~~(ASC Topic 326)~~ to exclude accrued interest from its allowance for credit losses. Accordingly, as of March ~~28, 2021,~~27, 2022, December 31, ~~2020~~2021 and March ~~29, 2020,~~28, 2021, all retail finance receivables were accounted for as interest-earning receivables.

Table of Contents

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against interest income. As the Company follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio.

~~Table of Contents~~

There were no charged-off accounts during the three months ended March ~~28, 2021~~27, 2022 and March ~~29, 2020.~~28, 2021. As such, the Company did not reverse any accrued interest in those periods. There were no dealers on non-accrual status at March ~~28,~~27, 2022, December 31, 2021, and ~~December 31, 2020. At~~ March ~~29, 2020, $4.3 million of wholesale finance receivables outstanding on non-accrual status, and of this, $2.6 million were over 90 days or more past due.~~28, 2021.

~~Additional information related~~ ~~to the wholesale finance receivables on non-accrual status at March 29, 2020 includes (in thousands):~~

Amortized Cost, Beginning of Period Amortized Cost, End of Period Interest Income Recognized
No related allowance recorded $ 0 $ 0 $ 0
Related allowance recorded 4,994 4,325 0
$ 4,994 $ 4,325 $ 0

The aging analysis of the Company's finance receivables was as follows (in thousands):


	March 27, 2022
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,343,673	$	99,705	$	32,521	$	35,946	$	168,172	$	6,511,845
Wholesale finance receivables	649,948		178		27		28		233		650,181
	$	6,993,621	$	99,883	$	32,548	$	35,974	$	168,405	$	7,162,026

	December 31, 2021
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,298,485	$	115,942	$	44,326	$	34,766	$	195,034	$	6,493,519
Wholesale finance receivables	417,720		9		1		51		61		417,781
	$	6,716,205	$	115,951	$	44,327	$	34,817	$	195,095	$	6,911,300

	March 28, 2021
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,196,345	$	69,032	$	23,420	$	22,185	$	114,637	$	6,310,982
Wholesale finance receivables	791,826		128		22		52		202		792,028
	$	6,988,171	$	69,160	$	23,442	$	22,237	$	114,839	$	7,103,010

March 28, 2021
Current 31-60 Days
Past Due 61-90 Days
Past Due Greater than
90 Days
Past Due Total
Past Due Total
Retail finance receivables $ 6,196,345 $ 69,032 $ 23,420 $ 22,185 $ 114,637 $ 6,310,982
Wholesale finance receivables 791,826 128 22 52 202 792,028
$ 6,988,171 $ 69,160 $ 23,442 $ 22,237 $ 114,839 $ 7,103,010
December 31, 2020
Current 31-60 Days
Past Due 61-90 Days
Past Due Greater than
90 Days
Past Due Total
Past Due Total
Retail finance receivables $ 6,164,369 $ 106,818 $ 39,933 $ 33,075 $ 179,826 $ 6,344,195
Wholesale finance receivables 489,556 166 23 4 193 489,749
$ 6,653,925 $ 106,984 $ 39,956 $ 33,079 $ 180,019 $ 6,833,944
March 29, 2020
Current 31-60 Days
Past Due 61-90 Days
Past Due Greater than
90 Days
Past Due Total
Past Due Total
Retail finance receivables $ 6,091,319 $ 101,412 $ 37,816 $ 38,700 $ 177,928 $ 6,269,247
Wholesale finance receivables 1,352,084 2,051 1,437 3,084 6,572 1,358,656
$ 7,443,403 $ 103,463 $ 39,253 $ 41,784 $ 184,500 $ 7,627,903

Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize economic loss, the Company may modify certain finance receivables in troubled debt restructurings. Total finance receivables in troubled debt restructurings were not si~~gnificant~~significant as of March ~~28, 2021,~~27, 2022, December 31, ~~2020~~2021 and March ~~29, 2020.~~28, 2021. Additionally, in certain situations, the Company may offer short-term adjustments to customer payment due dates without affecting the associated interest rate or loan term. ~~During~~From the second quarter of 2020 ~~and into~~through the ~~first~~second quarter of 2021, in response to the impact of the COVID-19 pandemic, the Company ~~offered~~granted an increased amount of short-term payment due date extensions on eligible retail loans to help retail customers get through financial difficulties associated with the COVID-19 pandemic. During the first quarter of 2021, the volume of payment extensions granted for eligible retail loans declined from the levels experienced during the second quarter and into the third quarter of 2020 but had not yet returned to pre-COVID-19 pandemic levels. The Company continues to grant standard payment extensions to customers in accordance with its policies.

9. Derivative Financial Instruments and Hedging Activities

The Company is exposed to risks from fluctuations in foreign currency exchange rates, interest rates and commodity prices. To reduce its exposure to such risks, the Company selectively uses derivative financial instruments. All derivative transactions are authorized and executed pursuant to regularly reviewed policies and procedures which prohibit the use of financial instruments for speculative trading purposes.

~~Table of Contents~~

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, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Chinese yuan, Singapore dollar, Thai baht, ~~Indian rupee, Singapore dollar,~~ and Pound sterling. The Company's foreign currency exchange contracts generally have maturities of less than one year.

Table of Contents

The Company utilizes commodity contracts to mitigate the effects of commodity price fluctuations related to metals and fuel consumed in ~~the Company’s~~its motorcycle operations. The Company's commodity contracts generally have maturities of less than one year.

The Company periodically utilizes treasury rate lock contracts to fix the interest rate on a portion of the principal related to an anticipated issuance of long-term debt, interest rate swaps to reduce the impact of fluctuations in interest rates on medium-term notes with floating interest rates, and cross-currency swaps to mitigate the effect of foreign currency exchange rate fluctuations on its foreign currency-denominated debt. The Company also utilizes interest rate caps to facilitate certain asset-backed securitization transactions.

All derivative financial instruments are recognized on the Consolidated balance sheets at fair value. In accordance with ASC Topic 815, Derivatives and Hedging (ASC Topic 815), the accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship.

Changes in the fair value of derivative financial instruments that are designated as cash flow hedges are initially recorded in Other comprehensive income ~~(loss)~~(OCI) and subsequently reclassified into ~~earnings~~income when the hedged item affects income. The Company assesses, both at the inception of each hedge and on an ongoing basis, whether the derivative financial instruments that are designated as cash flow hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. No component of a designated hedging derivative financial instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative financial instruments not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign currency, commodity risks, and interest rate risks. Changes in the fair value of derivative financial instruments not designated as hedging instruments are recorded directly in income. Cash flow activity associated with the Company's derivative financial instruments is recorded in Cash flows from operating activities on the Consolidated statement of cash flow.

The notional and fair values of the Company's derivative financial instruments under ASC Topic 815 were as follows (in thousands):

Derivative Financial Instruments
Designated as Cash Flow Hedging Instruments
March 28, 2021 December 31, 2020 March 29, 2020
Notional
Value Other Current Assets Accrued Liabilities Notional
Value Other Current Assets Accrued Liabilities Notional
Value Other Current Assets Accrued Liabilities
Foreign currency contracts $ 402,814 $ 6,356 $ 6,071 $ 533,925 $ 11 $ 21,927 $ 414,753 $ 12,108 $ 575
Commodity contracts 668 3 20 671 0 52 482 0 74
Cross-currency swaps 1,367,460 73,449 0 1,367,460 138,622 0 660,780 0 41,283
Interest rate swaps 0 0 0 450,000 0 3,086 900,000 0 11,398
$ 1,770,942 $ 79,808 $ 6,091 $ 2,352,056 $ 138,633 $ 25,065 $ 1,976,015 $ 12,108 $ 53,330
Derivative Financial Instruments
Not Designated as Hedging Instruments
March 28, 2021 December 31, 2020 March 29, 2020
Notional
Value Other Current Assets Accrued Liabilities Notional
Value Other Current Assets Accrued Liabilities Notional
Value Other Current Assets Accrued Liabilities
Foreign currency contracts $ 214,337 $ 670 $ 595 $ 245,494 $ 737 $ 435 $ 182,642 $ 2,573 $ 2,194
Commodity contracts 8,172 1,193 40 6,806 849 21 7,769 0 1,452
Interest rate caps 844,673 170 0 978,058 47 0 326,976 2 0
$ 1,067,182 $ 2,033 $ 635 $ 1,230,358 $ 1,633 $ 456 $ 517,387 $ 2,575 $ 3,646


	Derivative Financial Instruments Designated as Cash Flow Hedging Instruments
	March 27, 2022						December 31, 2021						March 28, 2021
	Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities
Foreign currency contracts	$	585,451	$	18,832	$	3,576	$	562,262	$	14,644	$	1,388	$	402,814	$	6,356	$	6,071
Commodity contracts	964		316		—		996		19		39		668		3		20
Cross-currency swaps	1,367,460		18,835		—		1,367,460		35,071		—		1,367,460		73,449		—


	$	1,953,875	$	37,983	$	3,576	$	1,930,718	$	49,734	$	1,427	$	1,770,942	$	79,808	$	6,091

	Derivative Financial Instruments Not Designated as Hedging Instruments
	March 27, 2022						December 31, 2021						March 28, 2021
	Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities
Foreign currency contracts	$	230,336	$	587	$	722	$	241,935	$	1,299	$	916	$	214,337	$	670	$	595
Commodity contracts	11,866		2,435		—		10,631		641		18		8,172		1,193		40
Interest rate caps	412,478		2,060		—		504,526		360		—		844,673		170		—
	$	654,680	$	5,082	$	722	$	757,092	$	2,300	$	934	$	1,067,182	$	2,033	$	635

Table of Contents

The amounts of gains and losses related to the Company's derivative financial instruments designated as cash flow hedges were as follows (in thousands):


		Gain/(Loss) Recognized in OCI					Gain/(Loss) Reclassified from AOCL into Income
	Three months ended					Three months ended
		March 27, 2022		March 28, 2021			March 27, 2022		March 28, 2021
Foreign currency contracts		$	8,444	$	14,037		$	5,655	$	(4,953)
Commodity contracts		562		3			226		(32)
Cross-currency swaps		(16,236)		(65,174)			(25,800)		(65,788)
Treasury rate lock contracts		—		—			(127)		(124)
Interest rate swaps		—		397			—		(2,689)
		$	(7,230)	$	(50,737)		$	(20,046)	$	(73,586)

Gain/(Loss)
Recognized in OCI Gain/(Loss)
Reclassified from AOCL into Income
Three months ended Three months ended
March 28,
2021 March 29,
2020 March 28,
2021 March 29,
2020
Foreign currency contracts $ 14,037 $ 16,899 $ (4,953) $ 3,400
Commodity contracts 3 (129) (32) (135)
Cross-currency swaps (65,174) (49,609) (65,788) (12,906)
Treasury rate lock contracts 0 0 (124) (124)
Interest rate swaps 397 (5,333) (2,689) (3,116)
$ (50,737) $ (38,172) $ (73,586) $ (12,881)

The location and amount of gains and losses recognized in income related to the Company's derivative financial instruments designated as cash flow hedges were as follows (in thousands):

Motorcycles
cost of goods sold Selling, administrative &
engineering expense Interest expense Financial Services interest expense
Three months ended March 28, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded $ 811,622 $ 231,844 $ 7,708 $ 55,707
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts $ (4,953) $ — $ — $ —
Commodity contracts $ (32) $ — $ — $ —
Cross-currency swaps $ — $ (65,788) $ — $ —
Treasury rate lock contracts $ — $ — $ (91) $ (33)
Interest rate swap $ — $ — $ — $ (2,689)
Three months ended March 29, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded $ 780,868 $ 277,971 $ 7,755 $ 52,473
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts $ 3,400 $ — $ — $ —
Commodity contracts $ (135) $ — $ — $ —
Cross-currency swaps $ — $ (12,906) $ — $ —
Treasury rate lock contracts $ — $ — $ (91) $ (33)
Interest rate swaps $ — $ — $ — $ (3,116)


	Motorcycles cost of goods sold		Selling, administrative & engineering expense		Interest expense		Financial Services interest expense
	Three months ended March 27, 2022
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	895,536	$	239,625	$	7,711	$	42,099

Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts	$	5,655	$	—	$	—	$	—
Commodity contracts	$	226	$	—	$	—	$	—
Cross-currency swaps	$	—	$	(25,800)	$	—	$	—
Treasury rate lock contracts	$	—	$	—	$	(91)	$	(36)

	Three months ended March 28, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	811,622	$	231,844	$	7,708	$	55,707

Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts	$	(4,953)	$	—	$	—	$	—
Commodity contracts	$	(32)	$	—	$	—	$	—
Cross-currency swaps	$	—	$	(65,788)	$	—	$	—
Treasury rate lock contracts	$	—	$	—	$	(91)	$	(33)
Interest rate swaps	$	—	$	—	$	—	$	(2,689)

The amount of net loss included in Accumulated other comprehensive loss (AOCL) at March ~~28, 2021,~~27, 2022, estimated to be reclassified into income over the next 12 months was ~~$17.1~~$1.4 million.

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The amount of gains and losses recognized in income related to derivative financial instruments not designated as hedging instruments were as follows (in thousands). Gains and losses on foreign currency contracts and commodity contracts were recorded in Motorcycles cost of goods sold and the gains and losses on interest rate caps were recorded in Financial Services ~~interest expense.~~revenue.


		Amount of Gain/(Loss) Recognized in Income					Amount of Gain/(Loss) Recognized in Income
		Three months ended					Three months ended
		March 28, 2021		March 29, 2020				March 27, 2022		March 28, 2021
Foreign currency contracts	Foreign currency contracts	$	(3,629)	$	2,194	Foreign currency contracts		$	(3,506)	$	(3,629)
Commodity contracts	Commodity contracts	703		(1,551)		Commodity contracts		2,387		703
Interest rate caps	Interest rate caps	123		0		Interest rate caps		1,700		123
		$	(2,803)	$	643			$	581	$	(2,803)

The Company is exposed to credit loss risk in the event of non-performance by counterparties to its derivative financial instruments. Although no assurances can be given, the Company does not expect any of the counterparties to its derivative financial instruments to fail to meet their obligations. To manage credit loss risk, the Company evaluates counterparties based on credit ratings and, on a quarterly basis, evaluates each hedge’s net position relative to the counterparty’s ability to cover their position.

10. Leases

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

ROU assets represent the Company’s right to use an underlying asset over the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The ROU asset also includes prepaid lease payments and initial direct costs and is reduced for lease incentives paid by the lessor. The discount rate used to determine the present value is generally the Company's incremental borrowing rate because the implicit rate in the lease is not readily determinable. The lease term used to calculate the ROU asset and lease liabilities includes periods covered by options to extend or terminate when the Company is reasonably certain the lease term will include these optional periods.

In accordance with ASC Topic 842, Leases (ASC Topic 842), the Company elected the short-term lease practical expedient that allows entities to recognize lease payments on a straight-line basis over the lease term for leases with a term of 12 months or less. The Company has also elected the practical expedient under ASC Topic 842 allowing entities to not separate non-lease components from lease components, but instead account for such components as a single lease component for all leases except leases involving assets ~~operated by a third-party.~~used in manufacturing and distribution processes.

The Company has operating lease arrangements for sales and administrative offices, manufacturing and distribution facilities, product testing facilities, equipment and vehicles. The Company’s leases have remaining lease terms ranging from 1 to 116 years, some of which include options to extend the lease term for periods generally not greater than 5 years and some of which include options to terminate the leases within 1 year. Certain leases also include options to purchase the leased asset. The Company's leases do not contain any material residual value guarantees or material restrictive covenants.

Operating lease expense for the three months ended March 27, 2022 and March 28, 2021 ~~and March 29, 2020~~ was ~~$8.2~~$6.7 million and ~~$7.3~~$8.2 million, respectively. This includes variable lease costs related to ~~leases involving~~ assets ~~operated by a third party~~used in manufacturing and distribution processes of approximately ~~$3.1~~$1.0 million and ~~$1.9~~$3.1 million for the three months ended March ~~28, 2021~~27, 2022 and March ~~29, 2020,~~28, 2021, respectively. Other variable and short-term lease costs were not material.

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Balance sheet information related to the Company's leases was as follows (in thousands):


	March 27, 2022		December 31, 2021		March 28, 2021
Lease assets	$	45,073	$	49,625	$	44,765

Accrued liabilities	$	15,745	$	17,369	$	17,021
Lease liabilities	27,633		29,904		30,061
	$	43,378	$	47,273	$	47,082

March 28,
2021 December 31,
2020 March 29,
2020
Lease assets $ 44,765 $ 45,203 $ 56,496
Accrued liabilities $ 17,021 $ 17,081 $ 17,939
Lease liabilities 30,061 30,115 40,053
$ 47,082 $ 47,196 $ 57,992

Future maturities of the Company's operating lease liabilities as of March ~~28, 2021~~27, 2022 were as follows (in thousands):


2022	$	13,552
2023	10,484
2024	7,745
2025	6,032
2026	5,075
Thereafter	1,927
Future lease payments	44,815
Present value discount	(1,437)
Lease liabilities	$	43,378

Operating Leases
2021 $ 13,805
2022 14,466
2023 6,511
2024 4,518
2025 6,816
Thereafter 3,677
Future lease payments 49,793
Present value discount (2,711)
Lease liabilities $ 47,082

Other lease information surrounding the Company's operating leases was as follows (dollars in thousands):


	Three months ended
		March 27, 2022		March 28, 2021
Cash outflows for amounts included in the measurement of lease liabilities		$	4,957	$	4,947
ROU assets obtained in exchange for lease obligations, net of modifications		$	1,279	$	5,305

Three months ended
March 28,
2021 March 29,
2020
Cash outflows for amounts included in the measurement of lease liabilities $ 4,947 $ 5,378
ROU assets obtained in exchange for lease obligations, net of modifications $ 5,305 $ 557

March 28,
2021 December 31,
2020 March 29,
2020
Weighted-average remaining lease term (in years) 3.81 3.78 4.20
Weighted-average discount rate 2.9 % 3.1 % 3.3 %


	March 27, 2022		December 31, 2021		March 28, 2021
Weighted-average remaining lease term (in years)	3.78		3.86		3.81
Weighted-average discount rate	1.9	%	1.9	%	2.9	%

11. Debt

Debt with a contractual term less than 12 months is generally classified as short-term and consisted of the following (in thousands):

March 28,
2021 December 31,
2020 March 29,
2020
Unsecured commercial paper $ 749,801 $ 1,014,274 $ 1,335,664
Global credit facility borrowings 15,462 0 0
$ 765,263 $ 1,014,274 $ 1,335,664


	March 27, 2022		December 31, 2021		March 28, 2021
Unsecured commercial paper	$	816,016	$	751,286	$	749,801
Global credit facility borrowings	—		—		15,462
	$	816,016	$	751,286	$	765,263

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Debt with a contractual term greater than 12 months is generally classified as long-term and consisted of the following (in thousands):


				March 28, 2021		December 31, 2020		March 29, 2020					March 27, 2022		December 31, 2021		March 28, 2021
Secured debt:	Secured debt:									Secured debt:
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility			$	102,543	$	116,678	$	155,243	Asset-backed Canadian commercial paper conduit facility			$	95,664	$	85,054	$	102,543
Asset-backed U.S. commercial paper conduit facilities				350,648		402,205		600,000
Asset-backed U.S. commercial paper conduit facility										Asset-backed U.S. commercial paper conduit facility			269,534		272,589		350,648
Asset-backed securitization debt	Asset-backed securitization debt			2,109,046		1,800,393		1,161,047		Asset-backed securitization debt			1,363,254		1,634,753		2,109,046
Unamortized discounts and debt issuance costs	Unamortized discounts and debt issuance costs			(9,788)		(8,437)		(4,202)		Unamortized discounts and debt issuance costs			(5,696)		(7,611)		(9,788)
				2,552,449		2,310,839		1,912,088					1,722,756		1,984,785		2,552,449
Unsecured notes (at par value):	Unsecured notes (at par value):									Unsecured notes (at par value):
Medium-term notes:	Medium-term notes:									Medium-term notes:

Due in 2020, issued May 2018		LIBOR + 0.50%		0		0		450,000
Due in 2020, issued March 2017		2.40	%	0		0		350,000
Due in 2021, issued January 2016		2.85	%	0		600,000		600,000
Due in 2021, issued November 2018		LIBOR + 0.94%		0		450,000		450,000
Due in 2021, issued May 2018	Due in 2021, issued May 2018	3.55	%	350,000		350,000		350,000		Due in 2021, issued May 2018	3.55	%	—		—		350,000
Due in 2022, issued February 2019	Due in 2022, issued February 2019	4.05	%	550,000		550,000		550,000		Due in 2022, issued February 2019	4.05	%	—		550,000		550,000
Due in 2022, issued June 2017	Due in 2022, issued June 2017	2.55	%	400,000		400,000		400,000		Due in 2022, issued June 2017	2.55	%	400,000		400,000		400,000
Due in 2023, issued February 2018	Due in 2023, issued February 2018	3.35	%	350,000		350,000		350,000		Due in 2023, issued February 2018	3.35	%	350,000		350,000		350,000
Due in 2023, issued May 2020(a)	Due in 2023, issued May 2020(a)	4.94	%	762,996		797,206		0		Due in 2023, issued May 2020(a)	4.94	%	723,886		737,302		762,996
Due in 2024, issued November 2019(b)	Due in 2024, issued November 2019(b)	3.14	%	704,304		735,882		660,030		Due in 2024, issued November 2019(b)	3.14	%	668,202		680,586		704,304
Due in 2025, issued June 2020	Due in 2025, issued June 2020	3.35	%	700,000		700,000		0		Due in 2025, issued June 2020	3.35	%	700,000		700,000		700,000
Due in 2027, issued February 2022										Due in 2027, issued February 2022	3.05	%	500,000		—		—
Unamortized discounts and debt issuance costs	Unamortized discounts and debt issuance costs			(13,564)		(15,374)		(11,046)		Unamortized discounts and debt issuance costs			(12,243)		(9,228)		(13,564)
				3,803,736		4,917,714		4,148,984					3,329,845		3,408,660		3,803,736

Senior notes:	Senior notes:									Senior notes:
Due in 2025, issued July 2015	Due in 2025, issued July 2015	3.50	%	450,000		450,000		450,000		Due in 2025, issued July 2015	3.50	%	450,000		450,000		450,000
Due in 2045, issued July 2015	Due in 2045, issued July 2015	4.625	%	300,000		300,000		300,000		Due in 2045, issued July 2015	4.625	%	300,000		300,000		300,000
Unamortized discounts and debt issuance costs	Unamortized discounts and debt issuance costs			(5,851)		(6,023)		(6,534)		Unamortized discounts and debt issuance costs			(5,158)		(5,332)		(5,851)
				744,149		743,977		743,466					744,842		744,668		744,149
				4,547,885		5,661,691		4,892,450					4,074,687		4,153,328		4,547,885
Long-term debt	Long-term debt			7,100,334		7,972,530		6,804,538		Long-term debt			5,797,443		6,138,113		7,100,334
Current portion of long-term debt, net	Current portion of long-term debt, net			(1,622,243)		(2,039,597)		(2,326,460)		Current portion of long-term debt, net			(1,327,357)		(1,542,496)		(1,622,243)
Long-term debt, net	Long-term debt, net			$	5,478,091	$	5,932,933	$	4,478,078	Long-term debt, net			$	4,470,086	$	4,595,617	$	5,478,091

(a)~~Euro denominated, €650.0~~€650.0 million par value remeasured to U.S. dollar at March ~~28,~~27, 2022, December 31, 2021, and ~~December 31, 2020,~~March 28, 2021, respectively

(b)~~Euro denominated, €600.0~~€600.0 million par value remeasured to U.S. dollar at March ~~28, 2021,~~27, 2022, December 31, ~~2020,~~2021, and March ~~29, 2020,~~28, 2021, respectively

~~The Company's future~~Future principal payments onof the Company's debt obligations as of March ~~28, 2021~~27, 2022 were as follows (in thousands):

2021 $ 1,670,913
2022 1,685,613
2023 1,829,349
2024 1,120,828
2025 1,287,560
Thereafter 300,537
$ 7,894,800


2022	$	1,716,955
2023	1,591,745
2024	1,058,291
2025	1,398,474
2026	71,091
Thereafter	800,000
Future principal payments	6,636,556
Unamortized discounts and debt issuance costs	(23,097)
	$	6,613,459

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12. Asset-Backed Financing

The Company participates in asset-backed financing both through asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. 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 financing is treated as a secured borrowing in this type of transaction and is referred to as an on-balance sheet asset-backed financing.

In transactions where the Company is not the primary beneficiary of the VIE, the Company must determine whether it can achieve a sale for accounting purposes under ASC Topic 860, Transfers and Servicing ~~(ASC Topic 860)~~. To achieve a sale for accounting purposes, the assets being transferred must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond the Company’s control. If the Company does not meet all of these criteria for sale accounting, then the transaction is accounted for as a secured borrowing and is referred to as an on-balance sheet asset-backed financing.

If the Company meets all three of the sale criteria above, the transaction is recorded as a sale for accounting purposes and is referred to as an off-balance sheet asset-backed financing. Upon sale, the retail motorcycle finance receivables are removed from the Company’s Consolidated balance sheets and a gain or loss is recognized for the difference between the 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 on the Consolidated statements of operations.

The Company is not required, and does not currently intend, to provide any additional financial support to the on- or off-balance sheet VIEs associated with these transactions. Investors and creditors in these transactions only have recourse to the assets held by the VIEs.

The assets and liabilities related to the on-balance sheet asset-backed financings included in the Consolidated balance sheets were as follows (in thousands):


		March 28, 2021													March 27, 2022
		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, net
On-balance sheet assets and liabilities:	On-balance sheet assets and liabilities:													On-balance sheet assets and liabilities:
Consolidated VIEs:	Consolidated VIEs:													Consolidated VIEs:
Asset-backed securitizations	Asset-backed securitizations	$	2,448,681	$	(126,053)	$	166,694	$	2,852	$	2,492,174	$	2,099,258	Asset-backed securitizations	$	1,755,446	$	(88,090)	$	131,992	$	3,724	$	1,803,072	$	1,357,558
Asset-backed U.S. commercial paper conduit facility	Asset-backed U.S. commercial paper conduit facility	378,035		(19,432)		30,252		1,175		390,030		350,648		Asset-backed U.S. commercial paper conduit facility	290,481		(14,549)		24,305		649		300,886		269,534
Unconsolidated VIEs:	Unconsolidated VIEs:													Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility	115,742		(5,388)		9,743		206		120,303		102,543		Asset-backed Canadian commercial paper conduit facility	108,052		(4,457)		8,129		43		111,767		95,664
		$	2,942,458	$	(150,873)	$	206,689	$	4,233	$	3,002,507	$	2,552,449		$	2,153,979	$	(107,096)	$	164,426	$	4,416	$	2,215,725	$	1,722,756

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		December 31, 2020													December 31, 2021
		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, net
On-balance sheet assets and liabilities:	On-balance sheet assets and liabilities:													On-balance sheet assets and liabilities:
Consolidated VIEs:	Consolidated VIEs:													Consolidated VIEs:
Asset-backed securitizations	Asset-backed securitizations	$	2,129,372	$	(124,627)	$	116,268	$	2,622	$	2,123,635	$	1,791,956	Asset-backed securitizations	$	2,048,194	$	(102,779)	$	123,717	$	2,328	$	2,071,460	$	1,627,142
Asset-backed U.S. commercial paper conduit facility	Asset-backed U.S. commercial paper conduit facility	441,402		(25,793)		26,624		1,131		443,364		402,205		Asset-backed U.S. commercial paper conduit facility	297,454		(14,898)		20,567		654		303,777		272,589
Unconsolidated VIEs:	Unconsolidated VIEs:													Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility	133,976		(6,508)		9,073		126		136,667		116,678		Asset-backed Canadian commercial paper conduit facility	97,180		(3,990)		6,191		139		99,520		85,054
		$	2,704,750	$	(156,928)	$	151,965	$	3,879	$	2,703,666	$	2,310,839		$	2,442,828	$	(121,667)	$	150,475	$	3,121	$	2,474,757	$	1,984,785

		March 29, 2020													March 28, 2021
		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, net
On-balance sheet assets and liabilities:	On-balance sheet assets and liabilities:													On-balance sheet assets and liabilities:
Consolidated VIEs:	Consolidated VIEs:													Consolidated VIEs:
Asset-backed securitizations	Asset-backed securitizations	$	1,250,382	$	(62,159)	$	61,945	$	852	$	1,251,020	$	1,156,845	Asset-backed securitizations	$	2,448,681	$	(126,053)	$	166,694	$	2,852	$	2,492,174	$	2,099,258
Asset-backed U.S. commercial paper conduit facilities		662,385		(32,872)		37,290		1,410		668,213		600,000
Asset-backed U.S. commercial paper conduit facility														Asset-backed U.S. commercial paper conduit facility	378,035		(19,432)		30,252		1,175		390,030		350,648
Unconsolidated VIEs:	Unconsolidated VIEs:													Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility	182,353		(6,671)		10,552		148		186,382		155,243		Asset-backed Canadian commercial paper conduit facility	115,742		(5,388)		9,743		206		120,303		102,543
		$	2,095,120	$	(101,702)	$	109,787	$	2,410	$	2,105,615	$	1,912,088		$	2,942,458	$	(150,873)	$	206,689	$	4,233	$	3,002,507	$	2,552,449

On-Balance Sheet Asset-Backed Securitization VIEs – The Company transfers U.S. retail motorcycle finance receivables to SPEs which in turn issue secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. Each on-balance sheet asset-backed securitization SPE is a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the asset-backed securitization transactions and are not available to pay other obligations or claims of the Company’s creditors until the associated secured debt and other obligations are satisfied. Restricted cash balances held by the SPEs are used only to support the securitizations. There are no amortization schedules for the secured notes; however, the debt is reduced monthly as available collections on the related U.S. retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from ~~2022~~2024 to ~~2028.~~2029.

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 2022. During the first quarter of 2021, the Company transferred $663.1 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $600.0 million, or $597.4 million net of discount and issuance costs, of secured notes through an on-balance sheet asset-backed securitization transaction. During the first quarter of 2020, the Company transferred $580.2 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $525.0 million, or $522.7 million net of discount and issuance costs, of secured notes through an on-balance sheet asset-backed securitization transaction.

On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit ~~Facilities~~Facility VIE – ~~Until November 25, 2020, the~~The Company ~~had two separate agreements with third-party bank-sponsored asset-backed U.S. commercial paper conduits,~~has a $300.0 million revolving facility agreement and a $600.0 million revolving facility agreement (together, the Former U.S. Conduit Facilities). On November 25, 2020, the Company amended each revolving facility agreement by consolidating the two agreements into one $900.0 million revolving facility agreement (the U.S. Conduit Facility) with third-party ~~bank-sponsored~~banks and their asset-backed U.S. commercial paper conduits. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party ~~bank-sponsored~~banks and their asset-backed U.S. commercial paper conduits. In addition to the $900.0 million aggregate commitment, the agreement allows for additional borrowings, at the lender’s discretion, of up to

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~~discretion, of up to $300.0~~$300.0 million. Availability under the ~~$900.0 million revolving facility (the~~ U.S. Conduit ~~Facility)~~Facility is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.

Under the U.S. Conduit Facility, the assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, the terms of the interest are based on ~~LIBOR.~~LIBOR, with provisions for a transition to other benchmark rates, generally aligning to recommendations published by the Alternative Reference Rates Committee convened by the Federal Reserve Board and Federal Reserve Bank of New York. In each of these cases, a program fee is assessed based on the outstanding ~~principal.~~debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 45 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of March ~~28, 2021,~~27, 2022, the U.S. Conduit Facility has an expiration date of November ~~19, 2021.~~18, 2022.

The Company is the primary beneficiary of its U.S. Conduit Facility 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.

During the first quarter of 2022, the Company transferred $47.1 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $41.3 million of debt under the U.S. Conduit Facility. There were 0no finance receivable transfers under the U.S. Conduit Facility during the first quarter of 2021. During the first quarter of 2020, the Company transferred $195.3 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $163.6 million of debt under the Former U.S. Conduit Facilities.

On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility –~~In June 2020, the~~ The Company ~~renewed its~~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 eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the renewal and amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase from the Company eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$~~220.0~~125.0 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 45 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of March ~~28, 2021,~~27, 2022, the Canadian Conduit has an expiration date of June ~~25, 2021.~~27, 2022.

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 ~~$17.8~~$16.1 million at March ~~28, 2021.~~27, 2022. The maximum exposure is not an indication of the Company's expected loss exposure.

~~There were 0 finance receivable transfers under the Canadian Conduit Facility during the first quarter of 2021.~~ During the first quarter of ~~2020,~~2022, the Company transferred ~~$77.9~~$25.3 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of ~~$61.6~~$21.2 million.

~~Off-Balance Sheet Asset-Backed Securitization VIE –~~ There were ~~0 off-balance sheet asset-backed securitization transactions~~no finance receivable transfers under the Canadian Conduit during the first quarter of 2021 or 2020. During the second quarter of 2016, the Company sold retail motorcycle finance receivables with a principal balance of $301.8 million into a securitization VIE that was not consolidated, recognized a gain of $9.3 million and received cash proceeds of $312.6 million. The gain on sale was included in ~~Financial Services revenue~~ ~~on the~~ ~~Consolidated statements of operations. In April 2020, the Company repurchased the finance receivables associated with this off-balance sheet asset-backed securitization VIE for $27.4 million.~~2021.

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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 was a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitization were only available for payment of the secured debt and other obligations arising from the asset-backed securitization transaction and were 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 was not the primary beneficiary of the off-balance sheet asset-backed securitization VIE because it only retained servicing rights and did not have the obligation to absorb losses or the right to receive benefits from the VIE which could potentially be significant to the VIE. Accordingly, this transaction met the accounting sale requirements under ASC Topic 860 and was recorded as a sale for accounting purposes. Upon the sale in 2016, the retail motorcycle finance receivables were removed from the Company’s ~~Consolidated balance sheets~~ ~~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.~~

~~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~~ ~~on the~~ ~~Consolidated statements of operations~~. 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 repurchased the finance receivables associated with the off-balance sheet securitization VIE in April 2020. As such, the Company did not recognize any servicing fee income in 2021. The Company recognized servicing fee income of $0.1 million during the first quarter of 2020.

The unpaid principal balance of the off-balance sheet retail motorcycle finance receivables serviced by the Company were $27.4 million as of March 29, 2020 of which $0.7 million were 30 days or more delinquent. Credit losses, net of recoveries for the off-balance sheet retail motorcycle finance receivables as of March 29, 2020 were $0.01 million. There was no unpaid principal balance or credit losses, net of recoveries associated with the off-balance sheet retail motorcycle finance receivables as of December 31, 2020 and March 28, 2021.

13. Fair Value

The Company assesses the inputs used to measure fair value using a three-tier hierarchy.

Level 1 inputs include quoted prices for identical instruments and are the most observable.

Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity prices, and yield curves. The Company uses the market approach to derive the fair value for its Level 2 fair value measurements. Foreign currency contracts, commodity contracts, and cross-currency swaps ~~and treasury rate lock contracts~~ are valued using quoted forward rates and prices; interest rate ~~swaps and~~ caps are valued using quoted interest rates and yield ~~curves; investments in marketable securities and cash equivalents are valued using quoted prices.~~curves.

Level 3 inputs are not observable in the market and include the Company's judgments about the assumptions market participants would use in pricing the asset or liability.

~~Table of Contents~~

Recurring Fair Value Measurements – The Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):


		March 28, 2021						March 27, 2022
		Balance		Level 1		Level 2				Balance		Level 1		Level 2
Assets:	Assets:								Assets:
Cash equivalents	Cash equivalents	$	2,069,400	$	1,919,400	$	150,000		Cash equivalents	$	968,395	$	803,400	$	164,995
Marketable securities	Marketable securities	50,239		50,239		0			Marketable securities	45,189		45,189		—
Derivative financial instruments	Derivative financial instruments	81,841		0		81,841			Derivative financial instruments	43,065		—		43,065
		$	2,201,480	$	1,969,639	$	231,841			$	1,056,649	$	848,589	$	208,060
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments	Derivative financial instruments	$	6,726	$	0	$	6,726		Derivative financial instruments	$	4,298	$	—	$	4,298
		December 31, 2020						December 31, 2021
		Balance		Level 1		Level 2				Balance		Level 1		Level 2
Assets:	Assets:								Assets:
Cash equivalents	Cash equivalents	$	3,019,884	$	2,819,884	$	200,000		Cash equivalents	$	1,617,887	$	1,337,900	$	279,987
Marketable securities	Marketable securities	52,061		52,061		0			Marketable securities	49,650		49,650		—
Derivative financial instruments	Derivative financial instruments	140,266		0		140,266			Derivative financial instruments	52,034		—		52,034
		$	3,212,211	$	2,871,945	$	340,266			$	1,719,571	$	1,387,550	$	332,021
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments	Derivative financial instruments	$	25,521	$	0	$	25,521		Derivative financial instruments	$	2,361	$	—	$	2,361
		March 29, 2020						March 28, 2021
		Balance		Level 1		Level 2				Balance		Level 1		Level 2
Assets:	Assets:								Assets:
Cash equivalents	Cash equivalents	$	1,207,799	$	1,144,800	$	62,999		Cash equivalents	$	2,069,400	$	1,919,400	$	150,000
Marketable securities	Marketable securities	44,144		44,144		0			Marketable securities	50,239		50,239		—
Derivative financial instruments	Derivative financial instruments	14,683		0		14,683			Derivative financial instruments	81,841		—		81,841
		$	1,266,626	$	1,188,944	$	77,682			$	2,201,480	$	1,969,639	$	231,841
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments	Derivative financial instruments	$	56,976	$	0	$	56,976		Derivative financial instruments	$	6,726	$	—	$	6,726

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 ~~$18.6~~$17.9 million, ~~$17.7~~$18.3 million and ~~$22.2~~$18.6 million at March ~~28, 2021,~~27, 2022, December 31, ~~2020~~2021 and March ~~29, 2020,~~28, 2021, respectively, for which the fair value adjustment was ~~$2.4~~a decrease of $0.6 million, ~~$4.2~~$2.9 million and ~~$10.9~~$2.4 million, respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.

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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 fair value and carrying value of the Company’s remaining financial instruments that are measured at cost or amortized cost were as follows (in thousands):


		March 28, 2021				December 31, 2020				March 29, 2020					March 27, 2022				December 31, 2021				March 28, 2021
		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:	Assets:													Assets:
Finance receivables, net	Finance receivables, net	$	6,930,531	$	6,756,777	$	6,586,348	$	6,443,008	$	7,391,948	$	7,292,407	Finance receivables, net	$	6,920,395	$	6,821,553	$	6,794,499	$	6,571,921	$	6,930,531	$	6,756,777
Liabilities:	Liabilities:													Liabilities:
Deposits, net	Deposits, net	$	152,715	$	152,653	$	79,965	$	79,965	$	0	$	0	Deposits, net	$	359,995	$	348,083	$	293,602	$	290,326	$	152,715	$	152,653
Debt:	Debt:													Debt:
Unsecured commercial paper	Unsecured commercial paper	$	749,801	$	749,801	$	1,014,274	$	1,014,274	$	1,335,664	$	1,335,664	Unsecured commercial paper	$	816,016	$	816,016	$	751,286	$	751,286	$	749,801	$	749,801
Global credit facility borrowings	Global credit facility borrowings	$	15,462	$	15,462	$	0	$	0	$	0	$	0	Global credit facility borrowings	$	—	$	—	$	—	$	—	$	15,462	$	15,462

Asset-backed U.S. commercial paper conduit facilities		$	350,648	$	350,648	$	402,205	$	402,205	$	600,000	$	600,000
Asset-backed U.S. commercial paper conduit facility														Asset-backed U.S. commercial paper conduit facility	$	269,534	$	269,534	$	272,589	$	272,589	$	350,648	$	350,648
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility	$	102,543	$	102,543	$	116,678	$	116,678	$	155,243	$	155,243	Asset-backed Canadian commercial paper conduit facility	$	95,664	$	95,664	$	85,054	$	85,054	$	102,543	$	102,543
Asset-backed securitization debt	Asset-backed securitization debt	$	2,120,855	$	2,099,258	$	1,817,892	$	1,791,956	$	1,139,076	$	1,156,845	Asset-backed securitization debt	$	1,343,706	$	1,357,558	$	1,633,749	$	1,627,142	$	2,120,855	$	2,099,258
Medium-term notes	Medium-term notes	$	3,955,743	$	3,803,736	$	5,118,928	$	4,917,714	$	4,013,409	$	4,148,984	Medium-term notes	$	3,326,310	$	3,329,845	$	3,513,815	$	3,408,660	$	3,955,743	$	3,803,736
Senior notes	Senior notes	$	789,967	$	744,149	$	828,141	$	743,977	$	685,805	$	743,466	Senior notes	$	724,089	$	744,842	$	790,373	$	744,668	$	789,967	$	744,149

Finance Receivables, net – The carrying value of retail and wholesale finance receivables is amortized cost less an allowance for credit losses. The fair value of retail finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects current credit, interest rate and prepayment risks associated with similar types of instruments. Fair value is determined based on Level 3 inputs. The amortized cost basis of wholesale finance receivables approximates fair value because they are generally either short-term or have interest rates that adjust with changes in market interest rates.

Deposits, net – The carrying value of deposits is amortized cost. The fair value of deposits is estimated based upon rates currently available for deposits with similar terms and maturities. Fair value is calculated using Level 3 inputs.

Debt – The carrying value of debt is generally ~~amortized~~ cost, net of unamortized discounts and debt issuance costs. The fair value of unsecured commercial paper and credit facility borrowings are calculated using Level 2 inputs and approximates carrying value due to its short maturity. The fair value of debt provided under the U.S. Conduit ~~Facilities~~Facility and the Canadian Conduit Facility is calculated using Level 2 inputs and approximates carrying value since the interest rates charged under the facilities are tied directly to market rates and fluctuate as market rates change. The fair values of the medium-term notes and senior notes are estimated based upon rates currently available for debt with similar terms and remaining maturities (Level 2 inputs). The fair value of the fixed-rate debt related to on-balance sheet asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities (Level 2 inputs). The fair value of the floating-rate debt related to on-balance sheet asset-backed securitization transactions is calculated using Level 2 inputs and approximates carrying value since the interest rates charged are tied directly to market rates and fluctuate as market rates change.

14. Product Warranty and Recall Campaigns

The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except in ~~Japan,~~certain markets, where the Company currently provides a standard three-year limited warranty. The Company also provides a five-year unlimited warranty on the battery for electric motorcycles. In addition, the Company provides a one-year warranty for parts and accessories. The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company accrues for future warranty claims at the time of ~~sale~~shipment using an estimated cost based primarily on historical Company claim information.

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Additionally, the Company has from time to time initiated certain voluntary recall campaigns. The Company records estimated recall costs when the liability is both probable and estimable. This generally occurs when the Company's management approves and commits to a recall. The warranty and recall liability is included in Accrued liabilities and Other long-term liabilities on the Consolidated balance sheets. Changes in the Company’s warranty and recall liabilities were as follows (in thousands):


		Three months ended					Three months ended
		March 28, 2021		March 29, 2020				March 27, 2022		March 28, 2021
Balance, beginning of period	Balance, beginning of period	$	69,208	$	89,793	Balance, beginning of period		$	61,621	$	69,208
Warranties issued during the period	Warranties issued during the period	11,672		11,025		Warranties issued during the period		10,711		11,672
Settlements made during the period	Settlements made during the period	(8,585)		(14,157)		Settlements made during the period		(7,096)		(8,585)
Recalls and changes to pre-existing warranty liabilities	Recalls and changes to pre-existing warranty liabilities	132		(353)		Recalls and changes to pre-existing warranty liabilities		(141)		132
Balance, end of period	Balance, end of period	$	72,427	$	86,308	Balance, end of period		$	65,095	$	72,427

The liability for recall campaigns, included in the balance above, was ~~$25.3~~$16.7 million, ~~$24.7~~$16.9 million and ~~$33.6~~$25.3 million at March ~~28, 2021,~~27, 2022, December 31, ~~2020~~2021 and March ~~29, 2020,~~28, 2021, respectively.

15. Employee Benefit Plans

The Company has a qualified pension plan and postretirement healthcare benefit plans. The plans cover certain eligible employees and retirees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees. Service cost is allocated among Selling, administrative and engineering expense, Motorcycles cost of goods sold and Inventories, net. Amounts capitalized in inventory are not significant. Non-service cost components of net periodic benefit (income) cost are presented in Other income, net. Components of net periodic benefit (income) cost for the Company's defined benefit plans were as follows (in thousands):


		Three months ended					Three months ended
		March 28, 2021		March 29, 2020				March 27, 2022		March 28, 2021
Pension and SERPA Benefits:	Pension and SERPA Benefits:					Pension and SERPA Benefits:
Service cost	Service cost	$	6,348	$	6,806	Service cost		$	4,763	$	6,348
Interest cost	Interest cost	15,470		19,112		Interest cost		15,472		15,470
Expected return on plan assets	Expected return on plan assets	(32,720)		(33,764)		Expected return on plan assets		(31,476)		(32,720)
Amortization of unrecognized:	Amortization of unrecognized:					Amortization of unrecognized:
Prior service credit	Prior service credit	(312)		(272)		Prior service credit		(328)		(312)
Net loss	Net loss	18,386		16,372		Net loss		7,978		18,386
Settlement loss		816		0
Settlement (gain) loss						Settlement (gain) loss		(256)		816

Net periodic benefit cost		$	7,988	$	8,254
Net periodic benefit (income) cost						Net periodic benefit (income) cost		$	(3,847)	$	7,988

Postretirement Healthcare Benefits:	Postretirement Healthcare Benefits:					Postretirement Healthcare Benefits:
Service cost	Service cost	$	1,288	$	1,201	Service cost		$	1,161	$	1,288
Interest cost	Interest cost	1,626		2,336		Interest cost		1,904		1,626
Expected return on plan assets	Expected return on plan assets	(3,495)		(3,467)		Expected return on plan assets		(3,809)		(3,495)
Amortization of unrecognized:	Amortization of unrecognized:					Amortization of unrecognized:
Prior service credit	Prior service credit	(581)		(595)		Prior service credit		(581)		(581)
Net loss	Net loss	264		123		Net loss		122		264

Net periodic benefit cost		$	(898)	$	(402)
Net periodic benefit income						Net periodic benefit income		$	(1,203)	$	(898)

There are no required or planned voluntary qualified pension plan contributions for ~~2021.~~2022. The Company expects it will continue to make ongoing benefit payments under the SERPA and postretirement healthcare plans.

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16. Commitments and Contingencies

Litigation and Other Claims – The Company is subject to lawsuits and other claims related to product, commercial, employee, 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. The Company accrues for matters when losses are both probable and estimable. 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.

~~York Environmental Matter~~ – The Company is involved with government agencies and the U.S. Navy related to a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. The Company has an agreement with the U.S. Navy which calls for the U.S. Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of costs associated with environmental investigation and remediation activities at the York facility (Response Costs). A site wide remedial investigation/feasibility study and a proposed final remedy for the York facility have been completed and approved by the Pennsylvania Department of Environmental Protection and the United States Environmental Protection Agency (EPA). The associated cleanup plan documents were approved in February 2020 and the remaining cleanup activities are expected to begin later in 2021. The Company has an accrual for its share of the estimated future Response Costs recorded in ~~Other long-term liabilities~~ ~~on the~~ ~~Consolidated balance sheets~~.

~~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 there are no material exposures to loss in excess of amounts accrued and insured for losses related to these matters.

LiveWire Transaction – On December 13, 2021, the Company and AEA-Bridges Impact Corp. (ABIC), a special purpose acquisition company (SPAC), announced that ~~product liability suits~~they have entered into a definitive business combination agreement under which LiveWire, the Company's electric motorcycle division, will ~~not have~~become a ~~material adverse effect on~~separate business of the ~~Company’s consolidated~~Company and ABIC will combine with LiveWire to create a new publicly traded company. The parties expect that the transaction will be financed by ABIC’s $400 million cash held in trust (assuming no redemptions by ABIC’s shareholders in the context of the transaction), a $100 million cash investment from the Company, and a $100 million investment from an independent strategic investor, Kwang Yang Motor Co., Ltd. (KYMCO). In addition, to the extent any shares of the SPAC are redeemed, the Company will invest an additional amount equal to the dollar value of such redemptions up to a maximum of $100 million.

The transaction, which has been approved by the boards of directors of both the Company and ABIC, is expected to close mid-2022. The consummation of the business combination is subject to the approval of ABIC’s shareholders as well as other conditions and regulatory approvals. Upon closing of the transaction, the Company will retain a controlling financial ~~statements.~~interest in LiveWire. The expectation is that, upon closing of the transaction, the Company will retain an equity interest in the separate public company of approximately 74%. As the controlling shareholder following the transaction, the Company will continue to consolidate LiveWire’s results, with additional adjustments to recognize non-controlling shareholder interests.

17. Accumulated Other Comprehensive Loss

Changes in Accumulated other comprehensive loss were as follows (in thousands):


		Three months ended March 28, 2021						Three months ended March 27, 2022
		Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans			Total			Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans		Total
Balance, beginning of period	Balance, beginning of period	$	(7,589)	$	(46,116)	$	(429,712)		$	(483,417)	Balance, beginning of period	$	(44,401)	$	(2,005)	$	(194,513)	$	(240,919)
Other comprehensive loss, before reclassifications	Other comprehensive loss, before reclassifications	(17,074)		(50,737)		0			(67,811)		Other comprehensive loss, before reclassifications	(3,804)		(7,230)		—		(11,034)
Income tax (expense) benefit	Income tax (expense) benefit	(264)		11,092		0			10,828		Income tax (expense) benefit	(317)		1,493		—		1,176
		(17,338)		(39,645)		0			(56,983)			(4,121)		(5,737)		—		(9,858)
Reclassifications:	Reclassifications:										Reclassifications:

Net loss on derivative financial instruments	Net loss on derivative financial instruments	—		73,586		—			73,586		Net loss on derivative financial instruments	—		20,046		—		20,046
Prior service credits(a)	Prior service credits(a)	—		—		(893)			(893)		Prior service credits(a)	—		—		(909)		(909)
Actuarial losses(a)	Actuarial losses(a)	—		—		18,650			18,650		Actuarial losses(a)	—		—		8,100		8,100
Reclassifications before tax	Reclassifications before tax	0		73,586		17,757			91,343		Reclassifications before tax	—		20,046		7,191		27,237
Income tax expense	Income tax expense	0		(16,411)		(4,169)			(20,580)		Income tax expense	—		(4,381)		(1,689)		(6,070)
		0		57,175		13,588			70,763			—		15,665		5,502		21,167
Other comprehensive (loss) income	Other comprehensive (loss) income	(17,338)		17,530		13,588			13,780		Other comprehensive (loss) income	(4,121)		9,928		5,502		11,309
Balance, end of period	Balance, end of period	$	(24,927)	$	(28,586)	$	(416,124)		$	(469,637)	Balance, end of period	$	(48,522)	$	7,923	$	(189,011)	$	(229,610)

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		Three months ended March 29, 2020						Three months ended March 28, 2021
		Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans			Total			Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans		Total
Balance, beginning of period	Balance, beginning of period	$	(40,813)	$	(14,586)	$	(481,550)		$	(536,949)	Balance, beginning of period	$	(7,589)	$	(46,116)	$	(429,712)	$	(483,417)
Other comprehensive loss, before reclassifications	Other comprehensive loss, before reclassifications	(35,821)		(38,172)		0			(73,993)		Other comprehensive loss, before reclassifications	(17,074)		(50,737)		—		(67,811)
Income tax benefit		1,366		8,267		0			9,633
Income tax (expense) benefit											Income tax (expense) benefit	(264)		11,092		—		10,828
		(34,455)		(29,905)		0			(64,360)			(17,338)		(39,645)		—		(56,983)
Reclassifications:	Reclassifications:										Reclassifications:

Net loss on derivative financial instruments	Net loss on derivative financial instruments	—		12,881		—			12,881		Net loss on derivative financial instruments	—		73,586		—		73,586
Prior service credits(a)	Prior service credits(a)	—		—		(867)			(867)		Prior service credits(a)	—		—		(893)		(893)
Actuarial losses(a)	Actuarial losses(a)	—		—		16,495			16,495		Actuarial losses(a)	—		—		18,650		18,650
Reclassifications before tax	Reclassifications before tax	0		12,881		15,628			28,509		Reclassifications before tax	—		73,586		17,757		91,343
Income tax expense	Income tax expense	0		(2,821)		(3,669)			(6,490)		Income tax expense	—		(16,411)		(4,169)		(20,580)
		0		10,060		11,959			22,019			—		57,175		13,588		70,763
Other comprehensive (loss) income	Other comprehensive (loss) income	(34,455)		(19,845)		11,959			(42,341)		Other comprehensive (loss) income	(17,338)		17,530		13,588		13,780
Balance, end of period	Balance, end of period	$	(75,268)	$	(34,431)	$	(469,591)		$	(579,290)	Balance, end of period	$	(24,927)	$	(28,586)	$	(416,124)	$	(469,637)

(a)Amounts reclassified are included in the computation of net periodic benefit (income) cost, discussed further in Note 15

18. ~~Business~~Reportable Segments

Harley-Davidson, Inc. is the parent company for the groups of companies referred to as Harley-Davidson Motor Company ~~(HDMC)~~ and Harley-Davidson Financial ~~Services (HDFS).~~Services. The Company operates in 2 business 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~~the activities of Harley-Davidson Motor Company which designs, manufactures and sells ~~Harley-Davidson motorcycles~~motorcycles. The Motorcycles segment also sells motorcycle parts, accessories, and apparel as well as ~~motorcycle parts, accessories, general merchandise and services.~~licenses its trademarks. The Company's products are sold to retail customers primarily through a network of ~~independent~~ dealers.

The Financial Services segment consists of ~~HDFS~~Harley-Davidson Financial Services 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~~Harley-Davidson Financial Services also works with certain unaffiliated insurance companies to provide motorcycle insurance and protection products to motorcycle owners.

~~Select~~

Table of Contents

Selected segment information is set forth below (in thousands):


	Three months ended
		March 27, 2022		March 28, 2021
Motorcycles and Related Products:
Motorcycles revenue		$	1,303,171	$	1,232,107
Gross profit		407,635		420,485
Selling, administrative and engineering expense		204,888		193,546
Restructuring benefit		(128)		(593)
Operating income		202,875		227,532
Financial Services:
Financial Services revenue		192,015		190,400
Financial Services expense		105,658		71,531
Restructuring expense		—		227
Operating income		86,357		118,642
Operating income		$	289,232	$	346,174

Three months ended
March 28,
2021 March 29,
2020
Motorcycles and Related Products:
Motorcycles revenue $ 1,232,107 $ 1,099,788
Gross profit 420,485 318,920
Selling, administrative and engineering expense 193,546 234,353
Restructuring benefit (593) 0
Operating income 227,532 84,567
Financial Services:
Financial Services revenue 190,400 198,456
Financial Services expense 71,531 175,510
Restructuring expense 227 0
Operating income 118,642 22,946
Operating income $ 346,174 $ 107,513
Total assets for the Motorcycles and Financial Services segments were $3.0 billion and $7.9 billion, respectively, as of March 27, 2022, $3.3 billion and $7.7 billion, respectively, as of December 31, 2021, and $2.4 billion and $8.9 billion, respectively, as of March 28, 2021.

19. Supplemental Consolidating Data

The supplemental consolidating legal entity data for Harley-Davidson Motor Company, Harley-Davidson Financial Services and related consolidating adjustments are presented for informational purposes. The legal entity income statement information presented below differs from reportable segment income statement information due to the allocation of legal entity consolidating adjustments to income for reportable segments. Supplemental consolidating data is as follows (in thousands):


	Three months ended March 27, 2022
	Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
Revenue:
Motorcycles and Related Products	$	1,306,293	$	—	$	(3,122)	$	1,303,171
Financial Services	—		192,390		(375)		192,015
	1,306,293		192,390		(3,497)		1,495,186
Costs and expenses:
Motorcycles and Related Products cost of goods sold	895,536		—		—		895,536
Financial Services interest expense	—		42,099		—		42,099
Financial Services provision for credit losses	—		28,822		—		28,822
Selling, administrative and engineering expense	205,417		37,858		(3,650)		239,625
Restructuring benefit	(128)		—		—		(128)
	1,100,825		108,779		(3,650)		1,205,954
Operating income	205,468		83,611		153		289,232
Other income, net	11,030		—		—		11,030
Investment loss	(1,979)		—		—		(1,979)
Interest expense	7,711		—		—		7,711
Income before income taxes	206,808		83,611		153		290,572
Provision for income taxes	47,847		20,223		—		68,070
Net income	$	158,961	$	63,388	$	153	$	222,502

Table of Contents

Total assets for the Motorcycles and Financial Services segments were $2.4 billion and $8.9 billion, respectively, as of March 28, 2021, $2.5 billion and $9.5 billion, respectively, as of December 31, 2020, and $2.5 billion and $8.6 billion, respectively, as of March 29, 2020.

~~19. Supplemental Consolidating Data~~

The supplemental consolidating data is presented for informational purposes and is different than segment information due to the allocation of consolidating adjustments to the reportable segments. Supplemental consolidating data is as follows (in thousands):


		Three months ended March 28, 2021									Three months ended March 28, 2021
		HDMC Entities		HDFS Entities		Consolidating Adjustments		Consolidated			Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
Revenue:	Revenue:									Revenue:
Motorcycles and Related Products	Motorcycles and Related Products	$	1,238,468	$	0	$	(6,361)	$	1,232,107	Motorcycles and Related Products	$	1,238,468	$	—	$	(6,361)	$	1,232,107
Financial Services	Financial Services	0		188,750		1,650		190,400		Financial Services	—		188,750		1,650		190,400
		1,238,468		188,750		(4,711)		1,422,507			1,238,468		188,750		(4,711)		1,422,507
Costs and expenses:	Costs and expenses:									Costs and expenses:
Motorcycles and Related Products cost of goods sold	Motorcycles and Related Products cost of goods sold	811,622		0		0		811,622		Motorcycles and Related Products cost of goods sold	811,622		—		—		811,622
Financial Services interest expense	Financial Services interest expense	0		55,707		0		55,707		Financial Services interest expense	—		55,707		—		55,707
Financial Services provision for credit losses	Financial Services provision for credit losses	0		(22,474)		0		(22,474)		Financial Services provision for credit losses	—		(22,474)		—		(22,474)
Selling, administrative and engineering expense	Selling, administrative and engineering expense	196,359		40,275		(4,790)		231,844		Selling, administrative and engineering expense	196,359		40,275		(4,790)		231,844
Restructuring (benefit) expense	Restructuring (benefit) expense	(593)		227		0		(366)		Restructuring (benefit) expense	(593)		227		—		(366)
		1,007,388		73,735		(4,790)		1,076,333			1,007,388		73,735		(4,790)		1,076,333
Operating income	Operating income	231,080		115,015		79		346,174		Operating income	231,080		115,015		79		346,174
Other income, net	Other income, net	277		0		0		277		Other income, net	277		—		—		277
Investment income	Investment income	1,402		0		0		1,402		Investment income	1,402		—		—		1,402
Interest expense	Interest expense	7,708		0		0		7,708		Interest expense	7,708		—		—		7,708
Income before income taxes	Income before income taxes	225,051		115,015		79		340,145		Income before income taxes	225,051		115,015		79		340,145
Provision for income taxes	Provision for income taxes	55,996		25,005		0		81,001		Provision for income taxes	55,996		25,005		—		81,001
Net income	Net income	$	169,055	$	90,010	$	79	$	259,144	Net income	$	169,055	$	90,010	$	79	$	259,144

Table of Contents


	March 27, 2022
	Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	678,616	$	715,115	$	—	$	1,393,731

Accounts receivable, net	601,148		—		(346,862)		254,286
Finance receivables, net	—		1,699,642		—		1,699,642
Inventories, net	714,259		—		—		714,259
Restricted cash	—		142,812		—		142,812
Other current assets	149,955		61,455		(28,883)		182,527
	2,143,978		2,619,024		(375,745)		4,387,257
Finance receivables, net	—		5,121,911		—		5,121,911
Property, plant and equipment, net	636,216		27,591		—		663,807
Pension and postretirement assets	399,029		—		—		399,029
Goodwill	62,607		—		—		62,607
Deferred income taxes	—		75,185		(3,259)		71,926
Lease assets	38,126		6,947		—		45,073
Other long-term assets	210,157		37,595		(104,722)		143,030
	$	3,490,113	$	7,888,253	$	(483,726)	$	10,894,640
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	434,731	$	389,048	$	(346,862)	$	476,917
Accrued liabilities	495,921		129,581		(27,578)		597,924
Short-term deposits, net	—		65,049		—		65,049
Short-term debt	—		816,016		—		816,016
Current portion of long-term debt, net	—		1,327,357		—		1,327,357
	930,652		2,727,051		(374,440)		3,283,263
Long-term deposits, net	—		283,034		—		283,034
Long-term debt, net	744,842		3,725,244		—		4,470,086
Lease liabilities	20,544		7,089		—		27,633
Pension and postretirement liabilities	93,792		—		—		93,792
Deferred income taxes	10,478		1,848		(2,748)		9,578
Other long-term liabilities	165,990		50,190		1,973		218,153
Commitments and contingencies (Note 16)	0		0		0		0
Shareholders’ equity	1,523,815		1,093,797		(108,511)		2,509,101
	$	3,490,113	$	7,888,253	$	(483,726)	$	10,894,640

March 28, 2021
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 607,941 $ 1,712,704 $ 0 $ 2,320,645
Accounts receivable, net 603,273 0 (386,704) 216,569
Finance receivables, net 0 1,798,194 0 1,798,194
Inventories, net 470,997 0 0 470,997
Restricted cash 0 185,374 0 185,374
Other current assets 81,559 113,797 0 195,356
1,763,770 3,810,069 (386,704) 5,187,135
Finance receivables, net 0 4,958,583 0 4,958,583
Property, plant and equipment, net 687,086 31,882 0 718,968
Pension and postretirement assets 105,910 0 0 105,910
Goodwill 65,157 0 0 65,157
Deferred income taxes 56,911 79,206 (730) 135,387
Lease assets 36,559 8,206 0 44,765
Other long-term assets 184,876 33,929 (95,722) 123,083
$ 2,900,269 $ 8,921,875 $ (483,156) $ 11,338,988
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 355,722 $ 433,746 $ (386,704) $ 402,764
Accrued liabilities 443,529 125,768 1,143 570,440
Short-term deposits, net 0 93,887 0 93,887
Short-term debt 0 765,263 0 765,263
Current portion of long-term debt, net 0 1,622,243 0 1,622,243
799,251 3,040,907 (385,561) 3,454,597
Long-term deposits, net 0 58,766 0 58,766
Long-term debt, net 744,149 4,733,942 0 5,478,091
Lease liabilities 22,461 7,600 0 30,061
Pension and postretirement liabilities 103,854 0 0 103,854
Deferred income taxes 7,166 1,516 0 8,682
Other long-term liabilities 179,525 46,920 2,106 228,551
Commitments and contingencies (Note 16) 0 0 0 0
Shareholders’ equity 1,043,863 1,032,224 (99,701) 1,976,386
$ 2,900,269 $ 8,921,875 $ (483,156) $ 11,338,988

Table of Contents

Three months ended March 28, 2021
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Cash flows from operating activities:
Net income $ 169,055 $ 90,010 $ 79 $ 259,144
Adjustments to reconcile Net income to Net cash (used) provided by operating activities:
Depreciation and amortization 37,778 2,443 0 40,221
Amortization of deferred loan origination costs 0 19,200 0 19,200
Amortization of financing origination fees 172 3,442 0 3,614
Provision for long-term employee benefits 7,090 0 0 7,090
Employee benefit plan contributions and payments (9,885) 0 0 (9,885)
Stock compensation expense 8,174 794 0 8,968
Net change in wholesale finance receivables related to sales 0 0 (308,532) (308,532)
Provision for credit losses 0 (22,474) 0 (22,474)
Deferred income taxes 3,811 9,812 (431) 13,192
Other, net 476 775 (80) 1,171
Changes in current assets and liabilities:
Accounts receivable, net (388,688) 0 309,676 (79,012)
Finance receivables – accrued interest and other
0 8,947 0 8,947
Inventories, net 45,086 0 0 45,086
Accounts payable and accrued liabilities 104,486 354,507 (305,396) 153,597
Derivative financial instruments (3,219) (90) 0 (3,309)
Other 18,222 11,271 (3,730) 25,763
(176,497) 388,627 (308,493) (96,363)
Net cash (used) provided by operating activities (7,442) 478,637 (308,414) 162,781
Cash flows from investing activities:
Capital expenditures (18,427) (386) 0 (18,813)
Origination of finance receivables 0 (1,923,911) 1,014,773 (909,138)
Collections on finance receivables 0 1,606,844 (706,359) 900,485
Other investing activities 733 0 0 733
Net cash used by investing activities (17,694) (317,453) 308,414 (26,733)


	March 28, 2021
	Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	607,941	$	1,712,704	$	—	$	2,320,645

Accounts receivable, net	603,273		—		(386,704)		216,569
Finance receivables, net	—		1,798,194		—		1,798,194
Inventories, net	470,997		—		—		470,997
Restricted cash	—		185,374		—		185,374
Other current assets	81,559		113,797		—		195,356
	1,763,770		3,810,069		(386,704)		5,187,135
Finance receivables, net	—		4,958,583		—		4,958,583
Property, plant and equipment, net	687,086		31,882		—		718,968
Pension and postretirement assets	105,910		—		—		105,910
Goodwill	65,157		—		—		65,157
Deferred income taxes	56,911		79,206		(730)		135,387
Lease assets	36,559		8,206		—		44,765
Other long-term assets	184,876		33,929		(95,722)		123,083
	$	2,900,269	$	8,921,875	$	(483,156)	$	11,338,988
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	355,722	$	433,746	$	(386,704)	$	402,764
Accrued liabilities	443,529		125,768		1,143		570,440
Short-term deposits, net	—		93,887		—		93,887
Short-term debt	—		765,263		—		765,263
Current portion of long-term debt, net	—		1,622,243		—		1,622,243
	799,251		3,040,907		(385,561)		3,454,597
Long-term deposits, net	—		58,766		—		58,766
Long-term debt, net	744,149		4,733,942		—		5,478,091
Lease liabilities	22,461		7,600		—		30,061
Pension and postretirement liabilities	103,854		—		—		103,854
Deferred income taxes	7,166		1,516		—		8,682
Other long-term liabilities	179,525		46,920		2,106		228,551
Commitments and contingencies (Note 16)	0		0		0		0
Shareholders’ equity	1,043,863		1,032,224		(99,701)		1,976,386
	$	2,900,269	$	8,921,875	$	(483,156)	$	11,338,988

Table of Contents

Three months ended March 28, 2021
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Cash flows from financing activities:
Repayments of medium-term notes 0 (1,050,000) 0 (1,050,000)
Proceeds from securitization debt 0 597,411 0 597,411
Repayments of securitization debt 0 (291,346) 0 (291,346)
Repayments of asset-backed commercial paper 0 (66,894) 0 (66,894)
Net decrease in unsecured commercial paper 0 (262,517) 0 (262,517)
Net increase in credit facilities 0 15,629 0 15,629
Net increase in deposits 0 72,664 0 72,664
Dividends paid (23,105) 0 0 (23,105)
Repurchase of common stock (5,646) 0 0 (5,646)
Issuance of common stock under share-based plans 1,085 0 0 1,085
Net cash used by financing activities (27,666) (985,053) 0 (1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,418) 255 0 (5,163)
Net decrease in cash, cash equivalents and restricted cash $ (58,220) $ (823,614) $ 0 $ (881,834)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period $ 666,161 $ 2,743,007 $ 0 $ 3,409,168
Net decrease in cash, cash equivalents and restricted cash (58,220) (823,614) 0 (881,834)
Cash, cash equivalents and restricted cash, end of period $ 607,941 $ 1,919,393 $ 0 $ 2,527,334


	Three months ended March 27, 2022
	Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
Cash flows from operating activities:
Net income	$	158,961	$	63,388	$	153	$	222,502
Adjustments to reconcile Net income to Net cash (used) provided by operating activities:
Depreciation and amortization	37,106		2,152		—		39,258
Amortization of deferred loan origination costs	—		22,995		—		22,995
Amortization of financing origination fees	174		3,527		—		3,701
Provision for long-term employee benefits	(5,050)		—		—		(5,050)
Employee benefit plan contributions and payments	(2,143)		—		—		(2,143)
Stock compensation expense	8,233		670		—		8,903
Net change in wholesale finance receivables related to sales	—		—		(205,727)		(205,727)
Provision for credit losses	—		28,822		—		28,822



Deferred income taxes	6,176		665		(534)		6,307
Other, net	(5,322)		67		(153)		(5,408)
Changes in current assets and liabilities:
Accounts receivable, net	(319,329)		—		244,336		(74,993)
Finance receivables – accrued interest and other	—		3,115		—		3,115
Inventories, net	(2,630)		—		—		(2,630)
Accounts payable and accrued liabilities	86,546		289,876		(269,453)		106,969
Other current assets	(47,418)		14,467		25,651		(7,300)
	(243,657)		366,356		(205,880)		(83,181)
Net cash (used) provided by operating activities	(84,696)		429,744		(205,727)		139,321

Cash flows from investing activities:
Capital expenditures	(27,149)		(850)		—		(27,999)
Origination of finance receivables	—		(2,023,861)		965,400		(1,058,461)
Collections on finance receivables	—		1,724,863		(759,673)		965,190

Other investing activities	135		—		—		135
Net cash used by investing activities	(27,014)		(299,848)		205,727		(121,135)

Table of Contents


	Three months ended March 27, 2022
	Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
Cash flows from financing activities:


Proceeds from issuance of medium-term notes	—		495,785		—		495,785
Repayments of medium-term notes	—		(550,000)		—		(550,000)

Repayments of securitization debt	—		(271,499)		—		(271,499)
Borrowings of asset-backed commercial paper	—		62,455		—		62,455
Repayments of asset-backed commercial paper	—		(56,634)		—		(56,634)
Net increase in unsecured commercial paper	—		64,521		—		64,521

Net increase in deposits	—		57,660		—		57,660

Dividends paid	(24,056)		—		—		(24,056)
Repurchase of common stock	(261,737)		—		—		(261,737)


Net cash used by financing activities	(285,793)		(197,712)		—		(483,505)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,086)		343		—		(1,743)
Net decrease in cash, cash equivalents and restricted cash	$	(399,589)	$	(67,473)	$	—	$	(467,062)

Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	$	1,078,205	$	947,014	$	—	$	2,025,219
Net decrease in cash, cash equivalents and restricted cash	(399,589)		(67,473)		—		(467,062)
Cash, cash equivalents and restricted cash, end of period	$	678,616	$	879,541	$	—	$	1,558,157

Table of Contents


	Three months ended March 28, 2021
	Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
Cash flows from operating activities:
Net income	$	169,055	$	90,010	$	79	$	259,144
Adjustments to reconcile Net income to Net cash (used) provided by operating activities:
Depreciation and amortization	37,778		2,443		—		40,221
Amortization of deferred loan origination costs	—		19,200		—		19,200
Amortization of financing origination fees	172		3,442		—		3,614
Provision for long-term employee benefits	7,090		—		—		7,090
Employee benefit plan contributions and payments	(9,885)		—		—		(9,885)
Stock compensation expense	8,174		794		—		8,968
Net change in wholesale finance receivables related to sales	—		—		(308,532)		(308,532)
Provision for credit losses	—		(22,474)		—		(22,474)



Deferred income taxes	3,811		9,812		(431)		13,192
Other, net	(2,743)		685		(80)		(2,138)
Changes in current assets and liabilities:
Accounts receivable, net	(388,688)		—		309,676		(79,012)
Finance receivables – accrued interest and other	—		8,947		—		8,947
Inventories, net	45,086		—		—		45,086
Accounts payable and accrued liabilities	104,486		354,507		(305,396)		153,597
Other current assets	18,222		11,271		(3,730)		25,763
	(176,497)		388,627		(308,493)		(96,363)
Net cash (used) provided by operating activities	(7,442)		478,637		(308,414)		162,781

Cash flows from investing activities:
Capital expenditures	(18,427)		(386)		—		(18,813)
Origination of finance receivables	—		(1,923,911)		1,014,773		(909,138)
Collections on finance receivables	—		1,606,844		(706,359)		900,485

Other investing activities	733		—		—		733
Net cash used by investing activities	(17,694)		(317,453)		308,414		(26,733)

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	Three months ended March 28, 2021
	Harley-Davidson Motor Company		Harley-Davidson Financial Services		Consolidating Adjustments		Consolidated
Cash flows from financing activities:


Repayments of medium-term notes	—		(1,050,000)		—		(1,050,000)
Proceeds from securitization debt	—		597,411		—		597,411
Repayments of securitization debt	—		(291,346)		—		(291,346)
Borrowings of asset-backed commercial paper							—
Repayments of asset-backed commercial paper	—		(66,894)		—		(66,894)
Net decrease in unsecured commercial paper	—		(262,517)		—		(262,517)
Net increase in credit facilities	—		15,629		—		15,629
Net increase in deposits	0		72,664		0		72,664
Dividends paid	(23,105)		—		—		(23,105)
Repurchase of common stock	(5,646)		—		—		(5,646)
Other financing activities	1,085		—		—		1,085
Net cash used by financing activities	(27,666)		(985,053)		—		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,418)		255		—		(5,163)
Net decrease in cash, cash equivalents and restricted cash	$	(58,220)	$	(823,614)	$	—	$	(881,834)

Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	$	666,161	$	2,743,007	$	—	$	3,409,168
Net decrease in cash, cash equivalents and restricted cash	(58,220)		(823,614)		—		(881,834)
Cash, cash equivalents and restricted cash, end of period	$	607,941	$	1,919,393	$	—	$	2,527,334

20. Subsequent Event

In April ~~2021,~~2022, the Company ~~received notification from the Economic Ministry~~issued $550.0 million of ~~Belgium that, following~~secured notes through an on-balance sheet asset-backed securitization transaction at a request from the European Union (EU), the Company would be subject to the revocation of Binding Origin Information (BOI) rulings, effective April 19, 2021. Beginning in 2019, the Company has operated under BOIs which allowed it to supply its EU markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. Following the revocation, all non-electric motorcycles that Harley-Davidson imports into the EU, regardless of origin, will be subject to a total tariffweighted average interest rate of 31% from April 19, 2021 through May 31, 2021. This rate is expected to increase to 56% effective June 1, 2021. This ruling will effectively prohibit the Company from functioning competitively in the EU. The Company estimates the impact of the additional EU tariffs in 2021, if unmitigated, to be approximately $135 million and expects the impact to be approximately $200 million to $225 million on annual basis in future years. The Company is appealing the revocation of the BOIs. It has also sought temporary extended reliance on the 6% tariff rate for motorcycles produced in Thailand, ordered prior to April 19, 2021. There is no assurance that the appeal will be successful or that the Company will receive the extended reliance.2.40%.

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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 referred to as Harley-Davidson Motor Company ~~(HDMC)~~ and Harley-Davidson Financial ~~Services (HDFS).~~Services. 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 “% Change” figures included in the Results of Operations ~~section~~sections were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented. Certain “% Change” deemed not meaningful (NM) have been excluded.

(1) Note Regarding Forward-Looking Statements

The Company intends that certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” “may,” “will,” “estimates,” “targets,” ~~“intend”~~“intends,” “is on-track,” “forecasting,” or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including under the caption ~~“Cautionary Statements”~~"Cautionary Statements" in this Item 2, ~~and~~as well as in Item 1A. Risk Factors, as well as inItem 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. 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”~~"Key Factors Impacting the Company" and the “Guidance” sections in this Item 2 are only made as of April ~~19, 2021~~27, 2022 and the remaining forward-looking statements in this report are made as of the date of the filing of this report (May ~~6, 2021)~~5, 2022), 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 $222.5 million, or $1.45 per diluted share, in the first quarter of 2022, compared to $259.1 million, or $1.68 per diluted share, in the first quarter of ~~2021, compared to $69.7 million, or $0.45 per diluted share, in~~2021. In the first quarter of ~~2020. The~~2022, Motorcycles segment ~~reported~~ operating income ~~of $227.5~~was $202.9 million, ~~for~~down $24.7 million from the first quarter of ~~2021 which was up $143.0 million over the first quarter of 2020. Operating~~2021. The decrease in operating income from the Motorcycles segment for the first quarter of ~~2021~~2022 was ~~favorably impacted~~driven by higher supply chain costs and a ~~3.5% increase in wholesale~~less favorable motorcycle ~~shipments, favorable~~ product mix, ~~lower sales incentives and reduced selling, administrative and engineering expenses.~~partially offset by the favorable impact of model year price increases, compared to the same quarter last year. Operating income from the Financial Services segment in the first quarter of ~~2021~~2022 was ~~$118.6~~$86.4 million, ~~up 417.0%~~down $32.3 million compared to the ~~year-ago~~prior year quarter due ~~primarily~~ to ~~a lower~~an increase in the provision for credit ~~losses.~~losses, partially offset by lower interest expense.

~~Worldwide independent dealer retail~~Retail sales of new Harley-Davidson motorcycles in the first quarter of ~~2021~~2022 were up ~~9.4%~~2.1% compared to the first quarter of ~~2020 led by a 30.6%~~2021. The increase in ~~the U.S.,~~retail sales was driven by higher retail sales in international markets, partially offset by ~~declines~~lower retail sales in ~~Europe/Middle East/Africa (EMEA)~~the U.S. Retail sales in the first quarter of 2022 decreased 5.1% in the U.S. compared to the prior year quarter and ~~Latin America.~~were adversely impacted by production shortfalls associated with ongoing supply chain challenges. Refer to the Motorcycles Retail Sales and Registration Data section for further discussion of retail sales results.

~~The~~

Key Factors Impacting the Company ~~is pleased with~~(1)

Supply Chain Challenges – During the ~~pace~~first quarter of ~~recovery that it has~~2022, the Company continued to experience disruption and increased costs related to global supply chain challenges. As a result of these challenges, the Company experienced ~~across the business~~higher costs as ~~compared~~well as supply constraints related to ~~prior year when the Company's results were adversely~~certain components including those impacted by the ~~onset~~continued global semiconductor chip shortages. In the first quarter of 2022, the ~~COVID-19 pandemic.~~Company's production was lower than what the Company had planned due to the lack of availability of certain components. The Company ~~continues to manage through~~expects that year-over-year inflation rates for logistics and manufacturing costs, excluding raw materials and components, will improve in the ~~impacts~~second half of 2022 from the ~~COVID-19 pandemic keeping safety~~peak levels of inflation experienced in 2021 and ~~community well-being at~~that the ~~forefront. The~~supply of semiconductor chips will stabilize in the second half of 2022. However, given the macro global factors influencing raw materials, the Company now believes ~~its actions during 2020 to reshape the business through The Rewire~~that raw materials and ~~its initial execution of The Hardwire 5-year strategic plan are having a positive impact on the Company's results. Refer to the Company's Annual Report on Form 10-K~~component cost inflation will continue for the ~~year ended December 31, 2020 for more information on The Rewire and The Hardwire.~~remainder of 2022 at rates similar to those experienced by the Company in the first quarter of 2022.

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~~Guidance(1)~~

Given the strong 2021 first quarter performance, the Company has increased its guidance for the full year. The decision to increase guidance was based on several key factors. First, the Company has better clarity on the cost impactSuspension of supply chain challenges and its ability to adapt to those challenges. Also, the economic outlook has improved with falling unemployment numbers, recent federal stimulus in the U.S. and continued progress on the global COVID-19 vaccine roll-out. The Company also has a better read on demand for its new model year 2021 motorcycles, which has been stronger than it had anticipated, particularly in the most profitable segments of Touring and Large Cruiser motorcycles. As a result, for the full-year 2021, the Company now expects:

•~~Motorcycles segment revenue growth of 30% to 35%, an increase from the previous guidance of 20% to 25%.~~

•~~Motorcycles segment operating income margin of 7% to 9%, up from the previous guidance of 5% to 7%, assuming the Company can successfully mitigate the impact of the additional~~Additional European Union ~~(EU) tariffs discussed below. This increase reflects an improved demand outlook and confidence in the Company's ability to continue navigating through the global supply chain headwinds.~~

•Tariffs – If the Company is unable to mitigate the impact of the additional EU tariffs to any extent in 2021, the Company expects Motorcycles segment operating income margin of 5% to 7%, in line with the original guidance.

•~~Financial Services segment operating income growth of 50% to 60%, an increase from the previous guidance of 10% to 15%, driven primarily by a favorable provision for credit losses.~~

~~Additionally, for the full-year 2021, the Company continues to expect capital expenditures of $190 million to $220 million.~~

Within 2021, the Company expects (a) approximately 60% of the total annual Motorcycles segment revenue to occur in the first half of the year driven by momentum from the model year 2021 launch through the riding season and (b) assuming the Company can successfully mitigate the impact of the additional EU tariffs discussed below, Motorcycles segment operating margin percent to be in the mid-teens during the first half of 2021 and near break-even in the second half of 2021.

In the second half of 2021, the Company expects retail inventory to decrease from its expected peak level at the end of the second quarter. In the fourth quarter the Company will prepare its manufacturing facilities to begin production of model year 2022 motorcycles. The Company believes the pattern for inventory and shipments in the second half of 2021 will be similar to what the Company experienced in the second half of 2020. In addition, during 2020, the Company benefited from cost reductions associated with COVID-19 pandemic cash preservation efforts, which started in the second quarter of 2020, and The Rewire restructuring savings, which started in the third quarter of 2020. Refer to "Restructuring Plan Costs and Savings" for additional discussion.

~~Additional EU Tariffs(1)~~

In April 2021, the Company received notification from the Economic Ministry of Belgium that, following a request from the ~~EU,~~European Union (EU), the Company would be subject to ~~the~~ revocation of the Binding Origin Information (BOI) rulings ~~effective April 19, 2021. Beginning in 2019, the Company has operated under BOIs which~~that allowed it to supply its EU markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. ~~Following~~As a result of the revocation, all non-electric motorcycles that Harley-Davidson ~~imports~~imported into the EU, regardless of origin, ~~will be~~were subject to a total tariff rate of 31% from April 19, 2021 through ~~May 31,~~the end of 2021. On October 30, 2021, the U.S. and EU announced an agreement related to the Section 232 tariffs on steel and aluminum that were implemented in 2018 by the U.S. and the subsequent rebalancing tariff measures taken by the EU. This agreement suspended the additional tariffs initially imposed by the EU on the Company's motorcycles, reducing the total EU tariff rate ~~is expected~~on the Company’s motorcycles from 31% to ~~increase~~6%, effective January 1, 2022. The lower 6% tariff rate applies to ~~56% effective June 1, 2021. This ruling will effectively prohibit~~all motorcycles imported by the Company ~~from functioning competitively~~into the EU, regardless of origin. Under the agreement between the U.S. and the EU, the lower tariff rate will remain in effect until December 31, 2023. During such time, the ~~EU. The Company estimates~~U.S. and EU will monitor and review the ~~impact~~operation of the ~~additional~~agreement, seeking to conclude the negotiations on steel and aluminum tariffs by December 31, 2023. These negotiations are ongoing, and there are no assurances the U.S. and EU will reach a resolution that concludes the trade conflict on steel and aluminum tariffs ~~in 2021, if unmitigated,~~beyond December 31, 2023.

To date, the Company continues to ~~be approximately $135 million and expects the impact to be approximately $200 million to $225 million on annual basis in future years. The Company is appealing~~pursue its appeals of the revocation of the ~~BOIs. It has also sought~~BOIs and the denial of its application for temporary extended reliance on the 6% tariff rate ~~for~~(for motorcycles produced in Thailand and ordered prior to April 19, ~~2021. There~~2021), although there is no assurance that ~~the appeal~~these appeals will continue or be ~~successful or that the Company will receive the extended reliance.~~successful.

COVID-19 Pandemic

– The Company continues to manage through the impacts of the COVID-19 pandemic and its associated variants by keeping safety and community well-being a priority. The Company continues to proactively follow protocols to keep workers safe in its manufacturing facilities. The full impact of the COVID-19 pandemic on future results depends on future developments, such as the ultimate duration and scope of the pandemic including associated variants, the success of vaccination programs, the consequences of vaccine requirements, and its impact on the Company's customers, ~~independent~~ dealers, distributors, and suppliers. Future impacts and disruptions could have an adverse effect on production, supply chains, distribution, and demand for the Company's products.

LiveWire Transaction – On December 13, 2021, the Company and AEA-Bridges Impact Corp. (ABIC), a special purpose acquisition company (SPAC), announced that they have entered into a definitive business combination agreement under which LiveWire, the Company's electric motorcycle division, will become a separate business of the Company and ABIC will combine with LiveWire to create a new publicly traded company. The parties expect that the transaction will be financed by ABIC’s $400 million cash held in trust (assuming no redemptions by ABIC’s shareholders in the context of the transaction), a $100 million cash investment from the Company, and a $100 million investment from an independent strategic investor, Kwang Yang Motor Co., Ltd. (KYMCO). In addition, to the extent any shares of the SPAC are redeemed, the Company will invest an additional amount equal to the dollar value of such redemptions up to a maximum of $100 million.

The transaction, which has been approved by the boards of directors of both the Company and ABIC, is expected to close mid-2022. The consummation of the business combination is subject to the approval of ABIC’s shareholders as well as other conditions and regulatory approvals. Upon closing of the transaction, the Company will retain a controlling financial interest in LiveWire. The expectation is that, upon closing of the transaction, the Company will retain an equity interest in the separate public company of approximately 74%. As the controlling shareholder following the transaction, the Company will continue to consolidate LiveWire’s results, with additional adjustments to recognize non-controlling shareholder interests.

Guidance(1)

On April 27, 2022, the Company provided the following guidance for 2022, which reflects its current outlook for the supply chain challenges discussed above.

The Company continues to expect Motorcycles segment revenue growth, compared to 2021, between 5% and 10%. This revenue growth guidance incorporates the Company's information and expectations as of April 27, 2022 for the impact of supply chain challenges, including semiconductor chip availability, that the industry continues to face. The Company expects revenue to be positively impacted by global pricing actions as the Company works to offset cost headwinds across the supply chain and recovers its ability to produce motorcycles at levels necessary to meet demand. Furthermore, the Company expects revenue growth from parts and accessories and apparel and licensing as it executes The Hardwire strategy.

The Company continues to expect Motorcycles segment operating margin as a percent of revenue of 11% to 12%. The Company believes the anticipated positive impacts from higher motorcycle volume, product mix and pricing, combined with expected growth in revenue from higher-margin parts and accessories and apparel, will more than offset the expected cost inflation across the supply chain. Also, the suspension of the additional EU tariffs is expected to contribute over a percentage point of margin growth.

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~~Supply Chain~~ ~~– During~~Given the ~~first quarter~~Company's estimated production cadence and the expected timing of ~~2021,~~supply chain stabilization, the Company experienced some disruption and increased cost related to the adverse impacts of the COVID-19 pandemic on its global supply chain. To date, the Company has been successful in mitigating these disruptions to avoid material adverse impacts on its ability to produce and supply product. The Company expects the ~~global supply chain disruptions~~Motorcycles segment revenue growth rate in 2022, compared to ~~continue through~~2021, to be in the ~~remainder~~mid-single digits for the first half of ~~2021,~~2022 and in the high-single digits for the second half of 2022. In addition, given the expected seasonality of the business, the Company ~~will continue~~expects Motorcycles segment operating income margin percent to ~~actively work to mitigate these impacts on its business.~~

~~Liquidity~~ ~~– The Company continues to closely monitor its liquidity~~be in ~~light of~~ the ~~COVID-19 pandemic. At the end~~mid-teens for the first ~~quarter~~half of ~~2021,~~2022 and in the ~~Company had $4.0 billion of available liquidity through cash, cash equivalents and availability under its credit and conduit facilities. Liquidity is discussed in more detail under~~ ~~Liquidity and Capital Resources~~.

~~Supporting Dealers and Riders~~ – The Company's response and recovery plans have included supporting global dealers and customers. HDFS continues to work with qualified retail borrowers who have been impacted by the COVID-19 pandemic by offering short-term adjustments to payment due dates. These temporary extensions do not affect the associated interest rate or loan term. The volume of payment extensions on eligible retail loans has declined from the levels experienced duringmid-to-high single digits for the second ~~quarter and into the third quarter~~half of ~~2020 but has not yet returned to pre-COVID-19 pandemic levels.~~2022.

~~Safety~~ – The Company continues to proactively manage through the COVID-19 pandemic and has implemented robust protocols to keep workers safe in its manufacturing facilities. Most non-production workers continue to work remotely in light of the COVID-19 pandemic.

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

During 2020, the Company initiated certain restructuring activities as part of The Rewire including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global independent dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. These actions included restructuring expenses related to employee termination costs, contract termination costs and non-current asset adjustments. The workforce reduction resulted in the elimination of approximately 700 positions globally, including the termination of approximately 500 employees. In addition, the India action resulted in the termination of approximately 70 employees. The Company incurred approximately $130 million of restructuring expense in connection with these actions during 2020. The Company expects to incur total restructuring expenses for these actions of approximately $150 million, including approximately $20 million in 2021. The Company continues to expect ~~annual ongoing gross savings resulting from these restructuring activities of approximately $115 million. Refer~~Financial Services operating income to ~~Note 4~~decline 20% to 25% in 2022 compared to 2021. This decline is largely a result of the ~~Notes~~favorable credit loss allowance reductions and lower actual credit losses in 2021 that are not expected to ~~Consolidated financial statements~~ ~~for additional information regarding~~repeat in 2022.

The Company continues to expect capital investments between $190 and $220 million in 2022. The Company plans to continue to invest behind product development and capability enhancement in support of The Hardwire strategy.

The Company's capital allocation priorities are to fund growth through The Hardwire initiatives, pay dividends and execute discretionary share repurchases, which the ~~Company's restructuring activities.~~Company plans to continue in 2022. At the end of the first quarter of 2022, the Company had 12.0 million shares remaining under its authorization to repurchase shares.

Results of Operations for the Three Months Ended March ~~28, 2021~~27, 2022

Compared to the Three Months Ended March ~~29, 2020~~28, 2021

Consolidated Results


	Three months ended
(in thousands, except earnings per share)	March 27, 2022		March 28, 2021		(Decrease) Increase		% Change
Operating income from Motorcycles and Related Products	$	202,875	$	227,532	$	(24,657)	(10.8)	%
Operating income from Financial Services	86,357		118,642		(32,285)		(27.2)
Operating income	289,232		346,174		(56,942)		(16.4)
Other income, net	11,030		277		10,753		NM
Investment (loss) income	(1,979)		1,402		(3,381)		NM
Interest expense	7,711		7,708		3		—
Income before income taxes	290,572		340,145		(49,573)		(14.6)
Provision for income taxes	68,070		81,001		(12,931)		(16.0)
Net income	$	222,502	$	259,144	$	(36,642)	(14.1)	%
Diluted earnings per share	$	1.45	$	1.68	$	(0.23)	(13.7)	%

Three months ended
(in thousands, except earnings per share) March 28,
2021 March 29,
2020 Increase (Decrease) %
Change
Operating income from Motorcycles and Related Products $ 227,532 $ 84,567 $ 142,965 169.1 %
Operating income from Financial Services 118,642 22,946 95,696 417.0
Operating income 346,174 107,513 238,661 222.0
Other income, net 277 155 122 78.7
Investment income (loss) 1,402 (5,347) 6,749 (126.2)
Interest expense 7,708 7,755 (47) (0.6)
Income before income taxes 340,145 94,566 245,579 259.7
Provision for income taxes 81,001 24,871 56,130 225.7
Net income $ 259,144 $ 69,695 $ 189,449 271.8 %
Diluted earnings per share $ 1.68 $ 0.45 $ 1.23 273.3 %

~~During~~The Company reported operating income of $289.2 million in the first quarter of ~~2021,~~2022 compared to $346.2 million in the same period last year. Motorcycles segment operating income ~~increased $238.7~~was $202.9 million ~~or 222.0%,~~in the first quarter of 2022, down $24.7 million compared to the same period last ~~year, driven by strong performance in both the Motorcycles and~~year. Operating income from the Financial Services ~~segments.~~segment decreased $32.3 million compared to the first quarter of 2021. Refer to the Motorcycles and Related Products Segment and Financial Services Segment discussions for a more detailed analysis of the factors affecting operating income.

~~Table~~Other income in the first quarter of ~~Contents~~

~~Investment income increased $6.7 million~~2022 was higher than in the first quarter of 2021, ~~as compared to 2020, driven~~impacted by higher non-operating income ~~from investments in marketable securities.~~related to the Company's defined benefit plans.

The Company's effective income tax rate for the first quarter of ~~2021~~2022 was ~~23.8%~~23.4% compared to ~~26.3%~~23.8% for the same period in ~~2020. The decrease in the 2021 effective income tax rate as compared to 2020 was due to the increase in~~ ~~Income before provision for income taxes, resulting in discrete income tax adjustments having a reduced impact on the effective income tax rate for the quarter.~~2021.

Diluted earnings per share was ~~$1.68~~$1.45 in the first quarter of ~~2021, up 273.3%~~2022, down from diluted earnings per share of ~~$0.45~~$1.68 for the same period last ~~year.~~year on lower net income, partially offset by the impact of lower diluted weighted average shares outstanding. Diluted weighted average shares outstanding ~~increased~~decreased from ~~153.7 million in the first three months of 2020 to~~ 154.5 million in the first three months of ~~2021.~~2021 to 153.9 million in the first three months of 2022, driven by the Company's discretionary repurchases of common stock. Please refer to Liquidity and Capital Resources for additional information concerning the Company's share repurchase activity.

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Motorcycles Retail Sales and Registration Data

~~Harley-Davidson~~ Motorcycle Retail Sales(a)

Retail unit sales of new Harley-Davidson and LiveWire motorcycles were as follows:

Three months ended
March 31,
2021 March 31,
2020 Increase
(Decrease) % Change
United States 30,983 23,732 7,251 30.6 %
Canada 1,799 1,466 333 22.7
North America 32,782 25,198 7,584 30.1
Europe/Middle East/Africa (EMEA) 4,943 7,730 (2,787) (36.1)
Asia Pacific 5,793 5,752 41 0.7
Latin America 717 1,759 (1,042) (59.2)
44,235 40,439 3,796 9.4 %


	Three months ended
	March 31, 2022	March 31, 2021	(Decrease) Increase	% Change
United States	29,408	30,983	(1,575)	(5.1)	%
Canada	1,872	1,799	73	4.1
North America	31,280	32,782	(1,502)	(4.6)
Europe/Middle East/Africa (EMEA)	6,339	4,943	1,396	28.2
Asia Pacific	6,724	5,793	931	16.1
Latin America	809	717	92	12.8
	45,152	44,235	917	2.1	%

(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by ~~independent Harley-Davidson~~ dealers and compiled by the Company. The Company must rely on information that its ~~independent~~ dealers supply concerning new retail sales, and the Company does not regularly verify the information that its ~~independent~~ dealers supply. This information is subject to revision.

Worldwide retail sales of new Harley-Davidson motorcycles were up ~~9.4%~~2.1% during the first quarter of ~~2021~~2022 compared to the same period last year. The increase in retail sales during the first quarter of 2022 was led by higher retail sales in the Company's EMEA and Asia Pacific markets, partially offset by a decline in North America.

In North America, retail sales in the first quarter of 2022 were down compared to the same period last year ~~when results were first impacted by~~due to a 5.1% decline in the ~~initial effects of~~U.S. The Company believes the ~~COVID-19 pandemic. The increase~~decline in U.S. retail sales ~~during 2021 was led by the U.S. market which was positively impacted by the Company's shift~~related to low dealer inventories as a result of production shortages associated with ongoing global supply chain challenges.

Retail sales outside of North America were higher in ~~new model year launch timing from August to~~ the first quarter of ~~2021 and strong demand for the Company's new model year Touring and Large Cruiser motorcycles. Retail sales in EMEA declined~~2022 compared to the same ~~quarter~~period last year, ~~due to~~driven primarily by increases in EMEA and Asia Pacific which were positively impacted by greater product availability following the Company's decision not to continue selling Street or Sportster motorcycles in Europe, shipping delays, as well as continued COVID-19 pandemic lockdowns. Latin America retail sales were adversely impacted duringlaunch of model year 2022 motorcycles.

At the end of the first quarter of ~~2021 by the reduction of independent dealers and pricing actions executed as part of The Rewire actions in 2020 to restore profitability in those markets.~~

~~Across the independent dealer network,~~2022, worldwide retail inventory of new Harley-Davidson motorcycles was down approximately ~~50% at the end of March 2021~~24%, or approximately 9,000 motorcycles, compared to ~~March 2020 behind~~ the ~~Company's new approach to supply and inventory management which was implemented in the second~~first quarter of ~~2020.~~2021. Retail inventory ~~at the end of March 2021 was up approximately 60% over the end of December 2020, as the Company worked to build inventory ahead of the riding season. The Company expects retail inventory~~levels at the end of the second and third quarters of 2021 to be lower than average historical levels. The Company believes its approach to inventory management is continuing to improve profitability and strengthen retail pricing, with 2021 first quarter ~~retail motorcycle transaction~~of 2022, primarily in the U.S., were adversely impacted by global supply chain challenges which impacted the Company's ability to produce at planned levels. Overall, the Company continued to observe strong pricing in the ~~U.S. up~~market for ~~all families, most~~both new and used motorcycles in the first quarter of ~~which are at or near Manufacturer's Suggested Retail Prices.~~2022.

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Motorcycle Registration Data and Market Share – 601+cc(a)

The Company's U.S. market share of new 601+cc motorcycles decreased during the first quarter of 2022 compared to the first quarter of last year on lower retail sales relative to the industry. However, despite the year-over-year decline in retail sales, the Company's market share within the Touring and large Cruiser segments of the U.S. market grew compared to the first quarter last year as the Company performed better than its competition on a relative basis in these segments. The Company's European market share of new 601+cc motorcycles for first quarter of 2022 grew behind strong retail sales compared to the prior year first quarter. Industry retail registration data for new motorcycles and the Company's market share was as follows:

Three months ended
March 31,
2021 March 31,
2020 Increase
(Decrease) % Change
Industry new motorcycle registrations:
United States(b)
63,412 47,232 16,180 34.3 %
Europe(c)
100,341 95,504 4,837 5.1 %
Harley-Davidson market share data:
United States(b)
48.3 % 48.9 % (0.6) pts.
Europe(c)
3.9 % 7.6 % (3.7) pts.


	Three months ended
	March 31, 2022		March 31, 2021		(Decrease) Increase	% Change
Industry new motorcycle registrations:
United States(b)	62,207		63,412		(1,205)	(1.9)	%
Europe(c)	106,716		95,810		10,906	11.4	%

Harley-Davidson market share data:
United States(b)	47.1	%	48.3	%	(1.2)	pts.
Europe(c)	4.9	%	4.0	%	0.9	pts.

(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt (kW) peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.

(b)United States industry data is derived from information provided by Motorcycle Industry Council. This third-party data is subject to revision and update.

(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Industry data is derived from information provided by Management Services Helwig Schmitt GmbH. This third-party data is subject to revision and update.

Motorcycles and Related Products Segment

Motorcycle Unit Shipments

Wholesale ~~Harley-Davidson~~ motorcycle unit shipments were as follows:

Three months ended
March 28, 2021 March 29, 2020 Unit Unit
Units Mix % Units Mix % Increase (Decrease) % Change
U.S. motorcycle shipments 40,153 73.3 % 33,024 62.3 % 7,129 21.6 %
Worldwide motorcycle shipments:
Touring motorcycle units 27,316 49.8 % 21,597 40.8 % 5,719 26.5 %
Cruiser motorcycle units(a)
20,468 37.3 % 20,131 38.0 % 337 1.7
Sportster® / Street motorcycle units 7,026 12.9 % 11,245 21.2 % (4,219) (37.5)
54,810 100.0 % 52,973 100.0 % 1,837 3.5 %


	Three months ended
	March 27, 2022			March 28, 2021			Unit	Unit
	Units	Mix %		Units	Mix %		(Decrease) Increase	% Change

U.S. motorcycle shipments	35,891	65.4	%	40,153	73.3	%	(4,262)	(10.6)	%



Worldwide motorcycle shipments:
Grand American Touring(a)	26,012	47.4	%	30,334	55.4	%	(4,322)	(14.2)	%
Cruiser(b)	15,660	28.6	%	17,450	31.8	%	(1,790)	(10.3)
Adventure Touring	3,520	6.4	%	—	—	%	3,520	NM
Sportster® / Street	9,651	17.6	%	7,026	12.8	%	2,625	37.4
	54,843	100.0	%	54,810	100.0	%	33	0.1	%

(a)Includes ~~Softail®,~~ CVOTM, and ~~LiveWire~~Trike

(b)TMIncludes Softail® and LiveWire®

The Company shipped ~~54,810 Harley-Davidson~~54,843 motorcycles worldwide during the first ~~quarter~~three months of ~~2021,~~2022, which was ~~3.5% higher than~~flat compared to the ~~same period~~first three months of 2021. The Company's shipments in ~~2020 reflecting~~ the ~~positive impact of the change in new model year launch timing from August to~~U.S. during the first quarter of ~~2021. In addition, wholesale shipments in the first quarter of 2020~~2022 were ~~adversely~~negatively impacted by ~~the temporary suspension of the Company's~~lower than planned production related to component part availability associated with ongoing global ~~manufacturing operations in March 2020 resulting from~~supply chain challenges.

The lower than planned production also impacted the ~~COVID-19 pandemic. The~~ mix of ~~Touring and Cruiser~~ motorcycles shipped during the first ~~quarter~~three months of ~~2021 increased~~2022 resulting in a lower mix of Grand American Touring and Cruiser motorcycles shipped as a percent of total shipments ~~while the mix of Sportster/Street motorcycles decreased compared to the same period last year.~~and a

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higher mix of Sportster/Street motorcycles compared to the same period last year. The mix of motorcycle unit shipments during the first quarter of 2022 was also impacted by shipments of the Company's Pan America™ Adventure Touring motorcycles, which were launched in the second quarter of 2021.

Segment Results

Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):


	Three months ended
	March 27, 2022			March 28, 2021			Increase (Decrease)		% Change
Revenue:
Motorcycles	$	1,059,113		$	1,016,334		$	42,779	4.2	%
Parts and accessories	165,525			149,859			15,666		10.5
Apparel	51,407			50,323			1,084		2.2
Licensing	6,497			5,512			985		17.9
Other	20,629			10,079			10,550		104.7
	1,303,171			1,232,107			71,064		5.8
Cost of goods sold	895,536			811,622			83,914		10.3
Gross profit	407,635			420,485			(12,850)		(3.1)
Operating expenses:
Selling & administrative expense	172,295			152,689			19,606		12.8
Engineering expense	32,593			40,857			(8,264)		(20.2)
Restructuring benefit	(128)			(593)			465		(78.4)
	204,760			192,953			11,807		6.1	%
Operating income	$	202,875		$	227,532		$	(24,657)
Operating margin	15.6		%	18.5		%	(2.9)		pts.

Three months ended
March 28, 2021 March 29, 2020 Increase
(Decrease) %
Change
Revenue:
Motorcycles $ 1,016,334 $ 899,365 $ 116,969 13.0 %
Parts & Accessories 149,859 134,685 15,174 11.3
General Merchandise 50,323 49,160 1,163 2.4
Licensing 5,512 8,029 (2,517) (31.3)
Other 10,079 8,549 1,530 17.9
1,232,107 1,099,788 132,319 12.0
Cost of goods sold 811,622 780,868 30,754 3.9
Gross profit 420,485 318,920 101,565 31.8
Operating expenses:
Selling & administrative expense 152,689 185,577 (32,888) (17.7)
Engineering expense 40,857 48,776 (7,919) (16.2)
Restructuring benefit (593) — (593) NM
192,953 234,353 (41,400) (17.7)
Operating income $ 227,532 $ 84,567 $ 142,965 169.1 %
Operating margin 18.5 % 7.7 % 10.8 pts.

The estimated ~~impact~~impacts of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first three months of ~~2020~~2021 to the first three months of ~~2021~~2022 were as follows (in millions):

Net
Revenue Cost of
Goods Sold Gross
Profit
Three months ended March 29, 2020 $ 1,100 $ 781 $ 319
Volume 35 25 10
Price and sales incentives, net of related costs 13 (4) 17
Foreign currency exchange rates and hedging 19 11 8
Shipment mix 65 8 57
Raw material prices — 1 (1)
Manufacturing and other costs — (11) 11
132 30 102
Three months ended March 28, 2021 $ 1,232 $ 811 $ 421


	Net Revenue		Cost of Goods Sold		Gross Profit
Three months ended March 28, 2021	$	1,232.1	$	811.6	$	420.5
Volume	26.6		12.7		13.9
Price and sales incentives	81.4		—		81.4
Foreign currency exchange rates and hedging	(17.3)		(13.8)		(3.5)
Shipment mix	(19.6)		2.5		(22.1)
Raw material prices	—		14.9		(14.9)
Manufacturing and other costs	—		67.7		(67.7)
	71.1		84.0		(12.9)
Three months ended March 27, 2022	$	1,303.2	$	895.6	$	407.6

Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first ~~three months~~quarter of ~~2020~~2021 to the first ~~three months~~quarter of ~~2021~~2022 were as follows:

•The increase in volume was due primarily to higher ~~wholesale motorcycle shipments~~parts and ~~higher Parts & Accessories~~accessories sales.

•During the first ~~three months~~quarter of ~~2021,~~2022, revenue benefited from ~~lower sales incentives.~~higher wholesale prices on new model year 2022 motorcycles coupled with pricing surcharges in select markets.

•Revenue ~~was favorably~~and gross profit were negatively impacted by ~~stronger~~weaker foreign currency exchange rates relative to the U.S. ~~dollar. The favorable revenue benefit was~~dollar partially offset by ~~unfavorable~~favorable net foreign currency ~~losses~~gains associated with hedging ~~and balance sheet remeasurements~~ recorded in cost of goods sold.

•Changes in the shipment mix between motorcycle families had ~~a favorable~~an unfavorable impact on revenue and gross profit during the first quarter of ~~2021 as the increased contribution from~~2022 due primarily to a lower mix of Grand American Touring ~~models more than offset the impact of unit declines of less profitable small Cruiser~~ models.

•~~Manufacturing and other costs benefited from~~Raw material cost ~~savings resulting from the Company's 2020 restructuring actions and lower tariff costs, partially offset~~increases were driven by ~~higher COVID-19 pandemic related~~cost inflation primarily due to supply chain ~~costs.~~challenges.

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~~Operating expenses were lower~~•Manufacturing and other costs increased due primarily to higher costs associated with supply chain challenges. In 2021, supply chain cost inflation started to accelerate in the second quarter and continued increasing throughout the remainder of the year. The cost inflation experienced in the first quarter of ~~2021~~2022 is consistent with levels experienced in the back-half of 2021.

Operating expenses were higher in the first quarter of 2022 compared to the same period in ~~2020~~2021 due primarily to ~~lower~~ costs ~~as a result of the Company's 2020 restructuring actions and a shift in the timing of expenses, related to initiatives under~~associated with The Hardwire ~~to subsequent quarters in 2021. Refer to~~ ~~Note 4 of~~initiatives, including the ~~Notes to Consolidated financial statements~~ ~~for additional information regarding restructuring activities.~~LiveWire transaction.

Financial Services Segment

Segment Results

Condensed statements of operations for the Financial Services segment were as follows (in thousands):

Three months ended
March 28, 2021 March 29, 2020 (Decrease)
Increase %
Change
Revenue:
Interest income $ 159,814 $ 170,001 $ (10,187) (6.0) %
Other income 30,586 28,455 2,131 7.5
190,400 198,456 (8,056) (4.1)
Expenses:
Interest expense 55,707 52,473 3,234 6.2
Provision for credit losses (22,474) 79,419 (101,893) (128.3)
Operating expense 38,298 43,618 (5,320) (12.2)
Restructuring expense 227 — 227 NM
71,758 175,510 (103,752) (59.1)
Operating income $ 118,642 $ 22,946 $ 95,696 417.0 %


	Three months ended
	March 27, 2022		March 28, 2021		Increase (Decrease)		% Change
Revenue:
Interest income	$	161,734	$	159,814	$	1,920	1.2	%
Other income	30,281		30,586		(305)		(1.0)
	192,015		190,400		1,615		0.8
Expenses:
Interest expense	42,099		55,707		(13,608)		(24.4)
Provision for credit losses	28,822		(22,474)		51,296		(228.2)
Operating expense	34,737		38,298		(3,561)		(9.3)
Restructuring expense	—		227		(227)		(100.0)
	105,658		71,758		33,900		47.2
Operating income	$	86,357	$	118,642	$	(32,285)	(27.2)	%

Interest income was ~~unfavorable in~~higher for the first quarter of ~~2021,~~2022, primarily due to ~~lower~~higher average outstanding finance receivables, partially offset by a ~~higher~~lower average yield. ~~Other income increased due in part to higher insurance income.~~ Interest expense ~~increased~~decreased due to ~~higher~~lower average outstanding debt ~~partially offset by~~and a lower cost of funds.

The provision for credit losses ~~decreased $101.9~~increased $51.3 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to a reduction in the allowance for credit losses recorded in the first quarter of 2021 and higher credit losses in the first quarter of 2022 as compared to the first quarter of 2021.

The reduction in the allowance for credit losses in 2021 was largely driven ~~primarily~~ by ~~improving~~improvement in economic conditions and the Company's outlook on future conditions during the first quarter of ~~2021 and favorable retail credit loss performance. The provision for credit losses was favorable as a result~~2021. During the first quarter of ~~improvement in the U.S. economy~~2022, economic conditions and the Company’s outlook ~~on future economic conditions. However, there is uncertainty surrounding~~were relatively unchanged from the end of 2021. The pace of economic recovery continues to remain uncertain as demonstrated by ~~unemployment levels above those experienced prior to~~rising inflation, muted consumer confidence, continued global supply chain disruptions, and the ~~COVID-19 pandemic and continuing COVID-19 pandemic-related challenges across the U.S.,~~conflict in Ukraine, among other factors. As such, ~~the Company considered various third-party economic forecast scenarios and applied a probability-weighting to those economic forecast scenarios. At~~at the end of the first quarter of ~~2021,~~2022, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios included continued slow economic ~~improvement; however, the pace of economic recovery remains uncertain. As a result, the Company included some adverse economic conditions~~improvement in its economic scenario weighting. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.

Annualized credit losses on the Company's retail motorcycle loans were 1.77% during the first quarter of 2022 compared to 1.46% in the first quarter of 2021. The unfavorable retail credit loss performance was driven by delinquencies and the resulting charge-offs moving towards more normalized levels during the first quarter of 2022. The 30-day delinquency rate for retail motorcycle loans at March ~~28, 2021 was~~27, 2022 increased to 2.87% from 2.14% ~~compared to 3.37%~~ at March ~~29, 2020.~~28, 2021. The ~~improved~~30-day delinquency rate was ~~primarily driven by~~elevated as compared to the first quarter of 2021 as the delinquency rate for the first quarter of 2021 remained below levels experienced prior to the COVID-19 pandemic due to benefits to individuals provided byunder U.S. federal stimulus packages as well as ~~continued~~the effects of COVID-19 pandemic-related retail payment extensions. Starting in the second quarter of 2020 through the end of the second quarter of 2021, the Company granted COVID-19 pandemic-related extensions ~~granted~~ to help customers get through financial difficulties associated with the pandemic. During the first quarter of 2021, the volume of payment extensions declined from the levels experienced during the second quarter and into the third quarter of 2020 but has not yet returned to pre-COVID-19 pandemic levels. The Company continues to grant standard payment extensions to customers in accordance with its policies. ~~Annualized credit~~The Company expects the delinquency rate and losses ~~for the Company's retail motorcycle loans were 1.46% through March 28, 2021 compared~~ to ~~2.73% through March 29, 2020. The favorable retail credit loss performance was due~~continue to ~~the low delinquency levels as well as improved used motorcycle values at auction due to a limited supply of new and used motorcycles.~~

Operating expenses decreased $5.3 million compared to the first quarter of 2020 as the Company aggressively managed costs and benefited from lower costs resulting from the Company's 2020 restructuring actions. Refer to normalize over time~~Note 4 of the Notes to Consolidated financial statements~~. ~~for additional information regarding restructuring activities.~~(1)

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Operating expenses decreased $3.6 million in the first quarter of 2022 compared to the first quarter of 2021 in part due to lower technology costs.

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

Three months ended
March 28,
2021 March 29,
2020
Balance, beginning of period $ 390,936 $ 198,581
Cumulative effect of change in accounting(a)
— 100,604
Provision for credit losses (22,474) 79,419
Charge-offs, net of recoveries (22,229) (43,108)
Balance, end of period $ 346,233 $ 335,496

~~(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the allowance for loan loss through~~ ~~Retained Earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolio at date of adoption.~~


	Three months ended
	March 27, 2022		March 28, 2021
Balance, beginning of period	$	339,379	$	390,936
Provision for credit losses	28,822		(22,474)
Charge-offs, net of recoveries	(27,728)		(22,229)
Balance, end of period	$	340,473	$	346,233

Other Matters

Commitments and Contingencies

The Company is subject to lawsuits and other claims related to product, commercial, employee, 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. Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.

Liquidity and Capital Resources(1)

The Company's response to the COVID-19 pandemic included actions implemented during 2020 to preserve cash and secure additional liquidity. The Company continues to monitor its liquidity in light of uncertainty related to the potential impacts of the COVID-19 pandemic. Based on the Company's current outlook, for both the near and longer terms, it expects Motorcycles segment operations to continue to be funded primarily through cash flows generated by operations and Financial Services segment operations to continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and ~~deposits.~~brokered certificates of deposit.(1)

The Company's ~~cash~~capital allocation priorities are ~~first~~ to fund growth through The Hardwire initiatives, ~~then~~ to ~~reward shareholders through dividends. In addition, given the Company’s strong cash position, it will be evaluating~~pay dividends, and to execute discretionary share ~~repurchases and may choose to repurchase shares.~~repurchases.

The Company's strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to the COVID-19 pandemic, the Company increased its cash and cash equivalents during 2020. The Company's cash and cash equivalents remain ~~elevated~~higher than pre-COVID-19 pandemic levels at the end of March ~~2021,~~2022, but during the first ~~quarter~~three months of ~~2021,~~2022, the Company ~~began~~continued to gradually reduce its cash and cash equivalents from ~~December 2020~~prior year levels.

The Company’s cash and cash equivalents and availability under its credit and conduit facilities at March ~~28, 2021~~27, 2022 were as follows (in thousands):



Cash and cash equivalents	$	~~2,320,645~~1,393,731



Availability under credit and conduit facilities:
Credit facilities	~~999,737~~598,984
Asset-backed U.S. commercial paper conduit facility(a)	~~600,000~~630,466
Asset-backed Canadian commercial paper conduit facility(a)	~~71,895~~4,492
	$	~~3,992,277~~2,627,673

(a)Includes facilities expiring in the next 12 months which the Company expects to renew prior to expiration.(1)

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To access the debt capital markets, the Company relies on credit rating agencies to assign ~~short-term~~short- 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 March ~~28, 2021~~27, 2022 were as follows:

Short-Term

Long-Term

Outlook

Moody’s

Baa3

Stable

Standard & Poor’s

BBB-

Stable

Fitch

BBB+

~~Negative~~Stable

The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The Financial Services operations could be negatively affected by higher costs of funding and 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 Company's cash flow activities were as follows (in thousands):


	Three months ended
	March 27, 2022		March 28, 2021
Net cash provided by operating activities	$	139,321	$	162,781
Net cash used by investing activities	(121,135)		(26,733)
Net cash used by financing activities	(483,505)		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,743)		(5,163)
Net decrease in cash, cash equivalents and restricted cash	$	(467,062)	$	(881,834)

Three months ended
March 28, 2021 March 29, 2020
Net cash provided (used) by operating activities $ 162,781 $ (8,582)
Net cash (used) provided by investing activities (26,733) 28,288
Net cash (used) provided by financing activities (1,012,719) 655,508
Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,163) (5,732)
Net (decrease) increase in cash, cash equivalents and restricted cash $ (881,834) $ 669,482

Operating Activities

~~The increase~~Operating cash flow in the first quarter of 2022 compared to the first quarter of 2021 was adversely impacted by changes in working capital partially offset by lower net cash ~~from operating activities~~outflows for wholesale financing. Working capital was negatively impacted by higher inventory levels at the end of March 2022, compared to the end of March 2021, as a result of production disruption associated with global supply chain challenges. Net cash outflows for wholesale financing activity were lower behind the decline in U.S. wholesale shipments in the first ~~three months~~quarter of ~~2021~~2022 compared to the same period last year. The Company’s sales of motorcycles and related products to dealers in ~~2020 reflects benefits from improved net income~~the U.S. and ~~favorable changes in working capital, including lower inventory.~~ Canada are financed through Harley-Davidson Financial Services and become finance receivables upon sale to the dealer and become operating cash flows when the dealer repays the wholesale finance receivable. As a result, operating cash flow is impacted by the amount and duration of wholesale financing that dealers elect to utilize.

The Company continues to expect that it will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments at March 27, 2022 relate to leases, retirement plan obligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in Note 10 of the Notes to Consolidated financial statements. There are no required qualified pension plan contributions in ~~2021.~~2022. The Company’s expected future contributions and benefit payments related to its defined benefit retirement plans are discussed further in Note 15 of the Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The Company has a liability for unrecognized tax benefits of ~~$51.4~~$45.8 million and related accrued interest and penalties of ~~$26.1~~$23.8 million as of March ~~28, 2021.~~27, 2022. The Company cannot reasonably estimate the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.

Table of Contents

Investing Activities

The Company’s most significant investing activities consist of capital expenditures and retail finance receivable originations and collections. Capital expenditures were ~~$18.8~~$28.0 million in the first three months of ~~2021~~2022 compared to ~~$32.9~~$18.8 million in the same period last year. The Company's ~~2021~~2022 plan includes estimated capital ~~expenditures~~investments between $190 million to $220 million, all of which the Company expects to fund with net cash flow generated by operations.(1)

Net cash outflows from finance receivables for the first ~~quarter~~three months of ~~2021~~2022 were ~~$69.9~~$84.6 million higher compared to the same period last year due primarily to higher retail finance receivable originations. The Company funds its finance receivables net lending activity through the issuance of debt, discussed in "Financing Activities" below.

~~Table of Contents~~

Financing Activities

The Company’s financing activities consist primarily of dividend payments, share repurchases, and debt activity.

The Company paid dividends of ~~$0.15~~$0.1575 and ~~$0.38~~$0.1500 per share totaling ~~$23.1~~$24.1 million and ~~$58.8~~$23.1 million during the first three months of ~~2021~~2022 and ~~2020,~~2021, respectively.

InCash outflows for share repurchases were $261.7 million in the first ~~quarter~~three months of ~~2020,~~2021 compared to $5.6 million in the ~~Company suspended discretionary share repurchases; as a result, there have been no discretionary share~~same period last year. Share repurchases ~~in 2021~~during the first three months of 2022 include $248.2 million or ~~2020. Share repurchases~~6.2 million shares of common stock ~~that~~related to discretionary repurchases and $13.5 million or 0.4 million shares of common stock employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units ~~during the first three months of 2021~~ and ~~2020 were $5.6 million or 0.2 million shares and $7.1 million or 0.2 million shares, respectively.~~performance shares. As of March ~~28, 2021,~~27, 2022, there were ~~18.2~~12.0 million shares remaining on board-approved share repurchase authorizations.

Financing cash flows related to debt and brokered certificates of deposit activity resulted in net cash outflows of $197.7 million and $985.1 million in the first three months of 2022 and 2021, ~~compared to net cash inflows of $721.4 million in~~respectively. Debt levels declined during the first ~~three months~~quarter of ~~2020.~~2022 and 2021 in connection with the reduction in cash and cash equivalents as the Company worked to normalize cash balances from the higher levels held at the end of 2020, as discussed earlier in Liquidity and Capital Resources. The Company’s total outstanding debt and ~~deposits~~liability for brokered certificates of deposit consisted of the following (in thousands):

March 28,
2021 March 29,
2020
Outstanding debt:
Global credit facility borrowings $ 15,462 $ —
Unsecured commercial paper 749,801 1,335,664
Asset-backed Canadian commercial paper conduit facility 102,543 155,243
Asset-backed U.S. commercial paper conduit facilities 350,648 600,000
Asset-backed securitization debt, net 2,099,258 1,156,845
Medium-term notes, net 3,803,736 4,148,984
Senior notes, net 744,149 743,466
$ 7,865,597 $ 8,140,202
Deposits, net $ 152,653 $ —


	March 27, 2022		March 28, 2021
Outstanding debt:
Global credit facility borrowings	$	—	$	15,462
Unsecured commercial paper	816,016		749,801
Asset-backed Canadian commercial paper conduit facility	95,664		102,543
Asset-backed U.S. commercial paper conduit facility	269,534		350,648
Asset-backed securitization debt, net	1,357,558		2,099,258
Medium-term notes, net	3,329,845		3,803,736
Senior notes, net	744,842		744,149
	$	6,613,459	$	7,865,597

Deposits, net	$	348,083	$	152,653

Refer to Note 11 of the Notes to Consolidated financial statements for a summary of future principal payments on the Company's debt obligations. Refer to Note 7 of the Notes to Consolidated financial statements for a summary of future maturities on the Company's certificates of deposit.

Deposits – ~~During 2020, HDFS began offering~~Harley-Davidson Financial Services offers brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. The Company had $348.1 million and $152.7 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of March 27, 2022 and March 28, ~~2021. There were no deposits as of March 29, 2020.~~2021, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.

Credit Facilities – InOn April ~~2020,~~7, 2022, the Company entered into a ~~$707.5~~$710.0 million five-year credit facility to replace the ~~$765.0~~$707.5 million five-year credit facility that was due to mature in April ~~2021.~~2023. The new five-year credit facility matures in April ~~2025. At March 28, 2021, the Company had borrowings~~

Table of ~~$15.5 million outstanding under this facility, which the Company repaid in full on April 7, 2021.~~Contents

2027. The Company also amended its ~~$780.0~~other $707.5 million five-year credit facility ~~in April 2020~~ to ~~$707.5~~$710.0 million with no change to the maturity date of April ~~2023. Additionally, the~~2025. ~~Company has a $350.0 million 364-day credit facility which matures in May 2021.~~ The five-year credit facilities (together, the Global Credit Facilities)~~, as well as the $350.0 million 364-day credit facility,~~ bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities ~~and the $350.0 million 364-day credit facility~~ also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.

Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to ~~$1.40~~$1.42 billion as of March ~~28, 2021~~27, 2022 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

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commercial paper or through other means, such as borrowing under the Global Credit Facilities, ~~or the $350.0 million 364-day credit facility,~~ borrowing under its asset-backed U.S. commercial paper conduit facility or through the use of operating cash flow and cash on hand.(1)

Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at March ~~28, 2021~~27, 2022 (in thousands):

Principal Amount

Rate

Issue Date

Maturity Date

Principal Amount

Rate

Issue Date

Maturity Date

$350,000

3.55%

May 2018

May 2021

$550,000

4.05%

February 2019

February 2022

$400,000

2.55%

June 2017

June 2022

$400,000

2.55%

June 2017

June 2022

$350,000

3.35%

February 2018

February 2023

$350,000

3.35%

February 2018

February 2023

$762,996(a)

4.94%

May 2020

May 2023

$704,304(b)

3.14%

November 2019

November 2024

$723,886(a)

4.94%

May 2020

May 2023

$668,202(b)

3.14%

November 2019

November 2024

$700,000

3.35%

June 2020

June 2025

$700,000

3.35%

June 2020

June 2025

$500,000

3.05%

February 2022

February 2027

(a)~~Euro denominated, €650.0~~€650.0 million par value remeasured to U.S. dollar at March ~~28, 2021~~27, 2022

(b)~~Euro denominated, €600.0~~€600.0 million par value remeasured to U.S. dollar at March ~~28, 2021~~27, 2022

The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by ~~$13.6~~$12.2 million and ~~$11.0~~$13.6 million at March ~~28, 2021~~27, 2022 and March ~~29, 2020,~~28, 2021, respectively. During the first quarter of ~~2021, $600.0~~2022, $550.0 million of ~~2.85% medium-term notes and $450.0 million of floating-rate~~4.05% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of ~~2020,~~2021, $600.0 million of ~~2.15%~~2.85% medium-term notes and $450.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full.

Senior Notes – In July 2015, the Company issued $750.0 million of unsecured senior notes in an underwritten offering. The senior notes provide for semi-annual interest payments and principal due at maturity. $450.0 million of the senior notes mature in July 2025 and have an interest rate of 3.50%, and $300.0 million of the senior 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~~eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the ~~Company~~renewal and amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this ~~facility~~debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$~~220.0~~125.0 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 45 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of March ~~28, 2021,~~27, 2022, the Canadian Conduit has an expiration date of June ~~25, 2021.~~27, 2022.

During the first quarter of 2022, the Company transferred $25.3 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $21.2 million. There were no finance receivable transfers under the Canadian Conduit Facility during the first quarter of 2021. ~~During the first quarter of 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $61.6 million.~~

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~~There were no finance receivable transfers under the U.S. Conduit Facility during the first quarter of 2021.~~ During the first quarter of ~~2020,~~2022, the Company transferred ~~$195.3~~$47.1 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued ~~$163.6~~$41.3 million of debt under the ~~Former~~ U.S. Conduit ~~Facilities.~~Facility. There were no finance receivable transfers under the U.S. Conduit during the first quarter of 2021.

The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, the terms of the interest are based on ~~LIBOR.~~LIBOR, with provisions for a transition to other benchmark rates, generally aligning to recommendations published by the Alternative Reference Rates Committee convened by the Federal Reserve Board and Federal Reserve Bank of New York. In each of these cases, a program fee is assessed based on the outstanding ~~principal.~~debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 45 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of March ~~28, 2021,~~27, 2022, the U.S. Conduit Facility has an expiration date of November ~~19, 2021.~~18, 2022.

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. The Company's current outstanding asset-backed securitizations do not meet the criteria to be accounted for as a sale because, in addition to retaining servicing rights, the Company retains a financial interest in the VIE in the form of a debt security. These transactions are treated as secured ~~borrowings. As secured~~ borrowings, and as such, 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 currently have various contractual maturities ranging from ~~2022~~2024 to ~~2028.~~2029.

Support Agreement – The Company has a support agreement with ~~HDFS~~Harley-Davidson Financial Services whereby, if required, the Company agrees to provide ~~HDFS~~Harley-Davidson Financial Services with financial support to maintain ~~HDFS’~~Harley-Davidson Financial Services’ 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~~Harley-Davidson Financial Services under the support agreement.

Operating and Financial Covenants – ~~HDFS~~Harley-Davidson Financial Services and the Company are subject to various operating and financial covenants related to the credit facilities and various operating covenants under the medium-term and senior notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below.

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The operating covenants limit the Company’s and ~~HDFS’~~Harley-Davidson Financial Services’ 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’~~Harley-Davidson Financial Services’ consolidated debt, excluding secured debt, to ~~HDFS'~~Harley-Davidson Financial Services' consolidated allowance for credit losses on finance receivables plus ~~HDFS’~~Harley-Davidson Financial Services’ consolidated shareholders' equity, excluding accumulated other comprehensive loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of ~~HDFS~~Harley-Davidson Financial Services and its subsidiaries, and the Company's consolidated shareholders’ equity excludes AOCL), cannot exceed 0.7 to 1.0 as of the end of any fiscal quarter. No financial covenants are required under the medium-term or senior notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.

As of March ~~28, 2021, HDFS~~27, 2022, Harley-Davidson Financial Services and the Company remained in compliance with all of the then existing covenants.

~~Cautionary Statements~~Motorcycles and Related Products Segment

~~Important factors that could affect future results~~Motorcycle Unit Shipments

Wholesale motorcycle unit shipments were as follows:


	Three months ended
	March 27, 2022			March 28, 2021			Unit	Unit
	Units	Mix %		Units	Mix %		(Decrease) Increase	% Change

U.S. motorcycle shipments	35,891	65.4	%	40,153	73.3	%	(4,262)	(10.6)	%



Worldwide motorcycle shipments:
Grand American Touring(a)	26,012	47.4	%	30,334	55.4	%	(4,322)	(14.2)	%
Cruiser(b)	15,660	28.6	%	17,450	31.8	%	(1,790)	(10.3)
Adventure Touring	3,520	6.4	%	—	—	%	3,520	NM
Sportster® / Street	9,651	17.6	%	7,026	12.8	%	2,625	37.4
	54,843	100.0	%	54,810	100.0	%	33	0.1	%

(a)Includes CVOTM and ~~cause those results~~Trike

(b)Includes Softail® and LiveWire®

The Company shipped 54,843 motorcycles worldwide during the first three months of 2022, which was flat compared to ~~differ materially from those expressed~~the first three months of 2021. The Company's shipments in the ~~forward-looking statements include, among others,~~U.S. during the ~~following: (i) the COVID-19 pandemic, including the length and severity~~first quarter of the pandemic across the globe and the pace of recovery following the pandemic; and (ii) the Company’s ability to: (A) execute its business plans and strategies, including The Hardwire, successfully execute its remodeled approach to supply and inventory management, and strengthen its existing business while allowing for desirable growth; (B) mitigate the impact of the revocation of the Binding Origin Information (BOI) decisions that allowed the Company to supply its European Union (EU) market with certain of its motorcycles produced at its Thailand operations at a reduced tariff rate and favorably resolve risks and uncertainties2022 were negatively impacted by lower than planned production related to component part availability associated with ongoing global supply chain challenges.

The lower than planned production also impacted the ~~revocation of the BOI decisions including, among other: (1) uncertainties regarding the quantity and~~ mix of motorcycles ~~that~~shipped during the ~~Company imports into~~first three months of 2022 resulting in a lower mix of Grand American Touring and Cruiser motorcycles shipped as a percent of total shipments and a

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higher mix of Sportster/Street motorcycles compared to the ~~EU; (2) uncertainties regarding~~same period last year. The mix of motorcycle unit shipments during the ~~import prices~~first quarter of ~~motorcycles; (3) whether~~2022 was also impacted by shipments of the ~~Company will be granted temporary relief~~Company's Pan America™ Adventure Touring motorcycles, which were launched in the second quarter of 2021.

Segment Results

Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):


	Three months ended
	March 27, 2022			March 28, 2021			Increase (Decrease)		% Change
Revenue:
Motorcycles	$	1,059,113		$	1,016,334		$	42,779	4.2	%
Parts and accessories	165,525			149,859			15,666		10.5
Apparel	51,407			50,323			1,084		2.2
Licensing	6,497			5,512			985		17.9
Other	20,629			10,079			10,550		104.7
	1,303,171			1,232,107			71,064		5.8
Cost of goods sold	895,536			811,622			83,914		10.3
Gross profit	407,635			420,485			(12,850)		(3.1)
Operating expenses:
Selling & administrative expense	172,295			152,689			19,606		12.8
Engineering expense	32,593			40,857			(8,264)		(20.2)
Restructuring benefit	(128)			(593)			465		(78.4)
	204,760			192,953			11,807		6.1	%
Operating income	$	202,875		$	227,532		$	(24,657)
Operating margin	15.6		%	18.5		%	(2.9)		pts.

The estimated impacts of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the ~~effect~~first three months of the revocation of the BOI decisions; (4) whether the Company will be successful in appealing the revocation of the BOI decisions; (5) uncertainties regarding the size and duration of the EU tariffs; and (6) whether and to what extent the Company determines to attempt to pass on the impact of the revocation to dealers and its success in doing so; (C) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests; (D) successfully access the capital and/or credit markets on terms that are acceptable2021 to the ~~Company~~first three months of 2022 were as follows (in millions):


	Net Revenue		Cost of Goods Sold		Gross Profit
Three months ended March 28, 2021	$	1,232.1	$	811.6	$	420.5
Volume	26.6		12.7		13.9
Price and sales incentives	81.4		—		81.4
Foreign currency exchange rates and hedging	(17.3)		(13.8)		(3.5)
Shipment mix	(19.6)		2.5		(22.1)
Raw material prices	—		14.9		(14.9)
Manufacturing and other costs	—		67.7		(67.7)
	71.1		84.0		(12.9)
Three months ended March 27, 2022	$	1,303.2	$	895.6	$	407.6

Factors affecting the comparability of net revenue, cost of goods sold and ~~within its expectations; (E) successfully carry out its global manufacturing~~gross profit from the first quarter of 2021 to the first quarter of 2022 were as follows:

•The increase in volume was due primarily to higher parts and ~~assembly operations; (F) develop and introduce products, services and experiences~~accessories sales.

•During the first quarter of 2022, revenue benefited from higher wholesale prices on a timely basis that the market accepts, that enable the Company to generate desired sales levels and that provide the desired financial returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Touring, large Cruiser and Trike, and growing its complementary businesses; (G) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (H) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the manufacturing processes to avoid delays in new model ~~launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation~~year 2022 motorcycles coupled with pricing surcharges in select markets.

•Revenue and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing; (I) manage supply chain issues, including quality issues and any unexpected interruptions or price increases causedgross profit were negatively impacted by raw material shortages or natural disasters; (J) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (K) realize expectations concerning market demand for electric models, which will depend in part on the building of necessary infrastructure; (L) successfully manage and reduce costs throughout the business; (M) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment; (N) 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; (O) develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (P) develop and maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (Q) manage and predict the impact that new or adjusted tariffs may have on the Company’s ability to sell products internationally, and the cost of raw materials and components; (R) successfully maintain a manner in which to sell motorcycles in China and the Company’s Association of Southeast Asian Nations (ASEAN) countries that does not subject its motorcycles to incremental tariffs; (S) manage its Thailand corporate and manufacturing operation in a manner that allows the Company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets; (T) accurately estimate and adjust to fluctuations inweaker foreign currency exchange rates ~~interest rates~~relative to the U.S. dollar partially offset by favorable net foreign currency gains associated with hedging recorded in cost of goods sold.

•Changes in the shipment mix between motorcycle families had an unfavorable impact on revenue and ~~commodity prices; (U) retain~~gross profit during the first quarter of 2022 due primarily to a lower mix of Grand American Touring models.

•Raw material cost increases were driven by cost inflation primarily due to supply chain challenges.

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•Manufacturing and ~~attract talented employees,~~other costs increased due primarily to higher costs associated with supply chain challenges. In 2021, supply chain cost inflation started to accelerate in the second quarter and ~~eliminate personnel duplication, inefficiencies and complexity~~continued increasing throughout the ~~organization; (V) prevent~~remainder of the year. The cost inflation experienced in the first quarter of 2022 is consistent with levels experienced in the back-half of 2021.

Operating expenses were higher in the first quarter of 2022 compared to the same period in 2021 due primarily to costs associated with The Hardwire initiatives, including the LiveWire transaction.

Financial Services Segment

Segment Results

Condensed statements of operations for the Financial Services segment were as follows (in thousands):


	Three months ended
	March 27, 2022		March 28, 2021		Increase (Decrease)		% Change
Revenue:
Interest income	$	161,734	$	159,814	$	1,920	1.2	%
Other income	30,281		30,586		(305)		(1.0)
	192,015		190,400		1,615		0.8
Expenses:
Interest expense	42,099		55,707		(13,608)		(24.4)
Provision for credit losses	28,822		(22,474)		51,296		(228.2)
Operating expense	34,737		38,298		(3,561)		(9.3)
Restructuring expense	—		227		(227)		(100.0)
	105,658		71,758		33,900		47.2
Operating income	$	86,357	$	118,642	$	(32,285)	(27.2)	%

Interest income was higher for the first quarter of 2022, primarily due to higher average outstanding finance receivables, partially offset by a ~~cybersecurity breach involving~~lower average yield. Interest expense decreased due to lower average outstanding debt and a lower cost of funds.

The provision for credit losses increased $51.3 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to a reduction in the allowance for credit losses recorded in the first quarter of 2021 and higher credit losses in the first quarter of 2022 as compared to the first quarter of 2021.

The reduction in the allowance for credit losses in 2021 was largely driven by improvement in economic conditions and the Company's outlook on future conditions during the first quarter of 2021. During the first quarter of 2022, economic conditions and the Company’s outlook were relatively unchanged from the end of 2021. The pace of economic recovery continues to remain uncertain as demonstrated by rising inflation, muted consumer confidence, continued global supply chain disruptions, and the conflict in Ukraine, among other factors. As such, at the end of the first quarter of 2022, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios included continued slow economic improvement in its economic scenario weighting. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.

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Operating expenses decreased $3.6 million in the first quarter of 2022 compared to the first quarter of 2021 in part due to lower technology costs.

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


	Three months ended
	March 27, 2022		March 28, 2021
Balance, beginning of period	$	339,379	$	390,936
Provision for credit losses	28,822		(22,474)
Charge-offs, net of recoveries	(27,728)		(22,229)
Balance, end of period	$	340,473	$	346,233

Other Matters

Commitments and Contingencies

The Company is subject to lawsuits and other claims related to product, commercial, employee, environmental 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. Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.

Liquidity and Capital Resources(1)

Based on the Company's current outlook, for both the near and longer terms, it expects Motorcycles segment operations to continue to be funded primarily through cash flows generated by operations and Financial Services segment operations to continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and brokered certificates of deposit.(1)

The Company's capital allocation priorities are to fund growth through The Hardwire initiatives, to pay dividends, and to execute discretionary share repurchases.

The Company's strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to the COVID-19 pandemic, the Company increased its cash and cash equivalents during 2020. The Company's cash and cash equivalents remain higher than pre-COVID-19 pandemic levels at the end of March 2022, but during the first three months of 2022, the Company continued to gradually reduce its cash and cash equivalents from prior year levels.

The Company’s cash and cash equivalents and availability under its credit and conduit facilities at March 27, 2022 were as follows (in thousands):



Cash and cash equivalents	$	1,393,731



Availability under credit and conduit facilities:
Credit facilities	598,984
Asset-backed U.S. commercial paper conduit facility(a)	630,466
Asset-backed Canadian commercial paper conduit facility(a)	4,492
	$	2,627,673

(a)Includes facilities expiring in the next 12 months which the Company expects to renew prior to expiration.(1)

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To access the debt capital markets, the Company relies on credit rating agencies to assign short- 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 March 27, 2022 were as follows:

Short-Term

Long-Term

Outlook

Moody’s

Baa3

Stable

Standard & Poor’s

BBB-

Stable

Fitch

BBB+

Stable

The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The Financial Services operations could be negatively affected by higher costs of funding and 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 dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.

Cash Flow Activity

The Company's cash flow activities were as follows (in thousands):


	Three months ended
	March 27, 2022		March 28, 2021
Net cash provided by operating activities	$	139,321	$	162,781
Net cash used by investing activities	(121,135)		(26,733)
Net cash used by financing activities	(483,505)		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,743)		(5,163)
Net decrease in cash, cash equivalents and restricted cash	$	(467,062)	$	(881,834)

Operating Activities

Operating cash flow in the first quarter of 2022 compared to the first quarter of 2021 was adversely impacted by changes in working capital partially offset by lower net cash outflows for wholesale financing. Working capital was negatively impacted by higher inventory levels at the end of March 2022, compared to the end of March 2021, as a result of production disruption associated with global supply chain challenges. Net cash outflows for wholesale financing activity were lower behind the decline in U.S. wholesale shipments in the first quarter of 2022 compared to the same period last year. The Company’s sales of motorcycles and related products to dealers in the U.S. and Canada are financed through Harley-Davidson Financial Services and become finance receivables upon sale to the dealer ~~supplier,~~and become operating cash flows when the dealer repays the wholesale finance receivable. As a result, operating cash flow is impacted by the amount and duration of wholesale financing that dealers elect to utilize.

The Company continues to expect that it will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments at March 27, 2022 relate to leases, retirement plan obligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in Note 10 of the Notes to Consolidated financial statements. There are no required qualified pension plan contributions in 2022. The Company’s expected future contributions and benefit payments related to its defined benefit retirement plans are discussed further in Note 15 of the Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Company has a liability for unrecognized tax benefits of $45.8 million and related accrued interest and penalties of $23.8 million as of March 27, 2022. The Company cannot reasonably estimate the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.

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Investing Activities

The Company’s most significant investing activities consist of capital expenditures and retail finance receivable originations and collections. Capital expenditures were $28.0 million in the first three months of 2022 compared to $18.8 million in the same period last year. The Company's 2022 plan includes estimated capital investments between $190 million to $220 million, all of which the Company expects to fund with net cash flow generated by operations.(1)

Net cash outflows from finance receivables for the first three months of 2022 were $84.6 million higher compared to the same period last year due primarily to higher retail finance receivable originations. The Company funds its finance receivables net lending activity through the issuance of debt, discussed in "Financing Activities" below.

Financing Activities

The Company’s financing activities consist primarily of dividend payments, share repurchases, and debt activity.

The Company paid dividends of $0.1575 and $0.1500 per share totaling $24.1 million and $23.1 million during the first three months of 2022 and 2021, respectively.

Cash outflows for share repurchases were $261.7 million in the first three months of 2021 compared to $5.6 million in the same period last year. Share repurchases during the first three months of 2022 include $248.2 million or 6.2 million shares of common stock related to discretionary repurchases and $13.5 million or 0.4 million shares of common stock employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares. As of March 27, 2022, there were 12.0 million shares remaining on board-approved share repurchase authorizations.

Financing cash flows related to debt and brokered certificates of deposit activity resulted in net cash outflows of $197.7 million and $985.1 million in the first three months of 2022 and 2021, respectively. Debt levels declined during the first quarter of 2022 and 2021 in connection with the reduction in cash and cash equivalents as the Company worked to normalize cash balances from the higher levels held at the end of 2020, as discussed earlier in Liquidity and Capital Resources. The Company’s total outstanding debt and liability for brokered certificates of deposit consisted of the following (in thousands):


	March 27, 2022		March 28, 2021
Outstanding debt:
Global credit facility borrowings	$	—	$	15,462
Unsecured commercial paper	816,016		749,801
Asset-backed Canadian commercial paper conduit facility	95,664		102,543
Asset-backed U.S. commercial paper conduit facility	269,534		350,648
Asset-backed securitization debt, net	1,357,558		2,099,258
Medium-term notes, net	3,329,845		3,803,736
Senior notes, net	744,842		744,149
	$	6,613,459	$	7,865,597

Deposits, net	$	348,083	$	152,653

Deposits – Harley-Davidson Financial Services offers brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. The Company had $348.1 million and $152.7 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of March 27, 2022 and March 28, 2021, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.

Credit Facilities – On April 7, 2022, the Company entered into a $710.0 million five-year credit facility to replace the $707.5 million five-year credit facility that was due to mature in April 2023. The new five-year credit facility matures in April

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2027. The Company also amended its other $707.5 million five-year credit facility to $710.0 million with no change to the maturity date of April 2025. The 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 ~~data~~to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.

Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.42 billion as of March 27, 2022 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 or through the use of operating cash flow and ~~respond~~cash on hand.(1)

Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at March 27, 2022 (in thousands):

Principal Amount

Rate

Issue Date

Maturity Date

$400,000

2.55%

June 2017

June 2022

$350,000

3.35%

February 2018

February 2023

$723,886(a)

4.94%

May 2020

May 2023

$668,202(b)

3.14%

November 2019

November 2024

$700,000

3.35%

June 2020

June 2025

$500,000

3.05%

February 2022

February 2027

(a)€650.0 million par value remeasured to ~~evolving regulatory requirements regarding data security; (W) manage the credit quality, the loan servicing and collection activities,~~U.S. dollar at March 27, 2022

(b)€600.0 million par value remeasured to U.S. dollar at March 27, 2022

The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the ~~recovery rates of HDFS' loan portfolio; (X) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform~~foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by $12.2 million and $13.6 million at March 27, 2022 and March 28, 2021, respectively. During the first quarter of 2022, $550.0 million of 4.05% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2021, $600.0 million of 2.85% medium-term notes and $450.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full.

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 ~~business; (Y) manage through~~option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the ~~effects inconsistent~~renewal and ~~unpredictable weather patterns may have~~amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on ~~retail sales~~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 motorcycles; (Z) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (AA) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; (BB) manage its exposurethe total aggregate commitment of C$125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to ~~product liability claims and commercial or contractual disputes; (CC)~~outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to ~~manage~~be reduced monthly through available collections. The expected remaining term of the ~~relationships and agreements that~~related receivables is approximately 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of March 27, 2022, the Canadian Conduit has an expiration date of June 27, 2022.

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On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facility VIE – The Company has a $900.0 million revolving facility agreement (the U.S. Conduit Facility) with ~~its labor unions~~third-party banks and their asset-backed U.S. commercial paper conduits. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to ~~help drive long-term competitiveness; (DD) accurately predict~~an SPE, which in turn may issue debt to those third-party banks and their asset-backed U.S. commercial paper conduits. In addition to the ~~margins~~$900.0 million aggregate commitment, the agreement allows for additional borrowings, at the lender’s discretion, of ~~its Motorcycles and Related Products segment in light of,~~up to $300.0 million. Availability under the U.S. Conduit Facility is based on, among other things, ~~tariffs,~~ the ~~cost~~amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.

The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, the terms of the interest are based on LIBOR, with provisions for a transition to other benchmark rates, generally aligning to recommendations published by the Alternative Reference Rates Committee convened by the Federal Reserve Board and Federal Reserve Bank of New York. In each of these cases, a program fee is assessed based on the outstanding debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 5 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of March 27, 2022, the U.S. Conduit Facility has an expiration date of November 18, 2022.

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 ~~with product development initiatives~~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 ~~complex global supply chain; and (EE) successfully develop and launch~~continuing involvement with the ~~pre-owned motorcycle program, Harley-Davidson Certified.~~

VIE. The Company's ~~operations, demand~~current outstanding asset-backed securitizations do not meet the criteria to be accounted for ~~its products,~~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, and as such, 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 currently have various contractual maturities ranging from 2024 to 2029.

Support Agreement – The Company has a support agreement with Harley-Davidson Financial Services whereby, if required, the Company agrees to provide Harley-Davidson Financial Services with financial support to maintain Harley-Davidson Financial Services’ 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. No amount has ever been provided to Harley-Davidson Financial Services under the support agreement.

Operating and Financial Covenants – Harley-Davidson Financial Services and the Company are subject to various operating and financial covenants related to the credit facilities and various operating covenants under the medium-term and senior notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below.

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The operating covenants limit the Company’s and Harley-Davidson Financial Services’ 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 Harley-Davidson Financial Services’ consolidated debt, excluding secured debt, to Harley-Davidson Financial Services' consolidated allowance for credit losses on finance receivables plus Harley-Davidson Financial Services’ consolidated shareholders' equity, excluding accumulated other comprehensive loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of Harley-Davidson Financial Services and its ~~liquidity could be adversely impacted by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, or other factors. Other factors are described in~~ ~~Item 1A. Risk Factors~~ and 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 marketssubsidiaries, and the Company's ~~ability~~consolidated shareholders’ equity excludes AOCL), cannot exceed 0.7 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~~1.0 as of the ~~Company’s independent dealers to sell its motorcycles~~end of any fiscal quarter. No financial covenants are required under the medium-term or senior notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.

As of March 27, 2022, Harley-Davidson Financial Services and ~~related products and services to retail customers. The~~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 difficultiesremained in ~~operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions, the impact~~compliance with all of the ~~COVID-19 pandemic, or other factors.~~

In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The Company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior and HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers, as well as actions that the Company has taken and could take that impact motorcycle values.

~~Refer to~~ ~~Item 1A. Risk Factors~~ ~~of this report and~~ ~~Item 1A. Risk Factors~~ of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.then existing covenants.

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

The Company is exposed to market risk from changes in foreign currency exchange rates, commodity prices and interest rates. To reduce such risks, the Company selectively uses derivative financial instruments. All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes. Sensitivity analysis is used to manage and monitor foreign currency exchange rate and interest rate risks. Further disclosure relating to the fair value of the Company's derivative financial instruments is included in ~~Note 9 of the Notes to Consolidated financial statements~~.

Motorcycles and Related Products Segment

Motorcycle Unit Shipments

Wholesale motorcycle unit shipments were as follows:


	Three months ended
	March 27, 2022			March 28, 2021			Unit	Unit
	Units	Mix %		Units	Mix %		(Decrease) Increase	% Change

U.S. motorcycle shipments	35,891	65.4	%	40,153	73.3	%	(4,262)	(10.6)	%



Worldwide motorcycle shipments:
Grand American Touring(a)	26,012	47.4	%	30,334	55.4	%	(4,322)	(14.2)	%
Cruiser(b)	15,660	28.6	%	17,450	31.8	%	(1,790)	(10.3)
Adventure Touring	3,520	6.4	%	—	—	%	3,520	NM
Sportster® / Street	9,651	17.6	%	7,026	12.8	%	2,625	37.4
	54,843	100.0	%	54,810	100.0	%	33	0.1	%

(a)Includes CVOTM and Trike

(b)Includes Softail® and LiveWire®

The Company shipped 54,843 motorcycles worldwide during the first three months of 2022, which was flat compared to the first three months of 2021. The Company's shipments in the U.S. during the first quarter of 2022 were negatively impacted by lower than planned production related to component part availability associated with ongoing global supply chain challenges.

The lower than planned production also impacted the mix of motorcycles shipped during the first three months of 2022 resulting in a lower mix of Grand American Touring and Cruiser motorcycles shipped as a percent of total shipments and a

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Segment Results

Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):


	Three months ended
	March 27, 2022			March 28, 2021			Increase (Decrease)		% Change
Revenue:
Motorcycles	$	1,059,113		$	1,016,334		$	42,779	4.2	%
Parts and accessories	165,525			149,859			15,666		10.5
Apparel	51,407			50,323			1,084		2.2
Licensing	6,497			5,512			985		17.9
Other	20,629			10,079			10,550		104.7
	1,303,171			1,232,107			71,064		5.8
Cost of goods sold	895,536			811,622			83,914		10.3
Gross profit	407,635			420,485			(12,850)		(3.1)
Operating expenses:
Selling & administrative expense	172,295			152,689			19,606		12.8
Engineering expense	32,593			40,857			(8,264)		(20.2)
Restructuring benefit	(128)			(593)			465		(78.4)
	204,760			192,953			11,807		6.1	%
Operating income	$	202,875		$	227,532		$	(24,657)
Operating margin	15.6		%	18.5		%	(2.9)		pts.

The estimated impacts of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first three months of 2021 to the first three months of 2022 were as follows (in millions):


	Net Revenue		Cost of Goods Sold		Gross Profit
Three months ended March 28, 2021	$	1,232.1	$	811.6	$	420.5
Volume	26.6		12.7		13.9
Price and sales incentives	81.4		—		81.4
Foreign currency exchange rates and hedging	(17.3)		(13.8)		(3.5)
Shipment mix	(19.6)		2.5		(22.1)
Raw material prices	—		14.9		(14.9)
Manufacturing and other costs	—		67.7		(67.7)
	71.1		84.0		(12.9)
Three months ended March 27, 2022	$	1,303.2	$	895.6	$	407.6

Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first quarter of 2021 to the first quarter of 2022 were as follows:

•The increase in volume was due primarily to higher parts and accessories sales.

•During the first quarter of 2022, revenue benefited from higher wholesale prices on new model year 2022 motorcycles coupled with pricing surcharges in select markets.

•Revenue and gross profit were negatively impacted by weaker foreign currency exchange rates relative to the U.S. dollar partially offset by favorable net foreign currency gains associated with hedging recorded in cost of goods sold.

•Changes in the shipment mix between motorcycle families had an unfavorable impact on revenue and gross profit during the first quarter of 2022 due primarily to a lower mix of Grand American Touring models.

•Raw material cost increases were driven by cost inflation primarily due to supply chain challenges.

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•Manufacturing and other costs increased due primarily to higher costs associated with supply chain challenges. In 2021, supply chain cost inflation started to accelerate in the second quarter and continued increasing throughout the remainder of the year. The cost inflation experienced in the first quarter of 2022 is consistent with levels experienced in the back-half of 2021.

Operating expenses were higher in the first quarter of 2022 compared to the same period in 2021 due primarily to costs associated with The Hardwire initiatives, including the LiveWire transaction.

Financial Services Segment

Segment Results

Condensed statements of operations for the Financial Services segment were as follows (in thousands):


	Three months ended
	March 27, 2022		March 28, 2021		Increase (Decrease)		% Change
Revenue:
Interest income	$	161,734	$	159,814	$	1,920	1.2	%
Other income	30,281		30,586		(305)		(1.0)
	192,015		190,400		1,615		0.8
Expenses:
Interest expense	42,099		55,707		(13,608)		(24.4)
Provision for credit losses	28,822		(22,474)		51,296		(228.2)
Operating expense	34,737		38,298		(3,561)		(9.3)
Restructuring expense	—		227		(227)		(100.0)
	105,658		71,758		33,900		47.2
Operating income	$	86,357	$	118,642	$	(32,285)	(27.2)	%

Interest income was higher for the first quarter of 2022, primarily due to higher average outstanding finance receivables, partially offset by a lower average yield. Interest expense decreased due to lower average outstanding debt and a lower cost of funds.

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Operating expenses decreased $3.6 million in the first quarter of 2022 compared to the first quarter of 2021 in part due to lower technology costs.

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


	Three months ended
	March 27, 2022		March 28, 2021
Balance, beginning of period	$	339,379	$	390,936
Provision for credit losses	28,822		(22,474)
Charge-offs, net of recoveries	(27,728)		(22,229)
Balance, end of period	$	340,473	$	346,233

Other Matters

Commitments and Contingencies

Liquidity and Capital Resources(1)

The Company's capital allocation priorities are to fund growth through The Hardwire initiatives, to pay dividends, and to execute discretionary share repurchases.

The Company's strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to the COVID-19 pandemic, the Company increased its cash and cash equivalents during 2020. The Company's cash and cash equivalents remain higher than pre-COVID-19 pandemic levels at the end of March 2022, but during the first three months of 2022, the Company continued to gradually reduce its cash and cash equivalents from prior year levels.

The Company’s cash and cash equivalents and availability under its credit and conduit facilities at March 27, 2022 were as follows (in thousands):



Cash and cash equivalents	$	1,393,731



Availability under credit and conduit facilities:
Credit facilities	598,984
Asset-backed U.S. commercial paper conduit facility(a)	630,466
Asset-backed Canadian commercial paper conduit facility(a)	4,492
	$	2,627,673

(a)Includes facilities expiring in the next 12 months which the Company expects to renew prior to expiration.(1)

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Short-Term

Long-Term

Outlook

Moody’s

Baa3

Stable

Standard & Poor’s

BBB-

Stable

Fitch

BBB+

Stable

The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The Financial Services operations could be negatively affected by higher costs of funding and 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 dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.

Cash Flow Activity

The Company's cash flow activities were as follows (in thousands):


	Three months ended
	March 27, 2022		March 28, 2021
Net cash provided by operating activities	$	139,321	$	162,781
Net cash used by investing activities	(121,135)		(26,733)
Net cash used by financing activities	(483,505)		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,743)		(5,163)
Net decrease in cash, cash equivalents and restricted cash	$	(467,062)	$	(881,834)

Operating Activities

Operating cash flow in the first quarter of 2022 compared to the first quarter of 2021 was adversely impacted by changes in working capital partially offset by lower net cash outflows for wholesale financing. Working capital was negatively impacted by higher inventory levels at the end of March 2022, compared to the end of March 2021, as a result of production disruption associated with global supply chain challenges. Net cash outflows for wholesale financing activity were lower behind the decline in U.S. wholesale shipments in the first quarter of 2022 compared to the same period last year. The Company’s sales of motorcycles and related products to dealers in the U.S. and Canada are financed through Harley-Davidson Financial Services and become finance receivables upon sale to the dealer and become operating cash flows when the dealer repays the wholesale finance receivable. As a result, operating cash flow is impacted by the amount and duration of wholesale financing that dealers elect to utilize.

The Company continues to expect that it will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments at March 27, 2022 relate to leases, retirement plan obligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in Note 10 of the Notes to Consolidated financial statements. There are no required qualified pension plan contributions in 2022. The Company’s expected future contributions and benefit payments related to its defined benefit retirement plans are discussed further in Note 15 of the Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Company has a liability for unrecognized tax benefits of $45.8 million and related accrued interest and penalties of $23.8 million as of March 27, 2022. The Company cannot reasonably estimate the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.

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Investing Activities

The Company’s most significant investing activities consist of capital expenditures and retail finance receivable originations and collections. Capital expenditures were $28.0 million in the first three months of 2022 compared to $18.8 million in the same period last year. The Company's 2022 plan includes estimated capital investments between $190 million to $220 million, all of which the Company expects to fund with net cash flow generated by operations.(1)

Financing Activities

The Company’s financing activities consist primarily of dividend payments, share repurchases, and debt activity.

The Company paid dividends of $0.1575 and $0.1500 per share totaling $24.1 million and $23.1 million during the first three months of 2022 and 2021, respectively.

Financing cash flows related to debt and brokered certificates of deposit activity resulted in net cash outflows of $197.7 million and $985.1 million in the first three months of 2022 and 2021, respectively. Debt levels declined during the first quarter of 2022 and 2021 in connection with the reduction in cash and cash equivalents as the Company worked to normalize cash balances from the higher levels held at the end of 2020, as discussed earlier in Liquidity and Capital Resources. The Company’s total outstanding debt and liability for brokered certificates of deposit consisted of the following (in thousands):


	March 27, 2022		March 28, 2021
Outstanding debt:
Global credit facility borrowings	$	—	$	15,462
Unsecured commercial paper	816,016		749,801
Asset-backed Canadian commercial paper conduit facility	95,664		102,543
Asset-backed U.S. commercial paper conduit facility	269,534		350,648
Asset-backed securitization debt, net	1,357,558		2,099,258
Medium-term notes, net	3,329,845		3,803,736
Senior notes, net	744,842		744,149
	$	6,613,459	$	7,865,597

Deposits, net	$	348,083	$	152,653

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2027. The Company also amended its other $707.5 million five-year credit facility to $710.0 million with no change to the maturity date of April 2025. The 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. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.

Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at March 27, 2022 (in thousands):

Principal Amount

Rate

Issue Date

Maturity Date

$400,000

2.55%

June 2017

June 2022

$350,000

3.35%

February 2018

February 2023

$723,886(a)

4.94%

May 2020

May 2023

$668,202(b)

3.14%

November 2019

November 2024

$700,000

3.35%

June 2020

June 2025

$500,000

3.05%

February 2022

February 2027

(a)€650.0 million par value remeasured to U.S. dollar at March 27, 2022

(b)€600.0 million par value remeasured to U.S. dollar at March 27, 2022

The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by $12.2 million and $13.6 million at March 27, 2022 and March 28, 2021, respectively. During the first quarter of 2022, $550.0 million of 4.05% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2021, $600.0 million of 2.85% medium-term notes and $450.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full.

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 eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the renewal and amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$125.0 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 March 27, 2022, the Canadian Conduit has an expiration date of June 27, 2022.

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On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facility VIE – The Company has a $900.0 million revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset-backed U.S. commercial paper conduits. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party banks and their asset-backed U.S. commercial paper conduits. In addition to the $900.0 million aggregate commitment, the agreement allows for additional borrowings, at the lender’s discretion, of up to $300.0 million. Availability under the U.S. Conduit Facility is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.

The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, the terms of the interest are based on LIBOR, with provisions for a transition to other benchmark rates, generally aligning to recommendations published by the Alternative Reference Rates Committee convened by the Federal Reserve Board and Federal Reserve Bank of New York. In each of these cases, a program fee is assessed based on the outstanding debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 5 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of March 27, 2022, the U.S. Conduit Facility has an expiration date of November 18, 2022.

The accounting treatment for asset-backed securitizations depends on the terms of the related transaction and the Company’s continuing involvement with the VIE. The Company's current outstanding asset-backed securitizations do not meet the criteria to be accounted for as a sale because, in addition to retaining servicing rights, the Company retains a financial interest in the VIE in the form of a debt security. These transactions are treated as secured borrowings, and as such, 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 currently have various contractual maturities ranging from 2024 to 2029.

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The operating covenants limit the Company’s and Harley-Davidson Financial Services’ 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 Harley-Davidson Financial Services’ consolidated debt, excluding secured debt, to Harley-Davidson Financial Services' consolidated allowance for credit losses on finance receivables plus Harley-Davidson Financial Services’ consolidated shareholders' equity, excluding accumulated other comprehensive loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of Harley-Davidson Financial Services and its subsidiaries, and the Company's consolidated shareholders’ equity excludes AOCL), cannot exceed 0.7 to 1.0 as of the end of any fiscal quarter. No financial covenants are required under the medium-term or senior notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.

As of March 27, 2022, Harley-Davidson Financial Services and the Company remained in compliance with all of the then existing covenants.

Cautionary Statements

Important factors that could affect future results and cause those results to differ materially from those expressed in the forward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and severity of the pandemic across the globe and the pace of recovery following the pandemic; and (ii) the Company’s ability to: (A) execute its business plans and strategies, including The Hardwire and the evolution of LiveWire as a standalone brand, including the proposed separation of LiveWire into a separate business of the Company through the combination of LiveWire with AEA-Bridges Impact Corp. (ABIC), which includes the risks noted below; (B) manage supply chain and logistic issues, including quality issues, availability of semiconductor chip components and the ability to find alternative sources of those components in a timely manner, unexpected interruptions or price increases caused by supplier volatility, raw material shortages, war or other hostilities, including the conflict in Ukraine, or natural disasters, and longer shipping times and increased logistics costs, including by successfully implementing pricing surcharges; (C) realize the expected business benefits from the combination of LiveWire with ABIC, which may be affected by, among other things: (i) the ability of LiveWire to: (1) execute its plans to develop, produce, market, and sell its electric vehicles; (2) achieve profitability, which is dependent on the successful development and commercial introduction and acceptance of its electric vehicles, and its services, which may not occur; (3) adequately control the costs of its operations as a new entrant into a new space; (4) develop, maintain, and strengthen its brand; (5) execute its plans to develop, produce, market, and sell its electric vehicles; and (6) effectively establish and maintain cooperation from its retail partners, largely drawn from the Company's traditional motorcycle dealer network, to be able to effectively establish or maintain relationships with customers for electric vehicles; (ii) competition; and (iii) other risks and uncertainties indicated from time to time in the final prospectus of ABIC, including those under "Risk Factors" therein, and other documents filed or to be filed with the SEC by the Company, LW EV Holdings, Inc. (HoldCo) or ABIC; (D) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests; (E) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (F) successfully carry out its global manufacturing and assembly operations; (G) 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, including successfully implementing and executing plans to strengthen and grow its leadership position in Grand American Touring, large Cruiser and Trike, and grow its complementary businesses; (H) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (I) successfully appeal: (i) the revocation of the Binding Origin Information (BOI) decisions that allow the Company to supply its European Union (EU) market with certain of its motorcycles produced at its Thailand operations at a reduced tariff rate and (ii) the denial of the Company's application for temporary relief from the effect of the revocation of the BOI decisions; (J) manage and predict the impact that new, reinstated or adjusted tariffs may have on the Company's ability to sell products internationally, and the cost of raw materials and components, including the temporary lifting of the Section 232 steel and aluminum tariffs and incremental tariffs on motorcycles imported into the EU from the U.S., between U.S. and EU, which expires on December 31, 2023; (K) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the 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; (L) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (M) successfully manage and reduce costs throughout the business; (N) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing international political

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environment, including as a result of the conflict in Ukraine; (O) 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 dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; (P) continue to develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (Q) maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (R) successfully maintain a manner in which to sell motorcycles in China and the Company’s Association of Southeast Asian Nations (ASEAN) countries that does not subject its motorcycles to incremental tariffs; (S) manage its Thailand corporate and manufacturing operation in a manner that allows the Company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets; (T) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (U) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (V) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding data security; (W) manage the credit quality, the loan servicing and collection activities, and the recovery rates of Harley-Davidson Financial Services Inc.'s loan portfolio; (X) 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; (Y) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; (Z) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (AA) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; (BB) manage its exposure to product liability claims and commercial or contractual disputes; (CC) continue to manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness; (DD) achieve anticipated results with respect to the Company's pre-owned motorcycle program, Harley-Davidson Certified, and the Company's H-D1 Marketplace; (EE) accurately predict the margins of its Motorcycles and Related Products segment in light of, among other things, tariffs, the cost associated with product development initiatives and the Company's complex global supply chain; and (FF) optimize capital allocation in light of the Company's capital allocation priorities.

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 dealers to sell its motorcycles and related products and services to retail customers. The Company depends on the capability and financial capacity of its 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 dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions, the impact of the COVID-19 pandemic, or other factors.

In recent years, Harley-Davidson Financial Services has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The Company believes that Harley-Davidson Financial Services' retail credit losses will increase over time due to among other things to factors that have contributed to recently low levels of losses, including the favorable impact of recent federal stimulus payments that will not recur and the conflict in Ukraine.

The Company's operations, demand for its products, and its liquidity could be adversely impacted by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, war or other hostilities, including the conflict in Ukraine, or other factors. Refer to Item 1A. Risk Factors and risk factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 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 Market Risk

The Company is exposed to market risk from changes in foreign currency exchange rates, commodity prices and interest rates. To reduce such risks, the Company selectively uses derivative financial instruments. All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes. Sensitivity analysis is used to manage and monitor foreign currency exchange rate and interest rate risks. Further disclosure relating to the fair value of the Company's derivative financial instruments is included in Note 9 of the Notes to Consolidated financial statements.

Motorcycles and Related Products Segment

The Company sells its motorcycles and related products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, the Motorcycles segment operating results are affected by fluctuations in the value of the U.S. dollar relative to foreign currencies. The Company’s most significant foreign currency exchange rate risk resulting from the sale of motorcycles and related products relates to the Euro, Australian dollar, Japanese yen, Brazilian real,

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Canadian dollar, Mexican peso, Chinese yuan, Singapore dollar, Thai baht ~~Indian rupee, Singapore dollar~~ and Pound sterling. The Company utilizes foreign currency contracts to mitigate the effect of certain currencies' fluctuations on Motorcycles segment operating results. The foreign currency contracts are entered into with banks and allow the Company to exchange currencies at a future date, based on a fixed exchange rate. There have been no material changes to the foreign currency exchange rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

The Company purchases commodities for the use in the production of motorcycles. As a result, Motorcycles segment operating ~~results are~~income is affected by changes in commodity prices. The Company uses derivative financial instruments on a limited basis to hedge the prices of certain commodities. There have been no material changes to the commodity market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

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2021.

Financial Services Segment

The Company has interest rate sensitive financial instruments including financial receivables, debt and interest rate derivative financial instruments. As a result, Financial Services operating income is affected by changes in interest rates. The Company utilizes interest rate caps to reduce the impact of fluctuations in interest rates on its asset-backed securitization transactions. There have been no material changes to the interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~HDFS~~Harley-Davidson Financial Services also has short-term commercial paper and debt issued through the commercial paper conduit facilities that is subject to changes in interest rates which it does not hedge. There have been no material changes to the interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

The Company has foreign denominated medium-term ~~notes. As~~notes, and as a result, Financial Services operating income is affected by fluctuations in the value of the U.S. dollar relative to foreign currencies and interest rates. At March ~~28, 2021,~~27, 2022, this exposure related to the Euro. The Company utilizes cross-currency swaps to mitigate the effect of the foreign currency exchange rate and interest rate fluctuations related to foreign denominated debt. There have been no material changes to the foreign currency exchange rate and interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Refer to the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for further information concerning the Company's market risk.

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 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 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 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 March ~~28, 2021~~27, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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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 16 of the Notes to Consolidated financial statements, and such information is incorporated herein by reference in this Item 1 of Part II.

Item 1A. Risk Factors

An investment in Harley-Davidson, Inc. involves risks, including the risk factors discussed in Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which have not materially changed except as set forth below.

•~~Trade policies~~The ongoing conflict between Russia and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences, may continue to have a material adverse impact on our business, results of operations and outlook. ~~Tariffs and/or other developments with respect to trade policies, trade agreements and government regulations~~Ukraine could ~~have a material adverse impact on~~adversely affect the Company's business, financial condition and ~~results~~operating results. On February 24, 2022, Russian military forces launched a military action in Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of ~~operations. To date,~~ the ongoing military conflict in Ukraine are highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply and prices of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage. Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to an unprecedented expansion of sanction programs imposed by the United States, European Union, ~~(EU) has placed a 25% incremental tariff (31% total tariff) on motorcycles imported into~~United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the EUCrimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic, including, among others: (i) blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the ~~U.S.~~Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and ~~that is scheduled to increase to a 50% incremental tariff (56% total tariff) effective June 1, 2021. Shipments~~certain Russian businesses, some of ~~motorcycles~~which have significant financial and trade ties to the European ~~Union are a~~Union; (ii) blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government connections or involved in Russian military activities; and (iii) blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets and bans on various Russian imports. The Company has suspended its business in Russia and is actively monitoring the situation and assessing its impact on its business, including its business partners and customers. While the Company has not experienced any material interruptions to its infrastructure, supplies, technology systems or networks needed to support its operations or significant ~~portion~~costs due to the conflict, the Company cannot provide assurance that will remain the case. The Company has no way to predict the progress or outcome of the ~~Company’s total motorcycles sales. Beginning~~conflict in ~~2019,~~Ukraine or its impacts in Ukraine, Russia or Belarus as the ~~Company obtained regulatory approvals, reflected in five Binding Origin Information (BOI) rulings, that allowed it to supply~~conflict, and any resulting government reactions, are rapidly developing and beyond its EU markets with certain of its motorcycles produced at its Thailand facilities at tariff rates of 6%. In April 2021, the Company received notification from the Economic Ministry of Belgium that, following a request from the European Union, the Company would be subject to the revocation of the BOI rulings, effective April 19, 2021. Following the revocation, non-electric motorcycles Harley-Davidson imports into the European Union, regardless of origin, will be subject to a total tariff rate of 31% from April 19, 2021 to May 31, 2021. This rate is expected to increase to 56% effective June 1, 2021. This ruling will effectively prohibit the Company from functioning competitively in the European Union.control. The Company is appealing the revocation of the BOIs. It has also sought temporary extended reliance on the 6% tariff rate, for motorcycles produced in Thailand and ordered prior to April 19, 2021. There is no assurance that the appeal will be successful or that the Company will receive the extended reliance. The full impact of the revocation is subject to uncertainties that include the following, among other factors: (i) uncertainties regarding the quantity and mix of motorcycles that the Company imports into the EU; (ii) uncertainties regarding the import prices of motorcycles; (iii) whether the Company will be granted extended reliance on the 6% tariff rate for motorcycles ordered prior to April 19, 2021; (iv) whether the Company will be successful in appealing the revocation of the BOI rulings; (v) uncertainties regarding the sizeextent and duration of the ~~EU tariffs;~~military action, sanctions and ~~(vi) whether~~resulting market disruptions could be significant and ~~to what extent the Company determines to attempt to pass~~could potentially have substantial impact on the ~~impact~~global economy and the Company's business for an unknown period of time. Any of the ~~revocation to dealers and its success in doing so.~~

~~In addition, the U.S. government imposed increased tariffs on imports from China (Section 301 tariffs), which has resulted in higher costs for components and products sourced from China.~~

Without limitation, (i) tariffs currently in place, (ii) the imposition by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition by foreign countries of tariffs on U.S. products, including tariffs imposed in response to U.S. tariffs,factors mentioned above could materially increase: (a) the cost of Harley-Davidson products that the Company is offering for sale in relevant countries, (b) the cost of certain products that the Company sources from foreign manufacturers and (c) the prices of certain raw materials that the Company utilizes. The Company may not be able to pass such increased costs on to distributors, independent dealers or their customers, and the Company may not be able to secure sources of certain products and materials that are not subject to tariffs on a timely basis. Such developments could have a material adverse impact onaffect the Company's business, financial condition and ~~results~~operating results. The conflict could also exacerbate other risks that the Company described in Item 1A. Risk Factors of ~~operations.~~the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The Company disclaims any obligation to update these risk factors or any other forward-looking statements. The Company assumes no obligation, and specifically disclaims any such obligation, to update these risk factors or any other forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements.

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

The Company's share repurchases, which consisted of discretionary shares and shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares, were as follows during the quarter ended March ~~28, 2021:~~

2021 Fiscal Month Total Number of
Shares Purchased Average Price
Paid per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
January 1 to January 31 2,815 $ 36 2,815 18,246,721
February 1 to February 28 154,562 $ 36 154,562 18,246,721
March 1 to March 28 479 $ 36 479 18,246,721
157,856 $ 36 157,856
27, 2022:


2022 Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to January 30	300	$	38	300	18,246,721
January 31 to February 27	1,656,848	$	41	1,656,848	16,947,423
February 28 to March 27	4,945,120	$	39	4,945,120	12,006,258
	6,602,268	$	40	6,602,268

In February 2018, the Company's Board of Directors authorized the Company to repurchase up to 15.0 million shares of its common stock on a discretionary basis with no dollar limit or expiration date. In February 2020, the Company's Board of Directors authorized the Company to repurchase up to 10.0 million additional shares of its common stock on a discretionary basis with no dollar limit or expiration date. ~~As of March 28, 2021, 18.2 million shares remained under these authorizations.~~ The Company repurchased no6.2 million shares on a discretionary basis during the quarter ended March ~~28, 2021.~~27, 2022 under these authorizations. As of March 27, 2022, 12.0 million shares remained under these authorizations.

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. 2020 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 ~~2021,~~2022, the Company acquired ~~157,856~~361,805 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock units and performance ~~share units.~~shares.

Item 6. Exhibits

Refer to the exhibit index immediately following this page.

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Harley-Davidson, Inc.

Exhibit Index to Form 10-Q


Exhibit No.						Description
~~3.1~~4.1						~~Restated Articles~~Officers' Certificate, dated February 14, 2022, pursuant to Sections 102 and 301 of ~~Incorporation~~the Indenture, dated December 18, 2020, with the form of ~~Harley-Davidson, Inc. as amended through May 28, 2020~~3.050% Medium-Term Notes due 2027
~~3.2~~4.2						~~Harley-Davidson By-Laws,~~Second Amended and Restated 5-Year Credit Agreement, dated as ~~amended through May 28, 2020 (incorporated herein by reference to Exhibit 3.1~~of April 7, 2022, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto, and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the ~~Registrant's Current Report on Form 8-K~~5-year Credit Agreement, dated ~~May 28,~~as of April 1, 2020, ~~(File No. 1-9183))~~among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent
4.3						Second Amended and 7-Year Restated Credit Agreement, dated as of April 7, 2022, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto, and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the 7-year Credit Agreement, dated as of April 1, 2020, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent
10.1*						~~Amended~~Form of Notice of Award of Restricted Stock Units and ~~Restated~~Restricted Stock Unit Agreement and Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (LW) of Harley-Davidson, Inc. ~~Director~~under the Harley-Davidson, Inc. 2020 Incentive Stock Plan ~~as amended~~first approved for use in February 2022
10.2*						Form of Notice of Award of Performance Shares and ~~restated effective May 10, 2018 (incorporated herein by reference to Appendix A to~~Performance Shares Agreement (Standard) of Harley-Davidson, Inc. under the ~~Company's definitive proxy statement on Schedule 14A~~Harley-Davidson, Inc. 2020 Incentive Stock Plan first approved for ~~the Company's Annual Meeting of Shareholders held May 10, 2018 filed on March 29, 2018 (File No. 1-9183))~~use in February 2022
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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
104						Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101

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

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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 ~~6, 2021~~5, 2022			/s/ Gina Goetter
			Gina Goetter
			Chief Financial Officer
			(Principal financial officer)


Date: May ~~6, 2021~~5, 2022			/s/ Mark R. Kornetzke
			Mark R. Kornetzke
			Chief Accounting Officer
			(Principal accounting officer)

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2021	$	80,000
2022	14,000
2023	7,000
2024	22,000
2025	0
Thereafter	30,000
Unamortized fees	(347)
	$	152,653


	Amortized Cost, Beginning of Period		Amortized Cost, End of Period		Interest Income Recognized
No related allowance recorded	$	0	$	0	$	0
Related allowance recorded	4,994		4,325		0
	$	4,994	$	4,325	$	0


	Operating Leases
2021	$	13,805
2022	14,466
2023	6,511
2024	4,518
2025	6,816
Thereafter	3,677
Future lease payments	49,793
Present value discount	(2,711)
Lease liabilities	$	47,082


2021	$	1,670,913
2022	1,685,613
2023	1,829,349
2024	1,120,828
2025	1,287,560
Thereafter	300,537
	$	7,894,800


	Three months ended
	March 31, 2021	March 31, 2020	Increase (Decrease)	% Change
United States	30,983	23,732	7,251	30.6	%
Canada	1,799	1,466	333	22.7
North America	32,782	25,198	7,584	30.1
Europe/Middle East/Africa (EMEA)	4,943	7,730	(2,787)	(36.1)
Asia Pacific	5,793	5,752	41	0.7
Latin America	717	1,759	(1,042)	(59.2)
	44,235	40,439	3,796	9.4	%


2021 Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to January 31	2,815	$	36	2,815	18,246,721
February 1 to February 28	154,562	$	36	154,562	18,246,721
March 1 to March 28	479	$	36	479	18,246,721
	157,856	$	36	157,856