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 ~~September 26, 2021~~March 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 ~~153,876,904~~147,378,290 shares of common stock as of ~~October 29, 2021.~~April 30, 2022.

HARLEY-DAVIDSON, INC.

Form 10-Q

For The Quarter Ended ~~September 26, 2021~~March 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	1211
	6. Earnings Per Share	1211
	7. Additional Balance Sheet and Cash Flow Information	12
	8. Finance Receivables	1413

	9. Derivative Financial Instruments and Hedging Activities	1918
	10. Leases	2321
	11. Debt	2422
	12. Asset-Backed Financing	2524
	13. Fair Value	2927
	14. Product Warranty and Recall Campaigns	3028
	15. Employee Benefit Plans	3129
	16. Commitments and Contingencies	3230
	17. Accumulated Other Comprehensive Loss	3230
	18. ~~Business~~Reportable Segments	3431
	19. Supplemental Consolidating Data	3532
	20. Subsequent Event	39
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5853
Item 4.	Controls and Procedures	5954
Part II	Other Information	6055
Item 1.	Legal Proceedings	6055
Item 1A.	Risk Factors	6055
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6156
~~Item 5.~~	~~Other Information~~	61
Item 6.	Exhibits	6156
Signatures		6358

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				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Revenue:	Revenue:									Revenue:
Motorcycles and Related Products	Motorcycles and Related Products	$	1,160,618	$	964,029	$	3,724,225	$	2,733,091	Motorcycles and Related Products		$	1,303,171	$	1,232,107
Financial Services	Financial Services	204,692		201,655		595,650		596,064		Financial Services		192,015		190,400
		1,365,310		1,165,684		4,319,875		3,329,155				1,495,186		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	850,193		676,796		2,586,264		2,019,310		Motorcycles and Related Products cost of goods sold		895,536		811,622
Financial Services interest expense	Financial Services interest expense	44,770		67,533		149,098		182,193		Financial Services interest expense		42,099		55,707
Financial Services provision for credit losses	Financial Services provision for credit losses	11,208		7,835		4,935		178,433		Financial Services provision for credit losses		28,822		(22,474)
Selling, administrative and engineering expense	Selling, administrative and engineering expense	254,312		231,721		747,665		734,057		Selling, administrative and engineering expense		239,625		231,844
Restructuring expense		615		43,915		1,167		85,864
Restructuring benefit										Restructuring benefit		(128)		(366)
		1,161,098		1,027,800		3,489,129		3,199,857				1,205,954		1,076,333
Operating income	Operating income	204,212		137,884		830,746		129,298		Operating income		289,232		346,174
Other income, net	Other income, net	858		155		1,825		466		Other income, net		11,030		277
Investment income		198		2,672		4,331		3,082
Investment (loss) income										Investment (loss) income		(1,979)		1,402
Interest expense	Interest expense	7,779		7,783		23,209		23,307		Interest expense		7,711		7,708
Income before provision for income taxes	Income before provision for income taxes	197,489		132,928		813,693		109,539		Income before provision for income taxes		290,572		340,145
Provision for income taxes	Provision for income taxes	34,516		12,710		185,236		11,843		Provision for income taxes		68,070		81,001
Net income	Net income	$	162,973	$	120,218	$	628,457	$	97,696	Net income		$	222,502	$	259,144
Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.06	$	0.78	$	4.09	$	0.64	Basic		$	1.46	$	1.69
Diluted	Diluted	$	1.05	$	0.78	$	4.06	$	0.64	Diluted		$	1.45	$	1.68
Cash dividends per share	Cash dividends per share	$	0.15	$	0.02	$	0.45	$	0.42	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				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Net income	Net income	$	162,973	$	120,218	$	628,457	$	97,696	Net income		$	222,502	$	259,144
Other comprehensive income, net of tax:	Other comprehensive income, net of tax:									Other comprehensive income, net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	(17,836)		12,737		(33,759)		(275)		Foreign currency translation adjustments		(4,121)		(17,338)
Derivative financial instruments	Derivative financial instruments	4,270		(2,101)		21,298		(28,255)		Derivative financial instruments		9,928		17,530

Pension and postretirement benefit plans	Pension and postretirement benefit plans	13,588		11,959		40,763		35,876		Pension and postretirement benefit plans		5,502		13,588
		22		22,595		28,302		7,346				11,309		13,780
Comprehensive income	Comprehensive income	$	162,995	$	142,813	$	656,759	$	105,042	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)			(Unaudited)				(Unaudited)
		September 26, 2021		December 31, 2020		September 27, 2020			March 27, 2022		December 31, 2021		March 28, 2021
ASSETS	ASSETS							ASSETS
Current assets:	Current assets:							Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,061,303	$	3,257,203	$	3,560,950	Cash and cash equivalents	$	1,393,731	$	1,874,745	$	2,320,645

Accounts receivable, net	Accounts receivable, net	282,627		143,082		232,845		Accounts receivable, net	254,286		182,148		216,569
Finance receivables, net of allowance of $62,406, $72,632, and $74,111		1,540,822		1,509,539		1,701,478
Finance receivables, net of allowance of $60,889, $60,734, and $64,139								Finance receivables, net of allowance of $60,889, $60,734, and $64,139	1,699,642		1,465,544		1,798,194
Inventories, net	Inventories, net	475,314		523,497		322,375		Inventories, net	714,259		712,942		470,997
Restricted cash	Restricted cash	153,873		131,642		160,155		Restricted cash	142,812		128,935		185,374
Other current assets	Other current assets	194,481		280,470		178,931		Other current assets	182,527		185,777		195,356
		4,708,420		5,845,433		6,156,734			4,387,257		4,550,091		5,187,135
Finance receivables, net of allowance of $293,428, $318,304, and $334,591		5,322,436		4,933,469		5,142,014
Finance receivables, net of allowance of $279,584, $278,645, and $282,094								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	Property, plant and equipment, net	671,836		743,784		785,165		Property, plant and equipment, net	663,807		683,984		718,968
Pension and postretirement assets	Pension and postretirement assets	132,958		95,711		82,378		Pension and postretirement assets	399,029		386,152		105,910
Goodwill	Goodwill	63,841		65,976		64,884		Goodwill	62,607		63,177		65,157
Deferred income taxes	Deferred income taxes	128,059		158,538		137,960		Deferred income taxes	71,926		82,922		135,387
Lease assets	Lease assets	47,507		45,203		47,599		Lease assets	45,073		49,625		44,765
Other long-term assets	Other long-term assets	124,747		122,487		115,541		Other long-term assets	143,030		128,727		123,083
		$	11,199,804	$	12,010,601	$	12,532,275		$	10,894,640	$	11,051,055	$	11,338,988
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:							Current liabilities:
Accounts payable	Accounts payable	$	382,216	$	290,904	$	289,103	Accounts payable	$	476,917	$	374,978	$	402,764
Accrued liabilities	Accrued liabilities	599,852		557,214		561,282		Accrued liabilities	597,924		601,981		570,440
Short-term deposits, net	Short-term deposits, net	92,626		79,965		29,999		Short-term deposits, net	65,049		72,146		93,887
Short-term debt	Short-term debt	749,620		1,014,274		1,227,763		Short-term debt	816,016		751,286		765,263
Current portion of long-term debt, net	Current portion of long-term debt, net	1,605,798		2,039,597		2,109,284		Current portion of long-term debt, net	1,327,357		1,542,496		1,622,243
		3,430,112		3,981,954		4,217,431			3,283,263		3,342,887		3,454,597
Long-term deposits, net	Long-term deposits, net	197,644		—		—		Long-term deposits, net	283,034		218,180		58,766
Long-term debt, net	Long-term debt, net	4,876,292		5,932,933		6,171,676		Long-term debt, net	4,470,086		4,595,617		5,478,091
Lease liabilities	Lease liabilities	26,017		30,115		31,225		Lease liabilities	27,633		29,904		30,061
Pension and postretirement liabilities	Pension and postretirement liabilities	103,144		114,206		126,232		Pension and postretirement liabilities	93,792		95,299		103,854
Deferred income taxes	Deferred income taxes	8,585		8,607		6,219		Deferred income taxes	9,578		9,261		8,682
Other long-term liabilities	Other long-term liabilities	224,116		220,001		209,594		Other long-term liabilities	218,153		206,663		228,551
Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)	0		0		0		Commitments and contingencies (Note 16)	0		0		0
Shareholders’ equity:	Shareholders’ equity:							Shareholders’ equity:

Common stock	Common stock	1,694		1,685		1,835		Common stock	1,704		1,694		1,690
Additional paid-in-capital	Additional paid-in-capital	1,540,235		1,507,706		1,501,410		Additional paid-in-capital	1,554,840		1,547,011		1,517,129
Retained earnings	Retained earnings	1,843,964		1,284,823		2,148,462		Retained earnings	2,040,867		1,842,421		1,520,862
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(455,115)		(483,417)		(529,603)		Accumulated other comprehensive loss	(229,610)		(240,919)		(469,637)
Treasury stock, at cost	Treasury stock, at cost	(596,884)		(588,012)		(1,352,206)		Treasury stock, at cost	(858,700)		(596,963)		(593,658)
		2,333,894		1,722,785		1,769,898			2,509,101		2,553,244		1,976,386
		$	11,199,804	$	12,010,601	$	12,532,275		$	10,894,640	$	11,051,055	$	11,338,988

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands)


		(Unaudited)				(Unaudited)			(Unaudited)				(Unaudited)
		September 26, 2021		December 31, 2020		September 27, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Balances held by consolidated variable interest entities (Note 12):	Balances held by consolidated variable interest entities (Note 12):							Balances held by consolidated variable interest entities (Note 12):
Finance receivables, net - current	Finance receivables, net - current	$	531,942	$	530,882	$	576,750	Finance receivables, net - current	$	455,638	$	493,543	$	567,887
Other assets	Other assets	$	2,754	$	3,753	$	3,129	Other assets	$	4,373	$	2,982	$	4,027
Finance receivables, net - non-current	Finance receivables, net - non-current	$	1,961,367	$	1,889,472	$	2,177,875	Finance receivables, net - non-current	$	1,487,650	$	1,734,428	$	2,113,344
Restricted cash - current and non-current	Restricted cash - current and non-current	$	167,865	$	142,892	$	170,925	Restricted cash - current and non-current	$	156,297	$	144,284	$	196,946
Current portion of long-term debt, net	Current portion of long-term debt, net	$	629,600	$	608,987	$	677,099	Current portion of long-term debt, net	$	551,305	$	569,145	$	692,903
Long-term debt, net	Long-term debt, net	$	1,565,022	$	1,585,174	$	1,886,594	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)


		Nine months ended					Three months ended
		September 26, 2021		September 27, 2020			March 27, 2022		March 28, 2021
Net cash provided by operating activities (Note 7)	Net cash provided by operating activities (Note 7)	$	925,551	$	1,135,068	Net cash provided by operating activities (Note 7)	$	139,321	$	162,781
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(61,476)		(92,295)		Capital expenditures	(27,999)		(18,813)
Origination of finance receivables	Origination of finance receivables	(3,444,953)		(2,873,259)		Origination of finance receivables	(1,058,461)		(909,138)
Collections on finance receivables	Collections on finance receivables	2,968,397		2,730,166		Collections on finance receivables	965,190		900,485

Other investing activities	Other investing activities	2,485		334		Other investing activities	135		733
Net cash used by investing activities	Net cash used by investing activities	(535,547)		(235,054)		Net cash used by investing activities	(121,135)		(26,733)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of medium-term notes	Proceeds from issuance of medium-term notes	—		1,396,602		Proceeds from issuance of medium-term notes	495,785		—
Repayments of medium-term notes	Repayments of medium-term notes	(1,400,000)		(1,400,000)		Repayments of medium-term notes	(550,000)		(1,050,000)

Proceeds from securitization debt	Proceeds from securitization debt	1,169,910		2,064,450		Proceeds from securitization debt	—		597,411
Repayments of securitization debt	Repayments of securitization debt	(1,013,820)		(735,885)		Repayments of securitization debt	(271,499)		(291,346)
Borrowings of asset-backed commercial paper	Borrowings of asset-backed commercial paper	27,406		225,187		Borrowings of asset-backed commercial paper	62,455		—
Repayments of asset-backed commercial paper	Repayments of asset-backed commercial paper	(206,671)		(236,846)		Repayments of asset-backed commercial paper	(56,634)		(66,894)
Net (decrease) increase in unsecured commercial paper		(261,978)		509,978
Net increase (decrease) in unsecured commercial paper						Net increase (decrease) in unsecured commercial paper	64,521		(262,517)
Net increase in credit facilities	Net increase in credit facilities	—		150,000		Net increase in credit facilities	—		15,629
Net increase in deposits	Net increase in deposits	210,144		29,992		Net increase in deposits	57,660		72,664
Dividends paid	Dividends paid	(69,316)		(65,002)		Dividends paid	(24,056)		(23,105)
Repurchase of common stock	Repurchase of common stock	(11,545)		(7,895)		Repurchase of common stock	(261,737)		(5,646)

Issuance of common stock under share-based plans		4,324		96
Net cash (used) provided by financing activities		(1,551,546)		1,930,677
Other financing activities						Other financing activities	—		1,085
Net cash used by financing activities						Net cash used by financing activities	(483,505)		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(11,050)		6,071		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,743)		(5,163)
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(1,172,592)	$	2,836,762
Net decrease in cash, cash equivalents and restricted cash						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:					Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	$	3,409,168	$	905,366	Cash, cash equivalents and restricted cash, beginning of period	$	2,025,219	$	3,409,168
Net (decrease) increase in cash, cash equivalents and restricted cash		(1,172,592)		2,836,762
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(467,062)		(881,834)
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	2,236,576	$	3,742,128	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:	Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:					Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents	Cash and cash equivalents	$	2,061,303	$	3,560,950	Cash and cash equivalents	$	1,393,731	$	2,320,645
Restricted cash	Restricted cash	153,873		160,155		Restricted cash	142,812		185,374
Restricted cash included in Other long-term assets	Restricted cash included in Other long-term assets	21,400		21,023		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	Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows	$	2,236,576	$	3,742,128	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, 2020 168,503,526 $ 1,685 $ 1,507,706 $ 1,284,823 $ (483,417) $ (588,012) $ 1,722,785
Net income — — — 259,144 — — 259,144
Other comprehensive income, net of tax (Note 17) — — — — 13,780 — 13,780
Dividends ($0.15 per share) — — — (23,105) — — (23,105)
Repurchase of common stock — — — — — (5,646) (5,646)
Share-based compensation 483,326 5 9,423 — — — 9,428
Balance, March 28, 2021 168,986,852 1,690 1,517,129 1,520,862 (469,637) (593,658) 1,976,386
Net income — — — 206,340 — — 206,340
Other comprehensive income, net of tax (Note 17) — — — — 14,500 — 14,500
Dividends ($0.15 per share) — — — (23,104) — — (23,104)
Repurchase of common stock — — — — — (5,265) (5,265)
Share-based compensation 322,015 3 14,327 — — 1,085 15,415
Balance, June 27, 2021 169,308,867 1,693 1,531,456 1,704,098 (455,137) (597,838) 2,184,272
Net income — — — 162,973 — — 162,973
Other comprehensive income, net of tax (Note 17) — — — — 22 — 22
Dividends ($0.15 per share) — — — (23,107) — — (23,107)
Repurchase of common stock — — — — — (634) (634)
Share-based compensation 49,831 1 8,779 — — 1,588 10,368
Balance, September 26, 2021 169,358,698 $ 1,694 $ 1,540,235 $ 1,843,964 $ (455,115) $ (596,884) $ 2,333,894
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
Net loss — — — (92,217) — — (92,217)
Other comprehensive income, net of tax (Note 17) — — — — 27,092 — 27,092
Dividends ($0.02 per share) — — — (3,100) — — (3,100)
Repurchase of common stock — — — — — (85) (85)
Share-based compensation 9,615 — (882) — — 914 32
Balance, June 28, 2020 183,411,204 1,834 1,494,259 2,031,329 (552,198) (1,351,519) 1,623,705
Net income — — — 120,218 — — 120,218
Other comprehensive income, net of tax (Note 17) — — — — 22,595 — 22,595
Dividends ($0.02 per share) — — — (3,085) — — (3,085)
Repurchase of common stock — — — — — (739) (739)
Share-based compensation 82,329 1 7,151 — — 52 7,204
Balance, September 27, 2020 183,493,533 $ 1,835 $ 1,501,410 $ 2,148,462 $ (529,603) $ (1,352,206) $ 1,769,898


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

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

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

The accompanying notes are integral to the consolidated financial statements.

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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 ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020,~~ the Consolidated statements of operations for the three ~~and nine~~ month periods then ended, the Consolidated statements of comprehensive income for the three ~~and nine~~ month periods then ended, the Consolidated statements of cash flows for the ~~nine~~three month periods then ended, and the Consolidated statements of shareholders' equity for ~~each of~~ the three month periods ~~within the nine month periods ended September 26, 2021 and September 27, 2020.~~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 September 26, 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 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.

Table of Contents

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


		Three months ended				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Motorcycles and Related Products Revenue:	Motorcycles and Related Products Revenue:									Motorcycles and Related Products Revenue:
Motorcycles	Motorcycles	$	885,626	$	684,344	$	2,931,669	$	2,030,448	Motorcycles		$	1,059,113	$	1,016,334
Parts & Accessories		204,506		209,808		577,035		513,201
General Merchandise		49,424		49,356		155,378		136,321
Parts and accessories										Parts and accessories		165,525		149,859
Apparel										Apparel		51,407		50,323
Licensing	Licensing	8,481		8,894		22,865		21,826		Licensing		6,497		5,512
Other	Other	12,581		11,627		37,278		31,295		Other		20,629		10,079
		1,160,618		964,029		3,724,225		2,733,091				1,303,171		1,232,107
Financial Services Revenue:	Financial Services Revenue:									Financial Services Revenue:
Interest income	Interest income	174,103		174,464		501,645		512,726		Interest income		161,734		159,814
Other	Other	30,589		27,191		94,005		83,338		Other		30,281		30,586
		204,692		201,655		595,650		596,064				192,015		190,400
		$	1,365,310	$	1,165,684	$	4,319,875	$	3,329,155			$	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):


		September 26, 2021		September 27, 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	$	38,682	$	31,209	Balance, end of period	$	38,842	$	36,266

Previously deferred revenue recognized as revenue in the three months ended ~~September 26,~~March 27, 2022 and March 28, 2021 ~~and September 27, 2020~~ was ~~$6.1~~$7.7 million and ~~$6.3~~$6.2 million, ~~respectively, and $17.9 million and $19.6 million in the nine months ended September 26, 2021 and September 27, 2020,~~ respectively. The Company expects to recognize approximately ~~$15.0~~$17.5 million of the remaining unearned revenue over the next 12 months and ~~$23.7~~$21.4 million thereafter.

4. Restructuring Activities

The Company's restructuring activities are included in Restructuring ~~expense~~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.

~~Table~~ These restructuring activities are essentially complete, and the Company does not expect restructuring expenses of ~~Contents~~

any significance in 2022.

Since the inception of the restructuring activities in 2020 through the ~~nine~~three months ended ~~September 26, 2021,~~March 27, 2022, the Company has incurred cumulative restructuring expenses of ~~$131.2 million. This includes restructuring expense by segment as follows (in thousands):~~

Three months ended Nine months ended
September 26,
2021 September 27,
2020 September 26,
2021 September 27,
2020
Motorcycles and Related Products $ 517 $ 43,581 $ 731 $ 84,586
Financial Services 98 334 436 1,278
$ 615 $ 43,915 $ 1,167 $ 85,864

~~The Company expects total estimated restructuring expenses of approximately $135~~$133.2 million, including ~~approximately $123~~$121.7 million and ~~$12~~$11.5 million ~~expected to be in incurred~~ in the Motorcycles and Financial Services segments, respectively. ~~Total expected~~This includes restructuring ~~expenses include approximately $30 million related to employee termination benefits, $75 million related to contract termination~~(benefit) expense for the three months ended March 27, 2022 and ~~other costs and $30 million related to non-current asset adjustments, including accelerated depreciation and other adjustments to the carrying value~~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)

Table of ~~non-current assets. The Company expects to incur estimated restructuring expenses of approximately $5 million in 2021.~~Contents

Changes in accrued restructuring expenses, which are included in Accrued liabilities on the Consolidated balance sheets, were as follows (in thousands):
Three months ended September 26, 2021
Employee Termination Benefits Contract Terminations
& Other Non-Current Asset Adjustments Total
Balance, beginning of period $ 1,246 $ 2,084 $ — $ 3,330
Restructuring (benefit) expense (165) 807 (27) 615
Utilized – cash
(397) (1,197) — (1,594)
Utilized – non cash
— — 27 27
Foreign currency changes (7) (21) — (28)
Balance, end of period $ 677 $ 1,673

$ — $ 2,350
Three months ended September 27, 2020
Employee Termination Benefits Contract Terminations
& Other Non-Current Asset Adjustments Total
Balance, beginning of period $ 25,298 $ 14,270 $ — $ 39,568
Restructuring expense 4,493 23,422 16,000 43,915
Utilized – cash
(11,940) (5,899) — (17,839)
Utilized – non cash
— — (16,000) (16,000)
Foreign currency changes 166 (54) — 112
Balance, end of period $ 18,017 $ 31,739

$ — $ 49,756
Nine months ended September 26, 2021
Employee Termination Benefits Contract Terminations
& Other Non-Current Asset Adjustments Total
Balance, beginning of period $ 7,724 $ 16,196 $ — $ 23,920
Restructuring (benefit) expense (1,131) 2,576 (278) 1,167
Utilized – cash
(5,743) (16,987) — (22,730)
Utilized – non cash
— — 278 278
Foreign currency changes (173) (112) — (285)
Balance, end of period $ 677 $ 1,673

$ — $ 2,350

~~Table of~~ ~~Contents~~


		Nine months ended September 27, 2020									Three months ended March 27, 2022
		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	$	—	$	—	$	—	$	—	Balance, beginning of period	$	121	$	2,874	$	—	$	2,995
Restructuring expense		29,814		37,692		18,358		85,864
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
											Employee Termination Benefits		Contract Terminations & Other		Non-Current Asset Adjustments		Total
Balance, beginning of period										Balance, beginning of period	$	7,724	$	16,196	$	—	$	23,920
Restructuring (benefit) expense										Restructuring (benefit) expense	(944)		1,106		(528)		(366)
Utilized – cash	Utilized – cash	(11,940)		(5,899)		—		(17,839)		Utilized – cash	(3,661)		(12,781)		—		(16,442)
Utilized – non cash	Utilized – non cash	—		—		(18,358)		(18,358)		Utilized – non cash	—		—		528		528
Foreign currency changes	Foreign currency changes	143		(54)		—		89		Foreign currency changes	(112)		(54)		—		(166)
Balance, end of period	Balance, end of period	$	18,017	$	31,739	$	—	$	49,756	Balance, end of period	$	3,007	$	4,467	$	—	$	7,474

5. Income Taxes

The Company’s effective income tax rate for the ~~nine~~three months ended ~~September 26, 2021~~March 27, 2022 was ~~22.8%~~23.4% compared to ~~10.8%~~23.8% for the ~~nine~~three months ended September 27, 2020. The effective income tax rate for the nine months ended September 27, 2020 was impacted by discrete income tax expenses recorded during the period, including adjustments related to the reassessment of the realizability of certain deferred tax assets and favorable settlements with taxing authorities, which reduced the Company's income tax expense for the period.March 28, 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				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Net income	Net income	$	162,973	$	120,218	$	628,457	$	97,696	Net income		$	222,502	$	259,144

Basic weighted-average shares outstanding	Basic weighted-average shares outstanding	153,863		153,252		153,700		153,153		Basic weighted-average shares outstanding		152,820		153,478
Effect of dilutive securities – employee stock compensation plan	Effect of dilutive securities – employee stock compensation plan	1,254		663		1,203		637		Effect of dilutive securities – employee stock compensation plan		1,104		1,012
Diluted weighted-average shares outstanding	Diluted weighted-average shares outstanding	155,117		153,915		154,903		153,790		Diluted weighted-average shares outstanding		153,924		154,490
Net earnings per share:	Net earnings per share:									Net earnings per share:
Basic	Basic	$	1.06	$	0.78	$	4.09	$	0.64	Basic		$	1.46	$	1.69
Diluted	Diluted	$	1.05	$	0.78	$	4.06	$	0.64	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 0.5 million and ~~1.3~~0.6 million shares for the three months ended ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020, respectively, and 0.5 million and 1.6 million shares for the nine months ended September 26, 2021 and September 27, 2020,~~ respectively.

Table of Contents

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):
September 26,
2021 December 31,
2020 September 27,
2020
Mutual funds $ 48,766 $ 52,061 $ 48,845


	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.

~~Table of~~ ~~Contents~~

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):


		September 26, 2021		December 31, 2020		September 27, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Raw materials and work in process	Raw materials and work in process	$	279,699	$	211,979	$	152,740	Raw materials and work in process	$	376,600	$	347,915	$	251,199
Motorcycle finished goods	Motorcycle finished goods	178,315		281,132		125,930		Motorcycle finished goods	291,623		345,956		185,590
Parts & Accessories and General Merchandise		86,977		84,469		100,131
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	544,991		577,580		378,801		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	(69,677)		(54,083)		(56,426)		Excess of FIFO over LIFO cost	(84,120)		(84,120)		(54,083)
		$	475,314	$	523,497	$	322,375		$	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 $348.1 million, $290.3 million ~~$80.0 million~~ and ~~$30.0~~$152.7 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020,~~2021, and ~~September 27, 2020,~~March 28, 2021, respectively. 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 ~~September 26, 2021~~March 27, 2022 were as follows (in thousands):


2021		$	47,920
2022	2022	45,000		2022	$	58,475
2023	2023	65,000		2023	74,304
2024	2024	58,500		2024	71,696
2025	2025	—		2025	19,053
2026				2026	79,742
Thereafter	Thereafter	74,717		Thereafter	46,060
Future maturities				Future maturities	349,330
Unamortized fees	Unamortized fees	(867)		Unamortized fees	(1,247)
		$	290,270		$	348,083

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


		Nine months ended					Three months ended
		September 26, 2021		September 27, 2020			March 27, 2022		March 28, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	628,457	$	97,696	Net income	$	222,502	$	259,144
Adjustments to reconcile Net income to Net cash provided by operating activities:	Adjustments to reconcile Net income to Net cash provided by operating activities:					Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	122,483		140,057		Depreciation and amortization	39,258		40,221
Amortization of deferred loan origination costs	Amortization of deferred loan origination costs	63,265		52,374		Amortization of deferred loan origination costs	22,995		19,200
Amortization of financing origination fees	Amortization of financing origination fees	10,426		10,628		Amortization of financing origination fees	3,701		3,614
Provision for long-term employee benefits	Provision for long-term employee benefits	19,640		23,557		Provision for long-term employee benefits	(5,050)		7,090
Employee benefit plan contributions and payments	Employee benefit plan contributions and payments	(14,677)		(5,456)		Employee benefit plan contributions and payments	(2,143)		(9,885)
Stock compensation expense	Stock compensation expense	34,032		12,076		Stock compensation expense	8,903		8,968
Net change in wholesale finance receivables related to sales	Net change in wholesale finance receivables related to sales	(22,031)		330,793		Net change in wholesale finance receivables related to sales	(205,727)		(308,532)
Provision for credit losses	Provision for credit losses	4,935		178,433		Provision for credit losses	28,822		(22,474)

Deferred income taxes	Deferred income taxes	10,626		(18,978)		Deferred income taxes	6,307		13,192

Other, net	Other, net	2,094		(10,863)		Other, net	(5,408)		(2,138)
Changes in current assets and liabilities:	Changes in current assets and liabilities:					Changes in current assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(148,670)		29,630		Accounts receivable, net	(74,993)		(79,012)
Finance receivables – accrued interest and other	Finance receivables – accrued interest and other	11,088		5,097		Finance receivables – accrued interest and other	3,115		8,947
Inventories, net	Inventories, net	31,874		273,668		Inventories, net	(2,630)		45,086
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	168,306		(16,922)		Accounts payable and accrued liabilities	106,969		153,597

Other current assets	Other current assets	3,703		33,278		Other current assets	(7,300)		25,763
		297,094		1,037,372			(83,181)		(96,363)
Net cash provided by operating activities	Net cash provided by operating activities	$	925,551	$	1,135,068	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):


		September 26, 2021		December 31, 2020		September 27, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Retail finance receivables	Retail finance receivables	$	6,727,956	$	6,344,195	$	6,585,298	Retail finance receivables	$	6,511,845	$	6,493,519	$	6,310,982
Wholesale finance receivables	Wholesale finance receivables	491,136		489,749		666,896		Wholesale finance receivables	650,181		417,781		792,028
		7,219,092		6,833,944		7,252,194			7,162,026		6,911,300		7,103,010
Allowance for credit losses	Allowance for credit losses	(355,834)		(390,936)		(408,702)		Allowance for credit losses	(340,473)		(339,379)		(346,233)
		$	6,863,258	$	6,443,008	$	6,843,492		$	6,821,553	$	6,571,921	$	6,756,777

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On January 1, 2020, the Company adopted ASU No. 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 ~~September 26, 2021.~~March 27, 2022. During the ~~third~~first quarter of ~~2021,~~2022, the U.S. economy and the Company’s outlook on economic conditions ~~improved~~remained largely unchanged from the ~~second quarter~~end of ~~2021; however, the~~2021. The pace of economic recovery ~~remains~~remained uncertain as demonstrated by ~~unemployment levels that remain higher than those experienced prior to the COVID-19 pandemic,~~rising inflation, muted consumer confidence, continued global supply chain disruptions, and ~~continuing COVID-19 pandemic-related challenges across~~ the ~~U.S.,~~conflict in Ukraine, among other factors. As such, at the end of the ~~third~~first quarter of ~~2021,~~2022, the Company’s outlook on economic conditions included ~~continued~~ slow economic 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 September 26, 2021 Nine months ended September 26, 2021
Retail Wholesale Total Retail Wholesale Total
Balance, beginning of period $ 342,490 $ 16,321 $ 358,811 $ 371,738 $ 19,198 $ 390,936
Provision for credit losses 13,861 (2,653) 11,208 10,465 (5,530) 4,935
Charge-offs (24,670) — (24,670) (76,366) — (76,366)
Recoveries 10,335 150 10,485 36,179 150 36,329
Balance, end of period $ 342,016 $ 13,818 $ 355,834 $ 342,016 $ 13,818 $ 355,834
Three months ended September 27, 2020 Nine months ended September 27, 2020
Retail Wholesale Total Retail Wholesale Total
Balance, beginning of period $ 389,758 $ 21,257 $ 411,015 $ 188,501 $ 10,080 $ 198,581
Cumulative effect of change in accounting(a)
— — — 95,558 5,046 100,604
Provision for credit losses 8,024 (189) 7,835 172,491 5,942 178,433
Charge-offs (20,378) (2,442) (22,820) (105,452) (2,442) (107,894)
Recoveries 12,672 — 12,672 38,978 — 38,978
Balance, end of period $ 390,076 $ 18,626 $ 408,702 $ 390,076 $ 18,626 $ 408,702

~~(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 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):


		September 26, 2021															March 27, 2022
		2021		2020		2019		2018		2017		2016 & Prior		Total			2022		2021		2020		2019		2018		2017 & Prior		Total
U.S. Retail:	U.S. Retail:															U.S. Retail:
Super prime	Super prime	$	896,163	$	551,078	$	367,490	$	206,333	$	83,674	$	38,494	$	2,143,232	Super prime	$	311,114	$	890,413	$	422,454	$	268,692	$	139,540	$	68,682	$	2,100,895
Prime	Prime	1,228,335		805,349		538,440		323,554		171,308		107,715		3,174,701		Prime	394,793		1,247,764		627,102		407,242		233,630		176,018		3,086,549
Sub-prime	Sub-prime	428,238		312,163		207,139		119,730		72,026		64,890		1,204,186		Sub-prime	125,280		427,813		240,999		159,968		91,444		91,610		1,137,114
		2,552,736		1,668,590		1,113,069		649,617		327,008		211,099		6,522,119			831,187		2,565,990		1,290,555		835,902		464,614		336,310		6,324,558
Canadian Retail:	Canadian Retail:															Canadian Retail:
Super prime	Super prime	50,110		36,596		31,173		16,701		6,265		2,239		143,084		Super prime	14,015		47,025		29,382		23,367		11,524		4,515		129,828
Prime	Prime	16,166		13,904		10,336		7,026		4,228		2,350		54,010		Prime	4,228		15,842		11,513		8,349		5,454		4,391		49,777
Sub-prime	Sub-prime	2,345		2,436		1,694		1,090		704		474		8,743		Sub-prime	506		2,180		1,961		1,401		861		773		7,682
		68,621		52,936		43,203		24,817		11,197		5,063		205,837			18,749		65,047		42,856		33,117		17,839		9,679		187,287
		$	2,621,357	$	1,721,526	$	1,156,272	$	674,434	$	338,205	$	216,162	$	6,727,956		$	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


		September 27, 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	$	730,539	$	649,174	$	408,201	$	196,050	$	90,179	$	39,749	$	2,113,892	Super prime	$	260,359	$	725,383	$	502,847	$	301,839	$	134,213	$	74,086	$	1,998,727
Prime	Prime	993,429		877,714		570,851		336,134		187,067		101,403		3,066,598		Prime	349,662		1,026,080		706,940		445,201		249,327		183,217		2,960,427
Sub-prime	Sub-prime	387,766		326,537		196,001		124,312		82,975		64,537		1,182,128		Sub-prime	130,389		395,495		263,203		156,368		96,998		100,827		1,143,280
		2,111,734		1,853,425		1,175,053		656,496		360,221		205,689		6,362,618			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	48,974		51,939		31,351		16,013		6,526		2,723		157,526		Super prime	13,938		48,309		42,993		24,549		11,116		4,831		145,736
Prime	Prime	17,053		14,681		10,630		7,285		3,555		2,489		55,693		Prime	4,245		17,350		13,055		9,263		5,808		4,178		53,899
Sub-prime	Sub-prime	2,790		2,630		1,706		1,171		685		479		9,461		Sub-prime	601		2,949		2,227		1,407		951		778		8,913
		68,817		69,250		43,687		24,469		10,766		5,691		222,680			18,784		68,608		58,275		35,219		17,875		9,787		208,548
		$	2,180,551	$	1,922,675	$	1,218,740	$	680,965	$	370,987	$	211,380	$	6,585,298		$	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.

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


		September 26, 2021															March 27, 2022
		2021		2020		2019		2018		2017		2016 & Prior		Total			2022		2021		2020		2019		2018		2017 & Prior		Total
Non-Performing	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	Doubtful	—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—
Special Mention	Special Mention	—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—
Medium Risk	Medium Risk	—		—		—		—		—		—		—		Medium Risk	—		—		—		—		—		—		—
Low Risk	Low Risk	432,088		19,082		22,821		11,218		4,222		1,705		491,136		Low Risk	489,283		127,797		9,108		11,147		9,893		2,953		650,181
		$	432,088	$	19,082	$	22,821	$	11,218	$	4,222	$	1,705	$	491,136		$	489,283	$	127,797	$	9,108	$	11,147	$	9,893	$	2,953	$	650,181


		December 31, 2020															December 31, 2021
		2020		2019		2018		2017		2016		2015 & Prior		Total			2021		2020		2019		2018		2017		2016 & Prior		Total
Non-Performing	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	Doubtful	—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—
Substandard	Substandard	—		—		—		—		—		—		—		Substandard	—		—		—		—		—		—		—
Special Mention	Special Mention	658		365		31		—		—		—		1,054		Special Mention	—		—		—		—		—		—		—
Medium Risk	Medium Risk	1,925		242		—		—		—		—		2,167		Medium Risk	—		—		—		—		—		—		—
Low Risk	Low Risk	388,568		71,441		13,412		7,887		2,297		2,923		486,528		Low Risk	380,211		11,379		11,047		10,565		3,662		917		417,781
		$	391,151	$	72,048	$	13,443	$	7,887	$	2,297	$	2,923	$	489,749		$	380,211	$	11,379	$	11,047	$	10,565	$	3,662	$	917	$	417,781


		September 27, 2020															March 28, 2021
		2020		2019		2018		2017		2016		2015 & Prior		Total			2021		2020		2019		2018		2017		2016 & Prior		Total
Non-Performing	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	Doubtful	—		—		14		—		—		—		14		Doubtful	—		—		—		—		—		—		—
Substandard	Substandard	277		238		—		—		—		—		515		Substandard	—		—		—		—		—		—		—
Special Mention	Special Mention	2,316		1,213		160		—		—		1,139		4,828		Special Mention	567		530		262		17		—		—		1,376
Medium Risk	Medium Risk	1,283		448		33		—		—		—		1,764		Medium Risk	—		728		417		—		—		—		1,145
Low Risk	Low Risk	505,328		118,466		18,602		8,551		5,525		3,303		659,775		Low Risk	600,144		122,970		44,614		12,568		6,392		2,819		789,507
		$	509,204	$	120,365	$	18,809	$	8,551	$	5,525	$	4,442	$	666,896		$	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 ~~$3.1~~$4.9 million and $5.2 million of accrued interest against Financial Services interest income during the three months ended ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020, and $11.6 million~~ ~~and $14.5 million~~ ~~during the nine months ended September 26, 2021 and September 27, 2020,~~ 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 ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020~~2021 and ~~September 27, 2020,~~March 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

~~Table of~~ ~~Contents~~

follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio. There were no charged-off accounts during the three ~~and nine~~ months ended ~~September 26,~~March 27, 2022 and March 28, 2021. As such, the Company did not reverse any accrued interest in those periods. ~~The Company reversed $0.4 million of accrued interest related to the charge-off of Non-Performing dealer loans during the three and nine months ended September 27, 2020.~~ There were no dealers on non-accrual status at ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020,~~2021, and ~~September 27, 2020.~~March 28, 2021.

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


		September 26, 2021													March 27, 2022
		Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total			Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	Retail finance receivables	$	6,561,412	$	101,157	$	35,273	$	30,114	$	166,544	$	6,727,956	Retail finance receivables	$	6,343,673	$	99,705	$	32,521	$	35,946	$	168,172	$	6,511,845
Wholesale finance receivables	Wholesale finance receivables	490,974		46		92		24		162		491,136		Wholesale finance receivables	649,948		178		27		28		233		650,181
		$	7,052,386	$	101,203	$	35,365	$	30,138	$	166,706	$	7,219,092		$	6,993,621	$	99,883	$	32,548	$	35,974	$	168,405	$	7,162,026

		December 31, 2020													December 31, 2021
		Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total			Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	Retail finance receivables	$	6,164,369	$	106,818	$	39,933	$	33,075	$	179,826	$	6,344,195	Retail finance receivables	$	6,298,485	$	115,942	$	44,326	$	34,766	$	195,034	$	6,493,519
Wholesale finance receivables	Wholesale finance receivables	489,556		166		23		4		193		489,749		Wholesale finance receivables	417,720		9		1		51		61		417,781
		$	6,653,925	$	106,984	$	39,956	$	33,079	$	180,019	$	6,833,944		$	6,716,205	$	115,951	$	44,327	$	34,817	$	195,095	$	6,911,300

		September 27, 2020													March 28, 2021
		Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total			Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	Retail finance receivables	$	6,434,642	$	96,243	$	31,467	$	22,946	$	150,656	$	6,585,298	Retail finance receivables	$	6,196,345	$	69,032	$	23,420	$	22,185	$	114,637	$	6,310,982
Wholesale finance receivables	Wholesale finance receivables	666,335		244		3		314		561		666,896		Wholesale finance receivables	791,826		128		22		52		202		792,028
		$	7,100,977	$	96,487	$	31,470	$	23,260	$	151,217	$	7,252,194		$	6,988,171	$	69,160	$	23,442	$	22,237	$	114,839	$	7,103,010

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 ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020~~2021 and ~~September 27, 2020.~~March 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. ~~Starting in~~From the second quarter of 2020 through the second quarter of 2021, in response to the impact of the COVID-19 pandemic, the Company 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 half of 2021, the volume of extensions declined from the levels experienced during 2020 as a result of the COVID-19 pandemic, but extensions did not return to pre-COVID-19 pandemic levels until the end of the second quarter of 2021. The Company ~~discontinued extensions specific to the COVID-19 pandemic at the beginning of the third quarter of 2021; however, it continue~~scontinues 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.

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.

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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.

~~Table of~~ ~~Contents~~

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																			Derivative Financial Instruments Designated as Cash Flow Hedging Instruments
		September 26, 2021						December 31, 2020						September 27, 2020							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			Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities
Foreign currency contracts	Foreign currency contracts	$	406,220	$	10,174	$	502	$	533,925	$	11	$	21,927	$	352,933	$	2,334	$	6,132	Foreign currency contracts	$	585,451	$	18,832	$	3,576	$	562,262	$	14,644	$	1,388	$	402,814	$	6,356	$	6,071
Commodity contracts	Commodity contracts	1,000		458		—		671		—		52		801		95		—		Commodity contracts	964		316		—		996		19		39		668		3		20
Cross-currency swaps	Cross-currency swaps	1,367,460		47,989		—		1,367,460		138,622		—		1,367,460		57,787		292		Cross-currency swaps	1,367,460		18,835		—		1,367,460		35,071		—		1,367,460		73,449		—

Interest rate swaps		—		—		—		450,000		—		3,086		450,000		—		6,184

		$	1,774,680	$	58,621	$	502	$	2,352,056	$	138,633	$	25,065	$	2,171,194	$	60,216	$	12,608		$	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																			Derivative Financial Instruments Not Designated as Hedging Instruments
		September 26, 2021						December 31, 2020						September 27, 2020							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			Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities
Foreign currency contracts	Foreign currency contracts	$	135,381	$	375	$	162	$	245,494	$	737	$	435	$	284,991	$	342	$	574	Foreign currency contracts	$	230,336	$	587	$	722	$	241,935	$	1,299	$	916	$	214,337	$	670	$	595
Commodity contracts	Commodity contracts	9,920		739		30		6,806		849		21		6,854		231		215		Commodity contracts	11,866		2,435		—		10,631		641		18		8,172		1,193		40
Interest rate caps	Interest rate caps	608,222		112		—		978,058		47		—		1,124,260		60		—		Interest rate caps	412,478		2,060		—		504,526		360		—		844,673		170		—
		$	753,523	$	1,226	$	192	$	1,230,358	$	1,633	$	456	$	1,416,105	$	633	$	789		$	654,680	$	5,082	$	722	$	757,092	$	2,300	$	934	$	1,067,182	$	2,033	$	635

2019

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										Gain/(Loss) Recognized in OCI					Gain/(Loss) Reclassified from AOCL into Income
		Three months ended				Nine months ended				Three months ended				Nine months ended					Three months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021			March 27, 2022		March 28, 2021
Foreign currency contracts	Foreign currency contracts	$	8,653	$	(6,587)	$	20,829	$	6,250	$	(3,504)	$	3,027	$	(16,051)	$	11,732	Foreign currency contracts		$	8,444	$	14,037		$	5,655	$	(4,953)
Commodity contracts	Commodity contracts	390		131		546		(26)		65		(12)		36		(201)		Commodity contracts		562		3			226		(32)
Cross-currency swaps	Cross-currency swaps	(40,741)		63,182		(90,633)		49,168		(33,600)		59,625		(77,775)		83,634		Cross-currency swaps		(16,236)		(65,174)			(25,800)		(65,788)
Treasury rate lock contracts	Treasury rate lock contracts	—		—		—		—		(127)		(124)		(375)		(370)		Treasury rate lock contracts		—		—			(127)		(124)
Interest rate swaps	Interest rate swaps	—		(994)		397		(7,503)		—		(3,931)		(2,689)		(10,500)		Interest rate swaps		—		397			—		(2,689)
		$	(31,698)	$	55,732	$	(68,861)	$	47,889	$	(37,166)	$	58,585	$	(96,854)	$	84,295			$	(7,230)	$	(50,737)		$	(20,046)	$	(73,586)

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 September 26, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded $ 850,193 $ 254,312 $ 7,779 $ 44,770
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts $ (3,504) $ — $ — $ —
Commodity contracts $ 65 $ — $ — $ —
Cross-currency swaps $ — $ (33,600) $ — $ —
Treasury rate lock contracts $ — $ — $ (91) $ (36)
Three months ended September 27, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded $ 676,796 $ 231,721 $ 7,783 $ 67,533
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts $ 3,027 $ — $ — $ —
Commodity contracts $ (12) $ — $ — $ —
Cross-currency swaps $ — $ 59,625 $ — $ —
Treasury rate lock contracts $ — $ — $ (91) $ (33)
Interest rate swaps $ — $ — $ — $ (3,931)

~~Table of~~ ~~Contents~~


											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										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:										Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts										Foreign currency contracts	$	5,655	$	—	$	—	$	—
Commodity contracts										Commodity contracts	$	226	$	—	$	—	$	—
Cross-currency swaps										Cross-currency swaps	$	—	$	(25,800)	$	—	$	—
Treasury rate lock contracts										Treasury rate lock contracts	$	—	$	—	$	(91)	$	(36)
		Motorcycles cost of goods sold		Selling, administrative & engineering expense		Interest expense		Financial Services interest expense
		Nine months ended September 26, 2021									Three months ended March 28, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	2,586,264	$	747,665	$	23,209	$	149,098	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:	Gain/(loss) reclassified from AOCL into income:									Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts	Foreign currency contracts	$	(16,051)	$	—	$	—	$	—	Foreign currency contracts	$	(4,953)	$	—	$	—	$	—
Commodity contracts	Commodity contracts	$	36	$	—	$	—	$	—	Commodity contracts	$	(32)	$	—	$	—	$	—
Cross-currency swaps	Cross-currency swaps	$	—	$	(77,775)	$	—	$	—	Cross-currency swaps	$	—	$	(65,788)	$	—	$	—
Treasury rate lock contracts	Treasury rate lock contracts	$	—	$	—	$	(272)	$	(103)	Treasury rate lock contracts	$	—	$	—	$	(91)	$	(33)
Interest rate swaps	Interest rate swaps	$	—	$	—	$	—	$	(2,689)	Interest rate swaps	$	—	$	—	$	—	$	(2,689)
		Nine months ended September 27, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded		$	2,019,310	$	734,057	$	23,307	$	182,193

Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts		$	11,732	$	—	$	—	$	—
Commodity contracts		$	(201)	$	—	$	—	$	—
Cross-currency swaps		$	—	$	83,634	$	—	$	—
Treasury rate lock contracts		$	—	$	—	$	(272)	$	(98)
Interest rate swaps		$	—	$	—	$	—	$	(10,500)

The amount of net ~~gain~~loss included in Accumulated other comprehensive loss (AOCL) at ~~September 26, 2021,~~March 27, 2022, estimated to be reclassified into income over the next 12 months was ~~$9.4~~$1.4 million.

Table of Contents

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				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Foreign currency contracts	Foreign currency contracts	$	2,152	$	(3,569)	$	(3,396)	$	(1,897)	Foreign currency contracts		$	(3,506)	$	(3,629)
Commodity contracts	Commodity contracts	102		134		1,528		(859)		Commodity contracts		2,387		703
Interest rate caps	Interest rate caps	(39)		92		65		519		Interest rate caps		1,700		123
		$	2,215	$	(3,343)	$	(1,803)	$	(2,237)			$	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.

~~Table of~~ ~~Contents~~

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 6 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 ~~September 26,~~March 27, 2022 and March 28, 2021 ~~and September 27, 2020~~ was ~~$6.1~~$6.7 million and ~~$7.1~~$8.2 million, ~~respectively, and $18.7 million and $20.9 million for the nine months ended September 26, 2021 and September 27, 2020,~~ respectively. This includes variable lease costs related to ~~leases involving~~ assets ~~operated by a third party~~used in manufacturing and distribution processes of approximately ~~$0.9~~$1.0 million and ~~$2.1~~$3.1 million for the three months ended ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020, respectively, and $3.4 million and $5.2 million for the nine months ended September 26, 2021 and September 27, 2020,~~ respectively. Other variable and short-term lease costs were not material.

Table of Contents

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


		September 26, 2021		December 31, 2020		September 27, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Lease assets	Lease assets	$	47,507	$	45,203	$	47,599	Lease assets	$	45,073	$	49,625	$	44,765

Accrued liabilities	Accrued liabilities	$	18,468	$	17,081	$	17,704	Accrued liabilities	$	15,745	$	17,369	$	17,021
Lease liabilities	Lease liabilities	26,017		30,115		31,225		Lease liabilities	27,633		29,904		30,061
		$	44,485	$	47,196	$	48,929		$	43,378	$	47,273	$	47,082

Future maturities of the Company's operating lease liabilities as of ~~September 26, 2021~~March 27, 2022 were as follows (in thousands):
Operating Leases
2021 $ 5,017
2022 17,694
2023 9,119
2024 6,907
2025 3,923
Thereafter 3,406
Future lease payments 46,066
Present value discount (1,581)
Lease liabilities $ 44,485

~~Table of~~ ~~Contents~~


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

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


		Three months ended				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Cash outflows for amounts included in the measurement of lease liabilities	Cash outflows for amounts included in the measurement of lease liabilities	$	4,756	$	5,274	$	20,479	$	15,893	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	ROU assets obtained in exchange for lease obligations, net of modifications	$	11,189	$	(1,327)	$	17,390	$	327	ROU assets obtained in exchange for lease obligations, net of modifications		$	1,279	$	5,305


		September 26, 2021		December 31, 2020		September 27, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)	3.36		3.78		3.92		Weighted-average remaining lease term (in years)	3.78		3.86		3.81
Weighted-average discount rate	Weighted-average discount rate	2.4	%	3.1	%	3.1	%	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):


		September 26, 2021		December 31, 2020		September 27, 2020			March 27, 2022		December 31, 2021		March 28, 2021
Unsecured commercial paper	Unsecured commercial paper	$	749,620	$	1,014,274	$	1,077,763	Unsecured commercial paper	$	816,016	$	751,286	$	749,801
364-day credit facility borrowings		—		—		150,000
Global credit facility borrowings								Global credit facility borrowings	—		—		15,462
		$	749,620	$	1,014,274	$	1,227,763		$	816,016	$	751,286	$	765,263

Table of Contents

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

September 26,
2021 December 31,
2020 September 27,
2020
Secured debt:
Asset-backed Canadian commercial paper conduit facility $ 98,310 $ 116,678 $ 127,500
Asset-backed U.S. commercial paper conduit facilities 242,254 402,205 467,338
Asset-backed securitization debt 1,961,571 1,800,393 2,106,258
Unamortized discounts and debt issuance costs (9,203) (8,437) (9,903)
2,292,932 2,310,839 2,691,193
Unsecured notes (at par value):
Medium-term notes:
Due in 2021, issued January 2016 2.85 % — 600,000 600,000
Due in 2021, issued November 2018 LIBOR + 0.94% — 450,000 450,000
Due in 2021, issued May 2018 3.55 % — 350,000 350,000
Due in 2022, issued February 2019 4.05 % 550,000 550,000 550,000
Due in 2022, issued June 2017 2.55 % 400,000 400,000 400,000
Due in 2023, issued February 2018 3.35 % 350,000 350,000 350,000
Due in 2023, issued May 2020(a)
4.94 % 756,763 797,206 760,890
Due in 2024, issued November 2019(b)
3.14 % 698,550 735,882 702,360
Due in 2025, issued June 2020 3.35 % 700,000 700,000 700,000
Unamortized discounts and debt issuance costs (10,649) (15,374) (17,289)
3,444,664 4,917,714 4,845,961

~~Table of~~ ~~Contents~~


													March 27, 2022		December 31, 2021		March 28, 2021
Secured debt:										Secured debt:
Asset-backed Canadian commercial paper conduit facility										Asset-backed Canadian commercial paper conduit facility			$	95,664	$	85,054	$	102,543
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			1,363,254		1,634,753		2,109,046
Unamortized discounts and debt issuance costs										Unamortized discounts and debt issuance costs			(5,696)		(7,611)		(9,788)
													1,722,756		1,984,785		2,552,449
Unsecured notes (at par value):										Unsecured notes (at par value):
Medium-term notes:										Medium-term notes:
Due in 2021, issued May 2018										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
Due in 2022, issued June 2017										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 May 2020(a)										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	%	668,202		680,586		704,304
Due in 2025, issued June 2020										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			(12,243)		(9,228)		(13,564)
													3,329,845		3,408,660		3,803,736
				September 26, 2021		December 31, 2020		September 27, 2020
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			(5,506)		(6,023)		(6,194)		Unamortized discounts and debt issuance costs			(5,158)		(5,332)		(5,851)
				744,494		743,977		743,806					744,842		744,668		744,149
				4,189,158		5,661,691		5,589,767					4,074,687		4,153,328		4,547,885
Long-term debt	Long-term debt			6,482,090		7,972,530		8,280,960		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			(1,605,798)		(2,039,597)		(2,109,284)		Current portion of long-term debt, net			(1,327,357)		(1,542,496)		(1,622,243)
Long-term debt, net	Long-term debt, net			$	4,876,292	$	5,932,933	$	6,171,676	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 ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020,~~2021, and ~~September 27, 2020,~~March 28, 2021, respectively

(b)~~Euro denominated, €600.0~~€600.0 million par value remeasured to U.S. dollar at ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020,~~2021, and ~~September 27, 2020,~~March 28, 2021, respectively

~~The Company's future~~Future principal payments onof the Company's debt obligations as of ~~September 26, 2021~~March 27, 2022 were as follows (in thousands):


2021		$	970,079
2022	2022	1,615,337		2022	$	1,716,955
2023	2023	1,752,575		2023	1,591,745
2024	2024	1,150,272		2024	1,058,291
2025	2025	1,384,747		2025	1,398,474
2026				2026	71,091
Thereafter	Thereafter	384,058		Thereafter	800,000
Future principal payments				Future principal payments	6,636,556
Unamortized discounts and debt issuance costs				Unamortized discounts and debt issuance costs	(23,097)
		$	7,257,068		$	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.

~~Table of~~ ~~Contents~~

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):


		September 26, 2021													March 27, 2022
		Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net			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	$	2,362,454	$	(119,975)	$	148,177	$	2,228	$	2,392,884	$	1,952,368	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	264,226		(13,396)		19,688		526		271,044		242,254		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	112,374		(4,729)		7,408		157		115,210		98,310		Asset-backed Canadian commercial paper conduit facility	108,052		(4,457)		8,129		43		111,767		95,664
		$	2,739,054	$	(138,100)	$	175,273	$	2,911	$	2,779,138	$	2,292,932		$	2,153,979	$	(107,096)	$	164,426	$	4,416	$	2,215,725	$	1,722,756

		December 31, 2020
		Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations		$	2,129,372	$	(124,627)	$	116,268	$	2,622	$	2,123,635	$	1,791,956
Asset-backed U.S. commercial paper conduit facility		441,402		(25,793)		26,624		1,131		443,364		402,205
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility		133,976		(6,508)		9,073		126		136,667		116,678
		$	2,704,750	$	(156,928)	$	151,965	$	3,879	$	2,703,666	$	2,310,839

		September 27, 2020
		Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations		$	2,422,841	$	(143,775)	$	138,276	$	1,923	$	2,419,265	$	2,096,355
Asset-backed U.S. commercial paper conduit facilities		505,507		(29,948)		32,649		1,206		509,414		467,338
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility		146,140		(6,878)		10,253		142		149,657		127,500
		$	3,074,488	$	(180,601)	$	181,178	$	3,271	$	3,078,336	$	2,691,193

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	December 31, 2021
	Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
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	297,454		(14,898)		20,567		654		303,777		272,589
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	97,180		(3,990)		6,191		139		99,520		85,054
	$	2,442,828	$	(121,667)	$	150,475	$	3,121	$	2,474,757	$	1,984,785

	March 28, 2021
	Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
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 facility	378,035		(19,432)		30,252		1,175		390,030		350,648
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	115,742		(5,388)		9,743		206		120,303		102,543
	$	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 2029.

~~Table of~~ ~~Contents~~

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.

~~Quarterly transfers~~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 ~~SPEs, the respective proceeds, and the respective proceeds,~~an SPE which, in turn, issued $600.0 million, or $597.4 million net of ~~discounts~~discount and issuance costs, ~~were as follows (in millions):~~

2021 2020
Transfers Proceeds Proceeds, net Transfers Proceeds Proceeds, net
First quarter $ 663.1 $ 600.0 $ 597.4 $ 580.2 $ 525.0 $ 522.7
Second quarter — — — 1,840.5 1,550.2 1,541.8
Third quarter 635.5 575.0 572.5 — — —
$ 1,298.6 $ 1,175.0 $ 1,169.9 $ 2,420.7 $ 2,075.2 $ 2,064.5
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 2 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 2 agreements into 1 $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 ~~$300.0~~

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$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 ~~September 26, 2021,~~March 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.

~~There were no finance receivable transfers under the U.S. Conduit Facility during the nine months ended September 26, 2021 or the second or third quarters of 2020.~~ 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 Facility during the first quarter of 2021.

~~Table of~~ ~~Contents~~

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 ~~September 26, 2021,~~March 27, 2022, the Canadian Conduit has an expiration date of June 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 ~~$16.9~~$16.1 million at ~~September 26, 2021.~~March 27, 2022. The maximum exposure is not an indication of the Company's expected loss exposure.

During the ~~third~~first quarter of ~~2021,~~2022, the Company transferred ~~$32.8~~$25.3 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of ~~$27.4~~$21.2 million. There were no finance receivable transfers under the Canadian Conduit ~~Facility~~ during ~~the first half of 2021 or the second or third quarters of 2020. 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.~~

~~Off-Balance Sheet Asset-Backed Securitization VIE –~~ There were no off-balance sheet asset-backed securitization transactions during the nine months ended September 26, 2021 or September 27, 2020. During the second quarter of 2016, the Company sold retail motorcycle finance receivables into a securitization VIE that was not consolidated. In April 2020, the Company repurchased the finance receivables associated with this off-balance sheet asset-backed securitization VIE for $27.4 million.

Similar to an on-balance sheet asset-backed securitization, the Company transferred U.S. retail motorcycle finance receivables to an SPE which in turn issued secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. The off-balance sheet asset-backed securitization SPE 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.

~~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 nine months ended September 27, 2020.~~

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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.

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


		September 26, 2021						March 27, 2022
		Balance		Level 1		Level 2				Balance		Level 1		Level 2
Assets:	Assets:								Assets:
Cash equivalents	Cash equivalents	$	1,753,398	$	1,503,400	$	249,998		Cash equivalents	$	968,395	$	803,400	$	164,995
Marketable securities	Marketable securities	48,766		48,766		—			Marketable securities	45,189		45,189		—
Derivative financial instruments	Derivative financial instruments	59,847		—		59,847			Derivative financial instruments	43,065		—		43,065
		$	1,862,011	$	1,552,166	$	309,845			$	1,056,649	$	848,589	$	208,060
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments	Derivative financial instruments	$	694	$	—	$	694		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		—			Marketable securities	49,650		49,650		—
Derivative financial instruments	Derivative financial instruments	140,266		—		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	$	—	$	25,521		Derivative financial instruments	$	2,361	$	—	$	2,361
		September 27, 2020						March 28, 2021
		Balance		Level 1		Level 2				Balance		Level 1		Level 2
Assets:	Assets:								Assets:
Cash equivalents	Cash equivalents	$	3,250,891	$	3,150,891	$	100,000		Cash equivalents	$	2,069,400	$	1,919,400	$	150,000
Marketable securities	Marketable securities	48,845		48,845		—			Marketable securities	50,239		50,239		—
Derivative financial instruments	Derivative financial instruments	60,849		—		60,849			Derivative financial instruments	81,841		—		81,841
		$	3,360,585	$	3,199,736	$	160,849			$	2,201,480	$	1,969,639	$	231,841
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments	Derivative financial instruments	$	13,397	$	—	$	13,397		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 $17.9 million, $18.3 million ~~$17.7 million~~ and ~~$17.1~~$18.6 million at ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020~~2021 and ~~September 27, 2020,~~March 28, 2021, respectively, for which the fair value adjustment was a decrease of ~~$1.4~~$0.6 million, ~~$4.2~~$2.9 million and ~~$2.9~~$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):


		September 26, 2021				December 31, 2020				September 27, 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	$	7,117,828	$	6,863,258	$	6,586,348	$	6,443,008	$	6,954,661	$	6,843,492	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	$	292,284	$	290,270	$	79,965	$	79,965	$	29,999	$	29,999	Deposits, net	$	359,995	$	348,083	$	293,602	$	290,326	$	152,715	$	152,653
Debt:	Debt:													Debt:
Unsecured commercial paper	Unsecured commercial paper	$	749,620	$	749,620	$	1,014,274	$	1,014,274	$	1,077,763	$	1,077,763	Unsecured commercial paper	$	816,016	$	816,016	$	751,286	$	751,286	$	749,801	$	749,801
Global credit facility borrowings	Global credit facility borrowings	$	—	$	—	$	—	$	—	$	150,000	$	150,000	Global credit facility borrowings	$	—	$	—	$	—	$	—	$	15,462	$	15,462

Asset-backed U.S. commercial paper conduit facilities		$	242,254	$	242,254	$	402,205	$	402,205	$	467,338	$	467,338
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	$	98,310	$	98,310	$	116,678	$	116,678	$	127,500	$	127,500	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	$	1,967,893	$	1,952,368	$	1,817,892	$	1,791,956	$	2,123,715	$	2,096,355	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	$	3,583,411	$	3,444,664	$	5,118,928	$	4,917,714	$	4,895,006	$	4,845,961	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	$	798,518	$	744,494	$	828,141	$	743,977	$	798,411	$	743,806	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 Nine months ended
September 26,
2021 September 27,
2020 September 26,
2021 September 27,
2020
Balance, beginning of period $ 73,626 $ 83,513 $ 69,208 $ 89,793
Warranties issued during the period 9,516 8,564 34,006 25,821
Settlements made during the period (10,860) (12,886) (29,823) (37,780)
Recalls and changes to pre-existing warranty liabilities (569) 239 (1,678) 1,596
Balance, end of period $ 71,713 $ 79,430 $ 71,713 $ 79,430


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

The liability for recall campaigns, included in the balance above, was ~~$21.9~~$16.7 million, ~~$24.7~~$16.9 million and ~~$29.8~~$25.3 million at ~~September 26, 2021,~~March 27, 2022, December 31, ~~2020~~2021 and ~~September 27, 2020,~~March 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				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 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	$	19,044	$	20,418	Service cost		$	4,763	$	6,348
Interest cost	Interest cost	15,472		19,112		46,412		57,335		Interest cost		15,472		15,470
Expected return on plan assets	Expected return on plan assets	(32,720)		(33,764)		(98,160)		(101,292)		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)		(936)		(816)		Prior service credit		(328)		(312)
Net loss	Net loss	18,386		16,372		55,158		49,116		Net loss		7,978		18,386
Settlement loss		—		—		816		—
Settlement (gain) loss										Settlement (gain) loss		(256)		816

Net periodic benefit cost		$	7,174	$	8,254	$	22,334	$	24,761
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	$	1,202	$	3,864	$	3,605	Service cost		$	1,161	$	1,288
Interest cost	Interest cost	1,626		2,336		4,878		7,008		Interest cost		1,904		1,626
Expected return on plan assets	Expected return on plan assets	(3,495)		(3,467)		(10,485)		(10,401)		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)		(1,743)		(1,785)		Prior service credit		(581)		(581)
Net loss	Net loss	264		123		792		369		Net loss		122		264

Net periodic benefit cost		$	(898)	$	(401)	$	(2,694)	$	(1,204)
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 in 2022. 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. The Company believes the accrual recorded is adequate and this matter is not expected to have a material adverse effect on the Company's consolidated financial statements.~~

~~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 September 26, 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	$	(23,512)	$	(29,088)	$	(402,537)		$	(455,137)	Balance, beginning of period	$	(44,401)	$	(2,005)	$	(194,513)	$	(240,919)
Other comprehensive loss, before reclassifications	Other comprehensive loss, before reclassifications	(18,296)		(31,698)		—			(49,994)		Other comprehensive loss, before reclassifications	(3,804)		(7,230)		—		(11,034)
Income tax benefit		460		6,928		—			7,388
Income tax (expense) benefit											Income tax (expense) benefit	(317)		1,493		—		1,176
		(17,836)		(24,770)		—			(42,606)			(4,121)		(5,737)		—		(9,858)
Reclassifications:	Reclassifications:										Reclassifications:

Net losses on derivative financial instruments		—		37,166		—			37,166
Net loss on derivative financial instruments											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	—		37,166		17,757			54,923		Reclassifications before tax	—		20,046		7,191		27,237
Income tax expense	Income tax expense	—		(8,126)		(4,169)			(12,295)		Income tax expense	—		(4,381)		(1,689)		(6,070)
		—		29,040		13,588			42,628			—		15,665		5,502		21,167
Other comprehensive (loss) income	Other comprehensive (loss) income	(17,836)		4,270		13,588			22		Other comprehensive (loss) income	(4,121)		9,928		5,502		11,309
Balance, end of period	Balance, end of period	$	(41,348)	$	(24,818)	$	(388,949)		$	(455,115)	Balance, end of period	$	(48,522)	$	7,923	$	(189,011)	$	(229,610)

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Three months ended September 27, 2020
Foreign currency translation adjustments Derivative financial instruments Pension and postretirement benefit plans Total
Balance, beginning of period $ (53,825) $ (40,740) $ (457,633) $ (552,198)
Other comprehensive income, before reclassifications 13,331 55,732 — 69,063
Income tax expense (594) (12,299) — (12,893)
12,737 43,433 — 56,170
Reclassifications:
Net gains on derivative financial instruments — (58,585) — (58,585)
Prior service credits(a)
— — (867) (867)
Actuarial losses(a)
— — 16,495 16,495
Reclassifications before tax — (58,585) 15,628 (42,957)
Income tax benefit (expense) — 13,051 (3,669) 9,382
— (45,534) 11,959 (33,575)
Other comprehensive income (loss) 12,737 (2,101) 11,959 22,595
Balance, end of period $ (41,088) $ (42,841) $ (445,674) $ (529,603)

Nine months ended September 26, 2021
Foreign currency translation adjustments Derivative financial instruments Pension and postretirement benefit plans Total
Balance, beginning of period $ (7,589) $ (46,116) $ (429,712) $ (483,417)
Other comprehensive loss, before reclassifications (33,648) (68,861) — (102,509)
Income tax (expense) benefit (111) 15,026 — 14,915
(33,759) (53,835) — (87,594)
Reclassifications:
Net losses on derivative financial instruments — 96,854 — 96,854
Prior service credits(a)
— — (2,679) (2,679)
Actuarial losses(a)
— — 55,950 55,950
Reclassifications before tax — 96,854 53,271 150,125
Income tax expense — (21,721) (12,508) (34,229)
— 75,133 40,763 115,896
Other comprehensive (loss) income (33,759) 21,298 40,763 28,302
Balance, end of period $ (41,348) $ (24,818) $ (388,949) $ (455,115)

~~Table of~~ ~~Contents~~


		Nine months ended September 27, 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) income, before reclassifications		(434)		47,889		—			47,455
Income tax benefit (expense)		159		(10,718)		—			(10,559)
Other comprehensive loss, before reclassifications											Other comprehensive loss, before reclassifications	(17,074)		(50,737)		—		(67,811)
Income tax (expense) benefit											Income tax (expense) benefit	(264)		11,092		—		10,828
		(275)		37,171		—			36,896			(17,338)		(39,645)		—		(56,983)
Reclassifications:	Reclassifications:										Reclassifications:

Net gains on derivative financial instruments		—		(84,295)		—			(84,295)
Net loss on derivative financial instruments											Net loss on derivative financial instruments	—		73,586		—		73,586
Prior service credits(a)	Prior service credits(a)	—		—		(2,601)			(2,601)		Prior service credits(a)	—		—		(893)		(893)
Actuarial losses(a)	Actuarial losses(a)	—		—		49,485			49,485		Actuarial losses(a)	—		—		18,650		18,650
Reclassifications before tax	Reclassifications before tax	—		(84,295)		46,884			(37,411)		Reclassifications before tax	—		73,586		17,757		91,343
Income tax benefit (expense)		—		18,869		(11,008)			7,861
Income tax expense											Income tax expense	—		(16,411)		(4,169)		(20,580)
		—		(65,426)		35,876			(29,550)			—		57,175		13,588		70,763
Other comprehensive (loss) income	Other comprehensive (loss) income	(275)		(28,255)		35,876			7,346		Other comprehensive (loss) income	(17,338)		17,530		13,588		13,780
Balance, end of period	Balance, end of period	$	(41,088)	$	(42,841)	$	(445,674)		$	(529,603)	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.

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


		Three months ended				Nine months ended					Three months ended
		September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020				March 27, 2022		March 28, 2021
Motorcycles and Related Products:	Motorcycles and Related Products:									Motorcycles and Related Products:
Motorcycles revenue	Motorcycles revenue	$	1,160,618	$	964,029	$	3,724,225	$	2,733,091	Motorcycles revenue		$	1,303,171	$	1,232,107
Gross profit	Gross profit	310,425		287,233		1,137,961		713,781		Gross profit		407,635		420,485
Selling, administrative and engineering expense	Selling, administrative and engineering expense	212,243		196,912		626,211		618,912		Selling, administrative and engineering expense		204,888		193,546
Restructuring expense		517		43,581		731		84,586
Restructuring benefit										Restructuring benefit		(128)		(593)
Operating income	Operating income	97,665		46,740		511,019		10,283		Operating income		202,875		227,532
Financial Services:	Financial Services:									Financial Services:
Financial Services revenue	Financial Services revenue	204,692		201,655		595,650		596,064		Financial Services revenue		192,015		190,400
Financial Services expense	Financial Services expense	98,047		110,177		275,487		475,771		Financial Services expense		105,658		71,531
Restructuring expense	Restructuring expense	98		334		436		1,278		Restructuring expense		—		227
Operating income	Operating income	106,547		91,144		319,727		119,015		Operating income		86,357		118,642
Operating income	Operating income	$	204,212	$	137,884	$	830,746	$	129,298	Operating income		$	289,232	$	346,174

Total assets for the Motorcycles and Financial Services segments were $3.0 billion and ~~$8.2~~$7.9 billion, respectively, as of ~~September 26, 2021, $2.5~~March 27, 2022, $3.3 billion and ~~$9.5~~$7.7 billion, respectively, as of December 31, ~~2020,~~2021, and $2.4 billion and ~~$10.1~~$8.9 billion, respectively, as of ~~September 27, 2020.~~March 28, 2021.

19. Supplemental Consolidating Data

The supplemental consolidating legal entity data isfor Harley-Davidson Motor Company, Harley-Davidson Financial Services and related consolidating adjustments are presented for informational ~~purposes and is different than~~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 ~~the~~income for reportable segments. Supplemental consolidating data is as follows (in thousands):


		Three months ended September 26, 2021									Three months ended March 27, 2022
		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	$	1,167,432	$	—	$	(6,814)	$	1,160,618	Motorcycles and Related Products	$	1,306,293	$	—	$	(3,122)	$	1,303,171
Financial Services	Financial Services	—		202,080		2,612		204,692		Financial Services	—		192,390		(375)		192,015
		1,167,432		202,080		(4,202)		1,365,310			1,306,293		192,390		(3,497)		1,495,186
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	850,193		—		—		850,193		Motorcycles and Related Products cost of goods sold	895,536		—		—		895,536
Financial Services interest expense	Financial Services interest expense	—		44,770		—		44,770		Financial Services interest expense	—		42,099		—		42,099
Financial Services provision for credit losses	Financial Services provision for credit losses	—		11,208		—		11,208		Financial Services provision for credit losses	—		28,822		—		28,822
Selling, administrative and engineering expense	Selling, administrative and engineering expense	216,030		42,686		(4,404)		254,312		Selling, administrative and engineering expense	205,417		37,858		(3,650)		239,625
Restructuring expense		517		98		—		615
Restructuring benefit										Restructuring benefit	(128)		—		—		(128)
		1,066,740		98,762		(4,404)		1,161,098			1,100,825		108,779		(3,650)		1,205,954
Operating income	Operating income	100,692		103,318		202		204,212		Operating income	205,468		83,611		153		289,232
Other income, net	Other income, net	858		—		—		858		Other income, net	11,030		—		—		11,030
Investment income		120,198		—		(120,000)		198
Investment loss										Investment loss	(1,979)		—		—		(1,979)
Interest expense	Interest expense	7,779		—		—		7,779		Interest expense	7,711		—		—		7,711
Income before income taxes	Income before income taxes	213,969		103,318		(119,798)		197,489		Income before income taxes	206,808		83,611		153		290,572
Provision for income taxes	Provision for income taxes	7,408		27,108		—		34,516		Provision for income taxes	47,847		20,223		—		68,070
Net income	Net income	$	206,561	$	76,210	$	(119,798)	$	162,973	Net income	$	158,961	$	63,388	$	153	$	222,502

Table of Contents


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

Table of Contents


	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

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Nine months ended September 26, 2021
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Revenue:
Motorcycles and Related Products $ 3,742,869 $ — $ (18,644) $ 3,724,225
Financial Services — 590,468 5,182 595,650
3,742,869 590,468 (13,462) 4,319,875
Costs and expenses:
Motorcycles and Related Products cost of goods sold 2,586,264 — — 2,586,264
Financial Services interest expense — 149,098 — 149,098
Financial Services provision for credit losses — 4,935 — 4,935
Selling, administrative and engineering expense 635,902 125,053 (13,290) 747,665
Restructuring expense 731 436 — 1,167
3,222,897 279,522 (13,290) 3,489,129
Operating income 519,972 310,946 (172) 830,746
Other income, net 1,825 — — 1,825
Investment income 244,331 — (240,000) 4,331
Interest expense 23,209 — 0 23,209
Income before income taxes 742,919 310,946 (240,172) 813,693
Provision for income taxes 112,974 72,262 — 185,236
Net income $ 629,945 $ 238,684 $ (240,172) $ 628,457


	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)

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September 26, 2021
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 1,115,014 $ 946,289 $ — $ 2,061,303
Accounts receivable, net 590,806 — (308,179) 282,627
Finance receivables, net — 1,540,822 — 1,540,822
Inventories, net 475,314 — — 475,314
Restricted cash — 153,873 — 153,873
Other current assets 114,221 94,868 (14,608) 194,481
2,295,355 2,735,852 (322,787) 4,708,420
Finance receivables, net — 5,322,436 — 5,322,436
Property, plant and equipment, net 642,253 29,583 — 671,836
Pension and postretirement assets 132,958 — — 132,958
Goodwill 63,841 — — 63,841
Deferred income taxes 43,097 86,011 (1,049) 128,059
Lease assets 40,163 7,344 — 47,507
Other long-term assets 191,126 37,370 (103,749) 124,747
$ 3,408,793 $ 8,218,596 $ (427,585) $ 11,199,804
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 361,057 $ 329,338 $ (308,179) $ 382,216
Accrued liabilities 489,988 123,642 (13,778) 599,852
Short-term deposits, net — 92,626 — 92,626
Short-term debt — 749,620 — 749,620
Current portion of long-term debt, net — 1,605,798 — 1,605,798
851,045 2,901,024 (321,957) 3,430,112
Long-term deposits, net — 197,644 — 197,644
Long-term debt, net 744,494 4,131,798 — 4,876,292
Lease liabilities 19,457 6,560 — 26,017
Pension and postretirement liabilities 103,144 — — 103,144
Deferred income taxes 7,166 1,419 — 8,585
Other long-term liabilities 173,178 48,586 2,352 224,116
Commitments and contingencies (Note 16) 0 0 0 0
Shareholders’ equity 1,510,309 931,565 (107,980) 2,333,894
$ 3,408,793 $ 8,218,596 $ (427,585) $ 11,199,804


	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

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		Nine months ended September 26, 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
Cash flows from operating activities:	Cash flows from operating activities:									Cash flows from operating activities:
Net income	Net income	$	629,945	$	238,684	$	(240,172)	$	628,457	Net income	$	169,055	$	90,010	$	79	$	259,144
Adjustments to reconcile Net income to Net cash provided by operating activities:
Adjustments to reconcile Net income to Net cash (used) provided by operating activities:										Adjustments to reconcile Net income to Net cash (used) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	115,779		6,704		—		122,483		Depreciation and amortization	37,778		2,443		—		40,221
Amortization of deferred loan origination costs	Amortization of deferred loan origination costs	—		63,265		—		63,265		Amortization of deferred loan origination costs	—		19,200		—		19,200
Amortization of financing origination fees	Amortization of financing origination fees	517		9,909		—		10,426		Amortization of financing origination fees	172		3,442		—		3,614
Provision for long-term employee benefits	Provision for long-term employee benefits	19,640		—		—		19,640		Provision for long-term employee benefits	7,090		—		—		7,090
Employee benefit plan contributions and payments	Employee benefit plan contributions and payments	(14,677)		—		—		(14,677)		Employee benefit plan contributions and payments	(9,885)		—		—		(9,885)
Stock compensation expense	Stock compensation expense	31,089		2,943		—		34,032		Stock compensation expense	8,174		794		—		8,968
Net change in wholesale finance receivables related to sales	Net change in wholesale finance receivables related to sales	—		—		(22,031)		(22,031)		Net change in wholesale finance receivables related to sales	—		—		(308,532)		(308,532)
Provision for credit losses	Provision for credit losses	—		4,935		—		4,935		Provision for credit losses	—		(22,474)		—		(22,474)

Deferred income taxes	Deferred income taxes	4,710		6,028		(112)		10,626		Deferred income taxes	3,811		9,812		(431)		13,192

Other, net	Other, net	3,320		(1,397)		171		2,094		Other, net	(2,743)		685		(80)		(2,138)
Changes in current assets and liabilities:	Changes in current assets and liabilities:									Changes in current assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(379,821)		—		231,151		(148,670)		Accounts receivable, net	(388,688)		—		309,676		(79,012)
Finance receivables – accrued interest and other	Finance receivables – accrued interest and other	—		11,088		—		11,088		Finance receivables – accrued interest and other	—		8,947		—		8,947
Inventories, net	Inventories, net	31,874		—		—		31,874		Inventories, net	45,086		—		—		45,086
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	162,088		247,740		(241,522)		168,306		Accounts payable and accrued liabilities	104,486		354,507		(305,396)		153,597

Other current assets	Other current assets	(11,127)		3,952		10,878		3,703		Other current assets	18,222		11,271		(3,730)		25,763
		(36,608)		355,167		(21,465)		297,094			(176,497)		388,627		(308,493)		(96,363)
Net cash provided by operating activities		593,337		593,851		(261,637)		925,551
Net cash (used) provided by operating activities										Net cash (used) provided by operating activities	(7,442)		478,637		(308,414)		162,781

Cash flows from investing activities:	Cash flows from investing activities:									Cash flows from investing activities:
Capital expenditures	Capital expenditures	(59,128)		(2,348)		—		(61,476)		Capital expenditures	(18,427)		(386)		—		(18,813)
Origination of finance receivables	Origination of finance receivables	—		(6,157,658)		2,712,705		(3,444,953)		Origination of finance receivables	—		(1,923,911)		1,014,773		(909,138)
Collections on finance receivables	Collections on finance receivables	—		5,659,465		(2,691,068)		2,968,397		Collections on finance receivables	—		1,606,844		(706,359)		900,485

Other investing activities	Other investing activities	2,485		—		—		2,485		Other investing activities	733		—		—		733
Net cash used by investing activities	Net cash used by investing activities	(56,643)		(500,541)		21,637		(535,547)		Net cash used by investing activities	(17,694)		(317,453)		308,414		(26,733)

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		Nine months ended September 26, 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
Cash flows from financing activities:	Cash flows from financing activities:									Cash flows from financing activities:

Repayments of medium-term notes	Repayments of medium-term notes	—		(1,400,000)		—		(1,400,000)		Repayments of medium-term notes	—		(1,050,000)		—		(1,050,000)

Proceeds from securitization debt	Proceeds from securitization debt	—		1,169,910		—		1,169,910		Proceeds from securitization debt	—		597,411		—		597,411
Repayments of securitization debt	Repayments of securitization debt	—		(1,013,820)		—		(1,013,820)		Repayments of securitization debt	—		(291,346)		—		(291,346)
Borrowings of asset-backed commercial paper	Borrowings of asset-backed commercial paper	—		27,406		—		27,406		Borrowings of asset-backed commercial paper							—
Repayments of asset-backed commercial paper	Repayments of asset-backed commercial paper	—		(206,671)		—		(206,671)		Repayments of asset-backed commercial paper	—		(66,894)		—		(66,894)
Net decrease in unsecured commercial paper	Net decrease in unsecured commercial paper	—		(261,978)		—		(261,978)		Net decrease in unsecured commercial paper	—		(262,517)		—		(262,517)

Net increase in credit facilities										Net increase in credit facilities	—		15,629		—		15,629
Net increase in deposits	Net increase in deposits	—		210,144		—		210,144		Net increase in deposits	0		72,664		0		72,664

Dividends paid	Dividends paid	(69,316)		(240,000)		240,000		(69,316)		Dividends paid	(23,105)		—		—		(23,105)
Repurchase of common stock	Repurchase of common stock	(11,545)		—		—		(11,545)		Repurchase of common stock	(5,646)		—		—		(5,646)

Issuance of common stock under share-based plans		4,324		—		—		4,324
Other financing activities										Other financing activities	1,085		—		—		1,085
Net cash used by financing activities	Net cash used by financing activities	(76,537)		(1,715,009)		240,000		(1,551,546)		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	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(11,304)		254		—		(11,050)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,418)		255		—		(5,163)
Net increase (decrease) in cash, cash equivalents and restricted cash		$	448,853	$	(1,621,445)	$	—	$	(1,172,592)
Net decrease in cash, cash equivalents and restricted cash										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:									Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	$	666,161	$	2,743,007	$	—	$	3,409,168	Cash, cash equivalents and restricted cash, beginning of period	$	666,161	$	2,743,007	$	—	$	3,409,168
Net increase (decrease) in cash, cash equivalents and restricted cash		448,853		(1,621,445)		—		(1,172,592)
Net decrease in cash, cash equivalents and restricted cash										Net decrease in cash, cash equivalents and restricted cash	(58,220)		(823,614)		—		(881,834)
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	1,115,014	$	1,121,562	$	—	$	2,236,576	Cash, cash equivalents and restricted cash, end of period	$	607,941	$	1,919,393	$	—	$	2,527,334

20. Subsequent Event

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 will remove the additional tariffs imposed by the EU beginning in 2018 on the Company’s motorcycles imported into the EU, reducing the total EU tariff rate on the Company’s motorcycles from 31% to 6%, effective January 1, 2022. The EU tariff rate will remain at 31% through the end of 2021 rather than increasing to 56% on December 1, 2021, as previously scheduled. The lower 6% tariff rate will apply to all motorcycles imported byIn April 2022, the Company ~~into the EU, regardless~~issued $550.0 million of ~~origin, beginning in 2022.~~secured notes through an on-balance sheet asset-backed securitization transaction at a weighted average interest rate of 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. During 2020, the Company executed a set of actions, referred to as The Rewire. The Rewire was a critical overhaul of the Company's business to set the Company on a new course and provide a solid foundation to execute its 2021-2025 strategic plan, The Hardwire. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for more information on The Rewire and The Hardwire.

The “% Change” figures included in the Results of Operations 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,” “intends,” ~~“forecasts,~~“is on-track,” ~~“sees,~~“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 "Key Factors Impacting the Company" and the “Guidance” sections in this Item 2 are only made as of April 27, 2022 and the remaining forward-looking statements in this report are made as of the date of the filing of this report ~~(November 4, 2021)~~(May 5, 2022), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Overview

The Company's net income was ~~$163.0~~$222.5 million, or ~~$1.05~~$1.45 per diluted share, in the ~~third~~first quarter of ~~2021,~~2022, compared to ~~$120.2~~$259.1 million, or ~~$0.78~~$1.68 per diluted share, in the ~~third~~first quarter of ~~2020.~~2021. In the ~~third~~first quarter of ~~2021,~~2022, Motorcycles segment operating income was ~~$97.7~~$202.9 million, ~~up $50.9~~down $24.7 million ~~over~~from the ~~third~~first quarter of ~~2020.~~2021. The ~~increase~~decrease in operating income from the Motorcycles segment for the ~~third~~first quarter of ~~2021~~2022 was driven by ~~an 11.5% increase in wholesale~~higher supply chain costs and a less favorable motorcycle ~~shipments, improved~~ product mix, ~~and lower restructuring 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 ~~third~~first quarter of ~~2021~~2022 was ~~$106.5~~$86.4 million, ~~up $15.4~~down $32.3 million compared to the ~~year-ago~~prior year quarter due ~~primarily~~ to an increase in the provision for credit losses, partially offset by lower interest expense.

Retail sales of new Harley-Davidson motorcycles in the ~~third~~first quarter of ~~2021~~2022 were ~~down 5.6%~~up 2.1% compared to the ~~third~~first quarter of ~~2020.~~2021. The increase in retail sales was driven by higher retail sales in international markets, partially offset by lower retail sales in the U.S. Retail sales in the ~~third~~first quarter of ~~2021 increased 1.9%~~2022 decreased 5.1% in ~~North America~~the U.S. compared to the prior year ~~ago~~ quarter ~~which was more than offset~~and were adversely impacted by ~~declines in the Company's markets outside of North America.~~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.

Key Factors Impacting the Company(1)

Supply Chain Challenges – During the first quarter of 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 higher costs as well as supply constraints related to certain components including those impacted by the continued global semiconductor chip shortages. In the first quarter of 2022, the Company's production was lower than what the Company had planned due to the lack of availability of certain components. The Company expects that year-over-year inflation rates for logistics and manufacturing costs, excluding raw materials and components, will improve in the second half of 2022 from the peak levels of inflation experienced in 2021 and that 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 that raw materials and component cost inflation will continue for the remainder of 2022 at rates similar to those experienced by the Company in the first quarter of 2022.

Table of Contents

Suspension of Additional European Union Tariffs – ~~(1)~~

Beginning in 2019, the Company operated under Binding Origin Information (BOI) rulings that allowed it to supply its European Union (EU) markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. 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 ~~BOI~~Binding Origin Information (BOI) rulings ~~effective April 19, 2021.~~that allowed it to supply its EU markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. As a result of the revocation, all non-electric motorcycles that Harley-Davidson imported into the EU, regardless of origin, were subject to a total tariff rate of 31% onfrom April 19, 2021 ~~that was scheduled to increase to 56% effective June 1,~~through the end of 2021. ~~However, in May 2021, the EU made a decision to delay the increase initially scheduled for June 2021 to December 2021, while tariff negotiations took place between the U.S. and the EU.~~ 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 ~~will remove~~suspended the additional tariffs initially imposed by the EU on the Company's motorcycles, ~~beginning in 2018,~~ reducing the total EU tariff rate on the Company’s motorcycles from 31% to 6%, effective January 1, 2022. The ~~EU tariff rate will remain at 31% through the end of 2021 rather than increasing to 56% on December 1, 2021 as~~

~~Table of~~ ~~Contents~~

~~previously scheduled. The~~ lower 6% tariff rate ~~will apply~~applies to all motorcycles imported by the Company into the EU, regardless of ~~origin, beginning in 2022.~~

~~Based on~~origin. Under the agreement between the ~~Company now estimates~~U.S. and the ~~impact~~EU, the lower tariff rate will remain in effect until December 31, 2023. During such time, the U.S. and EU will monitor and review the 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 to be approximately $61 million, including approximately $44 million recognized in the first nine months of 2021. The current estimate is lower than the previous estimate of $80 million reflecting a tariff rate of 31% for the remainder of 2021 as well as the Company's most recent EU volume estimates. In addition, as a result of this agreement, the Company now expects that there will be no impact from additional EU tariffs in 2022. The Company had previously estimated the impact of additional EU tariffs to be approximately $200 million to $225 million on annual basis after 2021 assuming a total EU tariff rate of 56%.beyond December 31, 2023.

To date, the Company continues to pursue its appeals of the revocation of the BOIs and the denial of its application for temporary extended reliance on the 6% tariff rate (for motorcycles produced in Thailand and ordered prior to April 19, 2021), although there is no assurance that these appeals will continue or be successful.

COVID-19 Pandemic ~~& Supply Chain~~

– 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.

~~Supply Chain and Distribution~~ LiveWire Transaction– ~~The global supply chain challenges, which the Company believes are primarily linked to the COVID-19 pandemic, continue to impact~~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 ~~industry. During the first nine months~~Company's electric motorcycle division, will become a separate business of ~~2021,~~ the Company ~~experienced disruption~~ and ~~increased costs related~~ABIC will combine with LiveWire to ~~global supply chain challenges. As~~create a ~~result~~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 ~~these challenges,~~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 ~~experienced cost increases for logistics, raw materials~~been approved by the boards of directors of both the Company and ~~purchased components,~~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 ~~increased manufacturing conversion costs. In~~other conditions and regulatory approvals. Upon closing of the ~~third quarter~~transaction, the Company will retain a controlling financial interest in LiveWire. The expectation is that, upon closing of ~~2021,~~ the ~~Company's supply chain cost impact was consistent with what it experienced~~transaction, the Company will retain an equity interest in the ~~second quarter~~separate public company of ~~2021; however, it did experience increased supplier volatility which impacted production levels for~~approximately 74%. As the ~~third quarter. In addition,~~controlling shareholder following the ~~Company continued to experience longer shipping times into its international markets during~~transaction, the ~~third quarter. The~~ Company ~~expects continued cost pressure in the fourth quarter of 2021 at the same levels experienced in the third quarter.(1)~~ In response to the supply chain challenges, the Company has imposed pricing surcharges in the U.S., worked to optimize production schedules to prioritize more profitable models and markets and enacted tighter operating expense cost controls. The Company expects the supply chain challenges to continue well into 2022 and will continue to ~~work~~consolidate LiveWire’s results, with additional adjustments to ~~mitigate the impact to its business.(1)~~recognize non-controlling shareholder interests.

~~Liquidity~~ – At the end of the third quarter of 2021, the Company had $3.4 billion of available liquidity through cash, cash equivalents and availability under its credit and conduit facilities. The Company continues to closely monitor its liquidity in light of the COVID-19 pandemic; however, during 2021 the Company has gradually reduced its cash and cash equivalents from the elevated December 2020 levels. Liquidity is discussed in more detail under ~~Liquidity and Capital Resources~~.

~~Supporting Customers~~ – Starting in the second quarter of 2020, the Company 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 half of 2021, the volume of extensions declined from the levels experienced during 2020 returning to pre-COVID-19 pandemic levels by the end of the second quarter of 2021. The Company discontinued extensions specific to the COVID-19 pandemic at the beginning of the third quarter of 2021; however, it continues to grant standard payment extensions to customers in accordance with its policies.

~~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.

Guidance(1)

~~The~~On April 27, 2022, the Company provided the following ~~expectations~~guidance for 2022, which reflects its current outlook for the ~~remainder of 2021.~~supply chain challenges discussed above.

The Company continues to expect ~~2021~~ Motorcycles segment revenue growth, compared to 2021, between 5% and 10%. This revenue growth guidance incorporates the Company's information and expectations as of ~~30%~~April 27, 2022 for the impact of supply chain challenges, including semiconductor chip availability, that the industry continues to ~~35% over 2020.~~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 ~~2021~~ Motorcycles segment operating margin as a percent of 6%revenue of 11% to 8%12%. ~~This guidance assumes $61 million~~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 ~~cost related to~~ the additional EU tariffs ~~discussed above under "Additional European Union Tariffs."~~is expected to contribute over a percentage point of margin growth.

Table of Contents

~~The Company expects to ship approximately 22,000 to 29,000 motorcycles at wholesale in~~Given the ~~fourth quarter~~Company's estimated production cadence and the expected timing of ~~2021. Consistent with~~supply chain stabilization, the prior year, during the fourth quarter of 2021, the Company will shift motorcycle production to begin producing next year's model year product. The model year changeover will limit the amount of wholesale shipments during the fourth quarter as model year 2022 motorcycles produced will remain in company-owned inventory ahead of the new model year launch in early 2022. The Company expects the ~~financial impact of the model year changeover~~Motorcycles segment revenue growth rate in ~~the fourth quarter of~~2022, compared to 2021, to be ~~very similar to~~in the ~~impact~~mid-single digits for the first half of 2022 and in the high-single digits for the second half of 2022. In addition, given the expected seasonality of the changeover experienced in the fourth quarter of 2020. This includes an increase in operating expense and capital expenditures in the fourth quarter as compared to the first three quarters of the year to support the product launch. Finally,business, the Company expects ~~lower restructuring expense in the fourth quarter of 2021 as compared to the fourth quarter of 2020.~~

~~The Company expects Financial Services~~Motorcycles segment operating income ~~growth~~margin percent to be in ~~2021 over 2020 of 95% to 105%, up from~~ the ~~previous range of 75% to 85%. The improved outlook takes into account the favorable credit loss experience through~~mid-teens for the first ~~nine months~~half of ~~2021, as well as~~2022 and in the ~~outlook~~mid-to-high single digits for the ~~remainder~~second half of ~~the year.~~2022.

The Company now expects capital expenditures of $135 million to $150 million in 2021, down from its previous estimate of $190 to $220 million. The decrease is driven by stronger capital management across projects, as well as changes in the timing of expenditures for key initiatives.

~~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 $135 million, including approximately $5 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 ~~September 26, 2021~~March 27, 2022

Compared to the Three Months Ended ~~September 27, 2020~~March 28, 2021

Consolidated Results


		Three months ended							Three months ended
(in thousands, except earnings per share)	(in thousands, except earnings per share)	September 26, 2021		September 27, 2020		Increase (Decrease)		(in thousands, except earnings per share)	March 27, 2022		March 28, 2021		(Decrease) Increase		% Change
Operating income from Motorcycles and Related Products	Operating income from Motorcycles and Related Products	$	97,665	$	46,740	$	50,925	Operating income from Motorcycles and Related Products	$	202,875	$	227,532	$	(24,657)	(10.8)	%
Operating income from Financial Services	Operating income from Financial Services	106,547		91,144		15,403		Operating income from Financial Services	86,357		118,642		(32,285)		(27.2)
Operating income	Operating income	204,212		137,884		66,328		Operating income	289,232		346,174		(56,942)		(16.4)
Other income, net	Other income, net	858		155		703		Other income, net	11,030		277		10,753		NM
Investment income		198		2,672		(2,474)
Investment (loss) income								Investment (loss) income	(1,979)		1,402		(3,381)		NM
Interest expense	Interest expense	7,779		7,783		(4)		Interest expense	7,711		7,708		3		—
Income before income taxes	Income before income taxes	197,489		132,928		64,561		Income before income taxes	290,572		340,145		(49,573)		(14.6)
Provision for income taxes	Provision for income taxes	34,516		12,710		21,806		Provision for income taxes	68,070		81,001		(12,931)		(16.0)
Net income	Net income	$	162,973	$	120,218	$	42,755	Net income	$	222,502	$	259,144	$	(36,642)	(14.1)	%
Diluted earnings per share	Diluted earnings per share	$	1.05	$	0.78	$	0.27	Diluted earnings per share	$	1.45	$	1.68	$	(0.23)	(13.7)	%

The Company reported operating income of ~~$204.2~~$289.2 million in the ~~third~~first quarter of ~~2021~~2022 compared to ~~$137.9~~$346.2 million in the same period last year. Motorcycles segment operating income was $97.7 million in the third quarter of 2021, an improvement of $50.9 million, compared to the third quarter of 2020. Operating income from the Financial Services segment increased $15.4 million, or 16.9%, compared to the third quarter of 2020. Refer to the Motorcycles and Related Products Segment and Financial Services Segment sections for a more detailed discussion of the factors affecting operating income.

~~Investment income decreased $2.5 million in the third quarter of 2021 as compared to 2020 driven by lower income from investments in marketable securities and cash equivalents.~~

~~Table of~~ ~~Contents~~

The effective income tax rate for the third quarter of 2021 was 17.5% compared to 9.6% for the third quarter of 2020. The increase in the effective tax rate is primarily attributable to higher discrete tax adjustments recorded in the third quarter of 2020, including favorable settlements with taxing authorities.

Diluted earnings per share was $1.05 in the third quarter of 2021, up 34.6% from the same period last year. Diluted weighted average shares outstanding increased from 153.9 million in the third quarter of 2020 to 155.1 million in the third quarter of 2021.

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

~~Retail unit sales of new Harley-Davidson motorcycles were as follows:~~
Three months ended
September 30,
2021 September 30,
2020 Increase
(Decrease) %
Change
United States 31,699 31,304 395 1.3 %
Canada 2,158 1,915 243 12.7
North America 33,857 33,219 638 1.9
Europe/Middle East/Africa (EMEA) 9,389 11,184 (1,795) (16.0)
Asia Pacific 6,484 7,631 (1,147) (15.0)
Latin America 1,048 1,768 (720) (40.7)
50,778 53,802 (3,024) (5.6) %

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

Worldwide retail sales of new Harley-Davidson motorcycles were down 5.6% during the third quarter of 2021 compared to the same period last year with growth in North America more than offset by declines in markets outside of North America. Retail sales in the third quarter of 2021 were impacted by strategic decisions made as part of The Rewire, as well as longer global shipping times which continued to impact international markets.

Retail sales in North America were up during the third quarter of 2021, driven by demand for the Company's Grand American Touring motorcycles, as well as the successful launch of the Company's new Pan America™ motorcycles. Outside of North America, retail sales were impacted by actions taken under The Rewire to streamline the product portfolio to reduce complexity and direct resources toward the Company's core stronghold products. This includes the Company's decision to discontinue selling Street motorcycles globally and legacy Sportster motorcycles in EMEA and certain countries within the Asia Pacific and Latin American markets. Latin America retail sales were also impacted during the third quarter of 2021 by the reduction of independent dealers and pricing actions executed as part of The Rewire in 2020 to restore profitability in those markets.

At the end of the third quarter of 2021, worldwide retail inventory of new Harley-Davidson motorcycles was down approximately 35%, or approximately 13,000 motorcycles, compared to the third quarter of 2020 and relatively flat to the second quarter of 2021. Retail inventory levels at the end of the third quarter of 2021 have been impacted by stronger demand in North America, as well as global supply chain challenges which impacted the Company's ability to produce at planned levels and resulted in longer shipping times. While retail inventory levels are lower than the Company's original plan, it has seen improvement in desirability as measured by stronger pricing across both new and used motorcycles and improved dealer profitability.

~~Table of~~ ~~Contents~~

~~Motorcycles and Related Products Segment~~

~~Motorcycle Unit Shipments~~

~~Wholesale Harley-Davidson motorcycle unit shipments were as follows:~~
Three months ended
September 26, 2021 September 27, 2020 Unit Unit
Units Mix % Units Mix % Increase % Change
U.S. motorcycle shipments 27,919 58.2 % 25,284 58.8 % 2,635 10.4 %
Worldwide motorcycle shipments:
Grand American Touring motorcycles(a)
21,988 45.9 % 17,230 40.1 % 4,758 27.6 %
Cruiser motorcycles(b)
16,531 34.5 % 14,775 34.4 % 1,756 11.9
Adventure Touring motorcycles 4,507 9.4 % — — % 4,507 100.0
Sportster® / Street motorcycles 4,915 10.2 % 10,978 25.5 % (6,063) (55.2)
47,941 100.0 % 42,983 100.0 % 4,958 11.5 %

~~(a)Includes CVO~~TM ~~and Trike~~

~~(b)Includes Softail® and LiveWire®~~

The Company shipped 47,941 Harley-Davidson motorcycles worldwide during the third quarter of 2021, which was 11.5% higher than the third quarter of 2020. The mix of Grand American Touring and Cruiser motorcycles shipped during the quarter increased compared to the same period last year, while the mix of Sportster/Street motorcycles declined given the Company's decision to discontinue the Street motorcycle globally and legacy Sportster models in certain markets. In addition, motorcycle unit shipments during the quarter benefited from shipments of the Company's new Pan America™ models, its first Adventure Touring motorcycles which were launched in the second quarter of 2021. During the third quarter of 2021, the Company also began shipping its new Sportster S model.

~~Segment Results~~

~~Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):~~
Three months ended
September 26, 2021 September 27, 2020 Increase
(Decrease) %
Change
Revenue:
Motorcycles $ 885,626 $ 684,344 $ 201,282 29.4 %
Parts & Accessories 204,506 209,808 (5,302) (2.5)
General Merchandise 49,424 49,356 68 0.1
Licensing 8,481 8,894 (413) (4.6)
Other 12,581 11,627 954 8.2
1,160,618 964,029 196,589 20.4
Cost of goods sold 850,193 676,796 173,397 25.6
Gross profit 310,425 287,233 23,192 8.1
Operating expenses:
Selling & administrative expense 172,411 149,780 22,631 15.1
Engineering expense 39,832 47,132 (7,300) (15.5)
Restructuring expense 517 43,581 (43,064) (98.8)
212,760 240,493 (27,733) (11.5)
Operating income $ 97,665 $ 46,740 $ 50,925 109.0 %
Operating margin 8.4 % 4.8 % 3.6 pts.

~~Table of~~ ~~Contents~~

The estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the third quarter of 2020 to the third quarter of 2021 were as follows (in millions):
Net
Revenue Cost of
Goods Sold Gross
Profit
Three months ended September 27, 2020 $ 964.0 $ 676.8 $ 287.2
Volume 86.6 54.3 32.3
Price and sales incentives, net of related costs 14.7 (0.7) 15.4
Foreign currency exchange rates and hedging 9.4 1.8 7.6
Shipment mix 85.9 41.9 44.0
Raw material prices — 24.6 (24.6)
Manufacturing and other costs — 51.5 (51.5)
196.6 173.4 23.2
Three months ended September 26, 2021 $ 1,160.6 $ 850.2 $ 310.4

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

•~~The increase in volume was due to higher wholesale motorcycle shipments.~~

•Revenue and gross profit benefited from higher prices and lower sales incentives including price increases implemented in the U.S. in the third quarter of 2021 to help offset increased cost related to supply chain challenges.

•Revenue and gross profit were favorably impacted by stronger foreign currency exchange rates relative to the U.S. dollar, partially offset by unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements recorded in cost of goods sold.

•Changes in the shipment mix between motorcycle families had a favorable impact on revenue and gross profit in the third quarter of 2021 due to a higher mix of Grand American Touring and Cruiser models.

•~~Raw material cost increases were driven by higher prices primarily due to supply chain challenges.~~

•Manufacturing and other costs were higher driven by increased supply chain costs and additional EU tariff costs. The impact of additional EU tariffs was $25.6 million in 2021 compared to $1.8 million in 2020. These cost increases were partially offset by a lower fixed cost per unit given increased production volumes compared to the prior year.

Operating expenses were lower in the third quarter of 2021 compared to the same period last year due to lower restructuring expenses partially offset by higher selling and administrative expenses. Selling and administrative expenses were higher given increased spending on The Hardwire initiatives and the absence of last year's cost saving efforts undertaken to preserve cash at the onset of the COVID-19 pandemic. Refer to ~~Note 4 of the Notes to Consolidated financial statements~~ ~~for additional information regarding restructuring expenses.~~

~~Financial Services Segment~~

~~Segment Results~~

~~Condensed statements of operations for the Financial Services segment were as follows (in thousands):~~
Three months ended
September 26, 2021 September 27, 2020 (Decrease)
Increase %
Change
Revenue:
Interest income $ 174,103 $ 174,464 $ (361) (0.2) %
Other income 30,589 27,191 3,398 12.5
204,692 201,655 3,037 1.5
Expenses:
Interest expense 44,770 67,533 (22,763) (33.7)
Provision for credit losses 11,208 7,835 3,373 43.1
Operating expense 42,069 34,809 7,260 20.9
Restructuring expense 98 334 (236) (70.7)
98,145 110,511 (12,366) (11.2)
Operating income $ 106,547 $ 91,144 $ 15,403 16.9 %

~~Table of~~ ~~Contents~~

Interest income was lower for the third quarter of 2021, compared to the same period last year, primarily due to lower average outstanding finance receivables. Other income increased in the third quarter of 2021 driven by higher licensing and insurance income. Interest expense decreased due to lower average outstanding debt and a lower cost of funds.

The provision for credit losses increased $3.4 million compared to the third quarter of 2020 primarily driven by higher credit losses. Although the provision for credit losses and actual retail credit losses were unfavorable during the third quarter of 2021, both remain significantly favorable through the first nine months of 2021. Refer to the ~~Results of Operations for the Nine Months Ended September 26, 2021 Compared to the Nine Months Ended September 27, 2020~~ ~~for a discussion of the 2021 year-to-date provision for credit losses.~~

~~Operating expenses increased $7.3 million compared to the third quarter of 2020 due in part to higher employee-related costs and sales and marketing expenses.~~

~~Changes in the allowance for credit losses on finance receivables were as follows (in thousands):~~
Three months ended
September 26,
2021 September 27,
2020
Balance, beginning of period $ 358,811 $ 411,015
Provision for credit losses 11,208 7,835
Charge-offs, net of recoveries (14,185) (10,148)
Balance, end of period $ 355,834 $ 408,702

~~Results of Operations for the Nine Months Ended September 26, 2021~~

~~Compared to the Nine Months Ended September 27, 2020~~

~~Consolidated Results~~
Nine months ended
(in thousands, except earnings per share) September 26,
2021 September 27,
2020 Increase (Decrease)
Operating income from Motorcycles and Related Products $ 511,019 $ 10,283 $ 500,736
Operating income from Financial Services 319,727 119,015 200,712
Operating income 830,746 129,298 701,448
Other income, net 1,825 466 1,359
Investment income 4,331 3,082 1,249
Interest expense 23,209 23,307 (98)
Income before income taxes 813,693 109,539 704,154
Provision for income taxes 185,236 11,843 173,393
Net income $ 628,457 $ 97,696 $ 530,761
Diluted earnings per share $ 4.06 $ 0.64 $ 3.42

~~The Company reported operating income of $830.7~~$202.9 million in the first ~~nine months~~quarter of ~~2021 compared to $129.3 million in the same period last year. Motorcycles segment operating income was $511.0 million in the first nine months of 2021, an improvement of $500.7~~2022, down $24.7 million compared to the same period last year. Operating income from the Financial Services segment ~~increased $200.7~~decreased $32.3 million compared to the first ~~nine months~~quarter of ~~2020.~~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.

~~Investment~~Other income ~~increased $1.2 million~~ in the first quarter of 2022 was higher than in the first quarter of 2021, ~~as compared to 2020, driven~~impacted by higher non-operating income ~~from investments in cash equivalents and marketable securities.~~related to the Company's defined benefit plans.

The Company's effective income tax rate for the first ~~nine months~~quarter of ~~2021~~2022 was ~~22.8%~~23.4% compared to ~~10.8%~~23.8% for the same period in 2020. The effective income tax rate for the nine months ended September 27, 2020 was impacted by discrete income tax expenses recorded during the period, including favorable settlements with taxing authorities.2021.

Diluted earnings per share was ~~$4.06~~$1.45 in the first ~~nine months~~quarter of ~~2021, up~~2022, down from a diluted earnings per share of ~~$0.64~~$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 ~~153.8~~154.5 million in the first ~~nine~~three months of ~~2020~~2021 to ~~154.9~~153.9 million in the first ~~nine~~three months of ~~2021.~~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:


		Nine months ended						Three months ended
		September 30, 2021	September 30, 2020	Increase (Decrease)	% Change			March 31, 2022	March 31, 2021	(Decrease) Increase	% Change
United States	United States	107,421	86,376	21,045	24.4	%	United States	29,408	30,983	(1,575)	(5.1)	%
Canada	Canada	7,403	5,668	1,735	30.6		Canada	1,872	1,799	73	4.1
North America	North America	114,824	92,044	22,780	24.7		North America	31,280	32,782	(1,502)	(4.6)
EMEA		24,580	29,878	(5,298)	(17.7)
Europe/Middle East/Africa (EMEA)							Europe/Middle East/Africa (EMEA)	6,339	4,943	1,396	28.2
Asia Pacific	Asia Pacific	18,263	20,271	(2,008)	(9.9)		Asia Pacific	6,724	5,793	931	16.1
Latin America	Latin America	2,620	4,760	(2,140)	(45.0)		Latin America	809	717	92	12.8
		160,287	146,953	13,334	9.1	%		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 ~~Harley-Davidson~~ dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning new retail sales, and the Company does not regularly verify the information that its dealers supply. This information is subject to revision.

Worldwide retail sales of new Harley-Davidson motorcycles were up ~~9.1%~~2.1% during the first ~~nine months~~quarter of ~~2021~~2022 compared to the same period last year when retail sales were impacted by the onset of the COVID-19 pandemic. Retail sales have improved over the prior year, but have been impacted by strategic decisions made as part of The Rewire, as well as longer global shipping times which impacted retail sales in international markets.

year. The increase in retail sales during the first ~~nine months~~quarter of ~~2021~~2022 was led by ~~the North American market which was positively impacted by increased demand for~~higher retail sales in the Company's ~~Grand American Touring~~EMEA and ~~large Cruiser motorcycles.~~ Asia Pacific markets, partially offset by a decline in North America.

In ~~addition, the increase in~~North America, retail sales ~~also reflects the Company's decision to shift its new model year launch timing to the first quarter, which resulted~~ in ~~a shift of the model year 2021 launch from August 2020 to~~ the first quarter of ~~2021. Finally,~~2022 were down compared to the same period last year due to a 5.1% decline in the U.S. The Company believes the decline in U.S. retail sales ~~in 2021 also benefited from the Company's introduction~~related to low dealer inventories as a result of ~~Pan America™, its new Adventure Touring motorcycles.~~production shortages associated with ongoing global supply chain challenges.

Retail sales outside of North America were ~~impacted~~higher in the first quarter of 2022 compared to the same period last year, driven primarily by actions taken under The Rewire to streamline the product portfolio to reduce complexity and direct resources toward the Company's core stronghold products. This includes the Company's decision to discontinue selling Street motorcycles and legacy Sportster motorcyclesincreases in EMEA and ~~certain countries with the~~ Asia Pacific ~~and Latin American markets. Latin America retail sales~~which were ~~also~~positively impacted ~~during~~by greater product availability following the launch of model year 2022 motorcycles.

At the end of the first ~~nine months~~quarter of ~~2021 by~~2022, worldwide retail inventory of new Harley-Davidson motorcycles was down approximately 24%, or approximately 9,000 motorcycles, compared to the ~~reduction~~first quarter of ~~independent dealers and pricing actions executed as part~~2021. Retail inventory levels at the end of ~~The Rewire~~the first quarter of 2022, primarily in ~~2020 to restore profitability in those market. In addition, international retail sales~~the U.S., were adversely impacted by global supply chain challenges ~~resulting~~which impacted the Company's ability to produce at planned levels. Overall, the Company continued to observe strong pricing in ~~longer shipping times~~the market for both new and ~~COVID-19 pandemic closures~~used motorcycles in ~~certain markets.~~the first quarter of 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:


		Nine months ended								Three months ended
		September 30, 2021		September 30, 2020		Increase (Decrease)	% Change			March 31, 2022		March 31, 2021		(Decrease) Increase	% Change
Industry new motorcycle registrations:	Industry new motorcycle registrations:								Industry new motorcycle registrations:
United States(b)	United States(b)	238,705		201,820		36,885	18.3	%	United States(b)	62,207		63,412		(1,205)	(1.9)	%
Europe(c)	Europe(c)	374,387		350,705		23,682	6.8	%	Europe(c)	106,716		95,810		10,906	11.4	%

Harley-Davidson market share data:	Harley-Davidson market share data:								Harley-Davidson market share data:
United States(b)	United States(b)	44.7	%	42.0	%	2.7	pts.		United States(b)	47.1	%	48.3	%	(1.2)	pts.
Europe(c)	Europe(c)	5.6	%	7.7	%	(2.1)	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:
Nine months ended
September 26, 2021 September 27, 2020 Unit Unit
Units Mix % Units Mix % Increase (Decrease) % Change
U.S. motorcycle shipments 104,190 65.4 % 69,359 55.8 % 34,831 50.2 %
Worldwide motorcycle shipments:
Grand American Touring motorcycles(a)
79,485 49.9 % 52,656 42.4 % 26,829 51.0 %
Cruiser motorcycles(b)
52,117 32.7 % 42,660 34.3 % 9,457 22.2
Adventure Touring motorcycles 8,555 5.4 % — — % 8,555 100.0
Sportster® / Street motorcycles 19,262 12.0 % 29,009 23.3 % (9,747) (33.6)
159,419 100.0 % 124,325 100.0 % 35,094 28.2 %


	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 ~~159,419 Harley-Davidson~~54,843 motorcycles worldwide during the first ~~nine~~three months of ~~2021,~~2022, which was ~~28.2% 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 shift in new model year launch timing from August 2020 to~~U.S. during the first quarter of ~~2021. In addition, wholesale shipments last year~~2022 were ~~adversely~~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 ~~temporary suspension~~mix of ~~the Company's global manufacturing operations~~motorcycles shipped during the ~~second quarter in response to the COVID-19 pandemic.~~

~~During the~~ first ~~nine~~three months of ~~2021, the~~2022 resulting in a lower mix of Grand American Touring and Cruiser motorcycles shipped ~~increased~~ as a percent of total shipments ~~while the~~and a

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

~~Table of~~ ~~Contents~~

Segment Results

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


		Nine months ended											Three months ended
		September 26, 2021			September 27, 2020			Increase (Decrease)		% Change			March 27, 2022			March 28, 2021			Increase (Decrease)		% Change
Revenue:	Revenue:											Revenue:
Motorcycles	Motorcycles	$	2,931,669		$	2,030,448		$	901,221	44.4	%	Motorcycles	$	1,059,113		$	1,016,334		$	42,779	4.2	%
Parts & Accessories		577,035			513,201			63,834		12.4
General Merchandise		155,378			136,321			19,057		14.0
Parts and accessories												Parts and accessories	165,525			149,859			15,666		10.5
Apparel												Apparel	51,407			50,323			1,084		2.2
Licensing	Licensing	22,865			21,826			1,039		4.8		Licensing	6,497			5,512			985		17.9
Other	Other	37,278			31,295			5,983		19.1		Other	20,629			10,079			10,550		104.7
		3,724,225			2,733,091			991,134		36.3			1,303,171			1,232,107			71,064		5.8
Cost of goods sold	Cost of goods sold	2,586,264			2,019,310			566,954		28.1		Cost of goods sold	895,536			811,622			83,914		10.3
Gross profit	Gross profit	1,137,961			713,781			424,180		59.4		Gross profit	407,635			420,485			(12,850)		(3.1)
Operating expenses:	Operating expenses:											Operating expenses:
Selling & administrative expense	Selling & administrative expense	506,245			477,286			28,959		6.1		Selling & administrative expense	172,295			152,689			19,606		12.8
Engineering expense	Engineering expense	119,966			141,626			(21,660)		(15.3)		Engineering expense	32,593			40,857			(8,264)		(20.2)
Restructuring expense		731			84,586			(83,855)		(99.1)
Restructuring benefit												Restructuring benefit	(128)			(593)			465		(78.4)
		626,942			703,498			(76,556)		(10.9)	%		204,760			192,953			11,807		6.1	%
Operating income	Operating income	$	511,019		$	10,283		$	500,736			Operating income	$	202,875		$	227,532		$	(24,657)
Operating margin	Operating margin	13.7		%	0.4		%	13.3		pts.		Operating margin	15.6		%	18.5		%	(2.9)		pts.

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


		Net Revenue		Cost of Goods Sold		Gross Profit			Net Revenue		Cost of Goods Sold		Gross Profit
Nine months ended September 27, 2020		$	2,733.1	$	2,019.3	$	713.8
Three months ended March 28, 2021								Three months ended March 28, 2021	$	1,232.1	$	811.6	$	420.5
Volume	Volume	662.3		459.7		202.6		Volume	26.6		12.7		13.9
Price and sales incentives, net of related costs		31.8		(7.0)		38.8
Price and sales incentives								Price and sales incentives	81.4		—		81.4
Foreign currency exchange rates and hedging	Foreign currency exchange rates and hedging	62.0		29.3		32.7		Foreign currency exchange rates and hedging	(17.3)		(13.8)		(3.5)
Shipment mix	Shipment mix	235.0		65.6		169.4		Shipment mix	(19.6)		2.5		(22.1)
Raw material prices	Raw material prices	—		45.7		(45.7)		Raw material prices	—		14.9		(14.9)
Manufacturing and other costs	Manufacturing and other costs	—		(26.4)		26.4		Manufacturing and other costs	—		67.7		(67.7)
		991.1		566.9		424.2			71.1		84.0		(12.9)
Nine months ended September 26, 2021		$	3,724.2	$	2,586.2	$	1,138.0
Three months ended March 27, 2022								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 ~~nine months~~quarter of ~~2020~~2021 to the first ~~nine 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 and General Merchandise~~accessories sales.

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

•Revenue and gross profit were ~~favorably~~negatively impacted by ~~stronger~~weaker foreign currency exchange rates relative to the U.S. 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 ~~nine months~~quarter of ~~2021~~2022 due primarily to a ~~higher~~lower mix of Grand American Touring ~~and Cruiser~~ models.

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

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•Manufacturing and other costs ~~decreased~~increased due primarily ~~due~~ to ~~a lower fixed~~higher costs associated with supply chain challenges. In 2021, supply chain cost ~~per unit given higher production volumes. Production volumes~~inflation started to accelerate in ~~2020 were adversely impacted by the temporary suspension of global manufacturing operations during~~ the second quarter and continued increasing throughout the remainder of ~~2020 in response to~~ the ~~COVID-19 pandemic.~~year. The ~~Company also benefited in 2021 from~~ cost savings resulting from the Company's 2020 restructuring actions. These favorable impacts to cost were partially offset by higher supply chain costs and increased tariff costs. The impact of additional EU tariffs was $44.3 millioninflation experienced in the first ~~nine months~~quarter of ~~2021 compared to $17.7 million~~2022 is consistent with levels experienced in the back-half of 2021.

Operating expenses were higher in the first ~~nine months~~quarter of ~~2020.~~

~~Operating expenses were lower in the first nine months of 2021~~2022 compared to the same period in ~~2020~~2021 due primarily to ~~lower restructuring~~ costs related to the Company's 2020 restructuring actions. Selling, administrative and engineering expenses benefited from cost savings resulting from the Company's 2020 restructuring actions; however, these benefits were offset by increased spending onassociated with The Hardwire initiatives, ~~and last year's cost saving efforts undertaken to preserve cash at~~including the ~~onset of the COVID-19 pandemic. Refer to~~ ~~Note 4 of 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):


		Nine months ended									Three months ended
		September 26, 2021		September 27, 2020		(Decrease) Increase		% Change			March 27, 2022		March 28, 2021		Increase (Decrease)		% Change
Revenue:	Revenue:									Revenue:
Interest income	Interest income	$	501,645	$	512,726	$	(11,081)	(2.2)	%	Interest income	$	161,734	$	159,814	$	1,920	1.2	%
Other income	Other income	94,005		83,338		10,667		12.8		Other income	30,281		30,586		(305)		(1.0)
		595,650		596,064		(414)		(0.1)			192,015		190,400		1,615		0.8
Expenses:	Expenses:									Expenses:
Interest expense	Interest expense	149,098		182,193		(33,095)		(18.2)		Interest expense	42,099		55,707		(13,608)		(24.4)
Provision for credit losses	Provision for credit losses	4,935		178,433		(173,498)		(97.2)		Provision for credit losses	28,822		(22,474)		51,296		(228.2)
Operating expense	Operating expense	121,454		115,145		6,309		5.5		Operating expense	34,737		38,298		(3,561)		(9.3)
Restructuring expense	Restructuring expense	436		1,278		(842)		(65.9)		Restructuring expense	—		227		(227)		(100.0)
		275,923		477,049		(201,126)		(42.2)			105,658		71,758		33,900		47.2
Operating income	Operating income	$	319,727	$	119,015	$	200,712	168.6	%	Operating income	$	86,357	$	118,642	$	(32,285)	(27.2)	%

Interest income was ~~lower~~higher for the first ~~nine months~~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 and licensing income.~~ Interest expense decreased due to lower average outstanding debt and a lower cost of funds.

The provision for credit losses ~~decreased $173.5~~increased $51.3 million in the first quarter of 2022 compared to the first ~~nine months~~quarter of ~~2020~~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 ~~improved~~improvement in economic conditions and ~~favorable retail credit loss performance. The provision for credit losses was favorable compared to prior year a result~~the Company's outlook on future conditions during the first quarter of ~~improvement in~~2021. During the ~~U.S. economy~~first quarter of 2022, economic conditions and the Company’s outlook ~~on future economic conditions. However,~~were relatively unchanged from the end of 2021. The pace of economic recovery ~~remains~~continues to remain uncertain as demonstrated by ~~unemployment levels above those experienced prior to the COVID-19 pandemic,~~rising inflation, muted consumer confidence, continued global supply chain disruptions, and ~~continuing COVID-19 pandemic-related challenges across~~ the ~~U.S.,~~conflict in Ukraine, among other factors. As such, at the end of the ~~third~~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 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 ~~for~~on the Company's retail motorcycle loans were ~~0.84% through~~1.77% during the first ~~nine months~~quarter of ~~2021~~2022 compared to ~~1.40% through~~1.46% in the first ~~nine months~~quarter of ~~2020.~~2021. The ~~favorable~~unfavorable retail credit loss performance was ~~due to elevated used motorcycle values at auction in the U.S. and continued lower than normal delinquency levels~~ driven by ~~benefits provided under~~delinquencies and the ~~U.S. federal stimulus packages and COVID-19 retail payment extensions. Favorable used motorcycle values stemmed from an ongoing low number~~resulting charge-offs moving towards more normalized levels during the first quarter of ~~motorcycles at auction.~~2022. The 30-day delinquency rate for retail motorcycle loans at ~~September 26, 2021~~March 27, 2022 increased to 2.87% from 2.14% at March 28, 2021. The 30-day delinquency rate was ~~2.76%~~elevated as compared to ~~2.59% at September 27, 2020. The continued low~~the first quarter of 2021 as the delinquency rate for the first quarter of 2021 remained below levels ~~were driven by~~experienced prior to the COVID-19 pandemic due to benefits to individuals provided under U.S. federal stimulus packages as well as 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 to help customers get through financial difficulties associated with the pandemic. ~~During the first nine months of 2021, the volume of extensions~~

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declined from the levels experienced during 2020 as a result of the COVID-19 pandemic, but extensions did not return to pre-COVID-19 pandemic levels until the end of the second quarter of 2021. Extensions specific to the COVID-19 pandemic were discontinued by the Company at the beginning of the third quarter of 2021. The Company continues to grant standard payment extensions to customers in accordance with its policies. ~~While the~~The Company expects the delinquency rate and losses to continue to normalize over time ~~given the influx of stimulus funding and improved economic conditions, the Company believes it is likely credit losses will continue to remain low through the remainder of 2021.~~.(1)

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Operating expenses ~~increased $6.3~~decreased $3.6 million in the first quarter of 2022 compared to the first ~~nine months~~quarter of ~~2020 primarily~~2021 in part due to ~~higher employee-related costs and sales and marketing expenses.~~lower technology costs.

Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
Nine months ended
September 26,
2021 September 27,
2020
Balance, beginning of period $ 390,936 $ 198,581
Cumulative effect of change in accounting(a)
— 100,604
Provision for credit losses 4,935 178,433
Charge-offs, net of recoveries (40,037) (68,916)
Balance, end of period $ 355,834 $ 408,702

~~(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		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)

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~~pay dividends, and ~~finally the Company may also choose~~ to execute discretionary share ~~repurchases in 2021 and 2022.~~

~~Table of~~ ~~Contents~~

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 ~~September 2021,~~March 2022, but during the first ~~nine~~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 ~~September 26, 2021~~March 27, 2022 were as follows (in thousands):



Cash and cash equivalents	$	~~2,061,303~~1,393,731



Availability under credit and conduit facilities:
Credit facilities	~~665,380~~598,984
Asset-backed U.S. commercial paper conduit facility(a)	~~657,746~~630,466
Asset-backed Canadian commercial paper conduit facility(a)	4,492
	$	~~3,384,429~~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 ~~September 26, 2021~~March 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):


		Nine months ended					Three months ended
		September 26, 2021		September 27, 2020			March 27, 2022		March 28, 2021
Net cash provided by operating activities	Net cash provided by operating activities	$	925,551	$	1,135,068	Net cash provided by operating activities	$	139,321	$	162,781
Net cash used by investing activities	Net cash used by investing activities	(535,547)		(235,054)		Net cash used by investing activities	(121,135)		(26,733)
Net cash (used) provided by financing activities		(1,551,546)		1,930,677
Net cash used by financing activities						Net cash used by financing activities	(483,505)		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(11,050)		6,071		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,743)		(5,163)
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(1,172,592)	$	2,836,762
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	$	(467,062)	$	(881,834)

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Operating Activities

~~The decrease~~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 ~~nine months~~quarter of ~~2021~~2022 compared to the same period ~~in 2020 was driven by lower cash flow from wholesale finance receivable activity. During the first nine months~~last year. The Company’s sales of ~~2020, operating cash inflow from wholesale finance receivable activity was significant resulting from a decrease in receivables outstanding in connection with the decline in wholesale shipments~~motorcycles and related products to dealers in the U.S. and ~~Canada. During~~Canada are financed through Harley-Davidson Financial Services and become finance receivables upon sale to the ~~first nine months of 2021,~~dealer and become operating cash ~~flow from~~flows when the dealer repays the wholesale finance ~~receivable activity resulted in~~receivable. As a ~~modest reduction to~~result, operating cash flow ~~as receivable levels remained relatively flat supported~~is impacted by ~~increased~~the amount and duration of wholesale ~~shipments in the U.S. and Canada.~~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 ~~$52.5~~$45.8 million and related accrued interest and penalties of ~~$27.3~~$23.8 million as of ~~September 26, 2021.~~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 ~~$61.5~~$28.0 million in the first ~~nine~~three months of ~~2021~~2022 compared to ~~$92.3~~$18.8 million in the same period last year. The Company's ~~2021~~2022 plan includes estimated capital ~~expenditures~~investments between ~~$135~~$190 million to ~~$150~~$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 ~~nine~~three months of ~~2021~~2022 were ~~$333.5~~$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 ~~$0.45~~$0.1575 and ~~$0.42~~$0.1500 per share totaling ~~$69.3~~$24.1 million and ~~$65.0~~$23.1 million during the first ~~nine~~three months of 2022 and 2021, respectively.

Cash outflows for share repurchases were $261.7 million in the first three months of 2021 ~~and 2020, respectively.~~

~~There were no discretionary share~~compared to $5.6 million in the 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 nine months of 2021~~ and ~~2020 were $11.5 million or 0.3 million shares and $7.9 million or 0.3 million shares, respectively.~~performance shares. As of ~~September 26, 2021,~~March 27, 2022, there were ~~18.2~~12.0 million shares remaining on board-approved share repurchase authorizations.

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Financing cash flows related to debt and brokered certificates of deposit activity resulted in net cash outflows of ~~$1.5 billion~~$197.7 million and $985.1 million in the first ~~nine~~three months of 2022 and 2021, ~~compared to net cash inflows of $2.0 billion in~~respectively. Debt levels declined during the first ~~nine 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):


		September 26, 2021		September 27, 2020			March 27, 2022		March 28, 2021
Outstanding debt:	Outstanding debt:					Outstanding debt:
Global credit facility borrowings						Global credit facility borrowings	$	—	$	15,462
Unsecured commercial paper	Unsecured commercial paper	$	749,620	$	1,077,763	Unsecured commercial paper	816,016		749,801
364-day credit facility borrowings		—		150,000
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility	98,310		127,500		Asset-backed Canadian commercial paper conduit facility	95,664		102,543
Asset-backed U.S. commercial paper conduit facilities		242,254		467,338
Asset-backed U.S. commercial paper conduit facility						Asset-backed U.S. commercial paper conduit facility	269,534		350,648
Asset-backed securitization debt, net	Asset-backed securitization debt, net	1,952,368		2,096,355		Asset-backed securitization debt, net	1,357,558		2,099,258
Medium-term notes, net	Medium-term notes, net	3,444,664		4,845,961		Medium-term notes, net	3,329,845		3,803,736
Senior notes, net	Senior notes, net	744,494		743,806		Senior notes, net	744,842		744,149
		$	7,231,710	$	9,508,723		$	6,613,459	$	7,865,597

Deposits, net	Deposits, net	$	290,270	$	29,999	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 ~~$290.3~~$348.1 million and ~~$30.0~~$152.7 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020,~~ 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 the end~~

Table of ~~the first quarter of 2021, the Company had borrowings 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 had a $350.0 million 364-day credit facility that matured in May 2021.~~ 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.

Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.42 billion as of ~~September 26, 2021~~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 cash on hand.(1)

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Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at ~~September 26, 2021~~March 27, 2022 (in thousands):

Principal Amount

Rate

Issue Date

Maturity Date

Principal Amount

Rate

Issue Date

Maturity Date

$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

$756,763(a)

4.94%

May 2020

May 2023

$698,550(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 ~~September 26, 2021~~March 27, 2022

(b)~~Euro denominated, €600.0~~€600.0 million par value remeasured to U.S. dollar at ~~September 26, 2021~~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 ~~$10.6~~$12.2 million and ~~$17.3~~$13.6 million at ~~September 26,~~March 27, 2022 and March 28, 2021, ~~and September 27, 2020,~~ respectively. ~~There were no medium-term note maturities during~~During the ~~third~~first quarter of ~~2021 or 2020. During the second quarter of 2021, $350.0~~2022, $550.0 million of ~~3.55%~~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. During the second quarter of 2020, $450.0 million of floating-rate and $350.0 million of 2.4% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2020, $600.0 million of 2.15% 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 – ~~In June 2021, the~~The Company ~~renewed and amended 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 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 ~~September 26, 2021,~~March 27, 2022, the Canadian Conduit has an expiration date of June 27, 2022.

During the ~~third~~first quarter of ~~2021,~~2022, the Company transferred ~~$32.8~~$25.3 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of ~~$27.4~~$21.2 million. There were no finance receivable transfers under the Canadian Conduit Facility during the first ~~half of 2021 or the second or third quarters of 2020. During the first~~ quarter of ~~2020, the Company transferred $77.9 million~~2021.

Table of ~~Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $61.6 million.~~Contents

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

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discretion, of up to $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.

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 ~~September 26, 2021,~~March 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 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.

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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 ~~September 26, 2021, HDFS~~March 27, 2022, Harley-Davidson Financial Services and the Company remained in compliance with all of the then existing covenants.

~~Cautionary Statements~~Financial Services Segment

~~Important factors that could affect future results~~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 ~~cause those results to differ materially from those expressed~~a lower cost of funds.

The provision for credit losses increased $51.3 million in the ~~forward-looking statements include,~~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 ~~others,~~other factors. As such, at the ~~following: (i)~~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.

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 27, 2022 increased to 2.87% from 2.14% at March 28, 2021. The 30-day delinquency rate was 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 ~~including~~due to benefits to individuals provided under U.S. federal stimulus packages as well as the ~~length and severity~~effects of COVID-19 pandemic-related retail payment extensions. Starting in the second quarter of 2020 through the end of the ~~pandemic across the globe and the pace~~second quarter 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, successfully execute its remodeled approach to supply and inventory management, and strengthen its existing business while allowing for desirable growth; (B) manage supply chain and logistic issues, including quality issues, unexpected interruptions or price increases caused by supplier volatility, raw material shortages or natural disasters, and longer shipping times and increased logistics costs, including by successfully implementing pricing surcharges; (C) invest in electric vehicle (EV) technology required to lead the transformation of motorcycling and leverage its engineering expertise, manufacturing footprint, supply chain infrastructure, and global logistics capabilities in the EV sector; (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 to2021, 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 Companygranted COVID-19 pandemic-related extensions to ~~generate desired sales levels and that provide the desired~~help customers get through financial returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Grand American Touring, large Cruiser and Trike, and growing 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) and (ii) the denial of the Company's application for temporary relief from the effect of the revocation; (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; (K) prevent, detect, and remediate any issues with its motorcycles or any issuesdifficulties associated with the ~~manufacturing processes~~pandemic. The Company continues to ~~avoid delays~~grant standard payment extensions to customers in ~~new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation~~accordance with its policies. The Company expects the delinquency rate 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) realize expectations concerning market demand for electric models, which will depend in part on the building of necessary infrastructure; (N) successfully manage and reduce costs throughout the business; (O) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment; (P)losses to 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; (Q) continue to develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (R) maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (S) 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; (T) 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; (U) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (V) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (W) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding data security; (X) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio; (Y) 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; (Z) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; (AA) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (BB) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; (CC) manage its exposure to product liability claims and commercial or contractual disputes; (DD) continue tonormalize over time.(1)

5746

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~~manage~~Operating expenses decreased $3.6 million in the ~~relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness; (EE) achieve anticipated results with respect~~first quarter of 2022 compared to the ~~Company's recently launched pre-owned motorcycle program, Harley-Davidson Certified, and the Company's H-D1 Marketplace; and (FF) accurately predict the margins~~first quarter of ~~its Motorcycles and Related Products segment~~2021 in ~~light of, among other things, tariffs, the cost associated with product development initiatives and the Company's complex global supply chain.~~part due to lower technology costs.

~~The Company's operations, demand~~Changes in the allowance for its products, 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 U.S. Securities and Exchange Commission. Many of these risk factors are impacted by the current changing capital, credit and retail markets and the Company's ability to manage through inconsistent economic conditions.

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

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

~~Refer to~~ follows (in thousands):~~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.


	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

~~Item 3. Quantitative~~Other Matters

Commitments and ~~Qualitative Disclosures About Market Risk~~Contingencies

The Company is ~~exposed~~subject to ~~market risk from changes in foreign currency exchange rates, commodity prices~~lawsuits and ~~interest rates. To reduce such risks,~~other claims related to product, commercial, employee, environmental and other matters. In determining costs to accrue related to these items, the Company ~~selectively uses derivative financial instruments. All hedging transactions~~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 ~~authorized~~monitored on an ongoing basis and ~~executed pursuant~~are updated based on new developments or new information as it becomes available for each matter. Refer 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 916 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 ~~Related Products Segment~~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 ~~sells~~increased its ~~motorcycles~~cash and ~~related products internationally~~cash equivalents during 2020. The Company's cash and ~~in most markets those sales are made~~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 ~~foreign country’s local currency. As~~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 ~~Motorcycles segment operating results are affected by fluctuations~~decline in U.S. wholesale shipments in the ~~value~~first quarter of 2022 compared to the ~~U.S. dollar relative to foreign currencies.~~same period last year. The Company’s ~~most significant foreign currency exchange rate risk resulting from the sale~~sales of motorcycles and related products ~~relates~~to dealers in the U.S. and Canada are financed through Harley-Davidson Financial Services and become finance receivables upon sale to the ~~Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Chinese yuan, Thai baht, Singapore dollar~~dealer and ~~Pound sterling.~~ 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 ~~utilizes foreign currency contracts~~continues to ~~mitigate~~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 ~~effect~~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 ~~certain currencies' fluctuations on Motorcycles segment operating results. The foreign currency contracts are entered into with banks and allow~~ the ~~Company~~Notes 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~~ 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 $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 ~~purchases commodities~~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 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 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 U.S. dollar at March 27, 2022

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

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 ~~use in~~payment of the ~~production~~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 ~~motorcycles. As a result, Motorcycles segment operating results~~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 ~~affected~~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 ~~changes in commodity prices.~~mutual agreement between the Company and the lenders, as of March 27, 2022, the Canadian Conduit has an expiration date of June 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.

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On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facility VIE – The Company ~~uses derivative financial instruments on~~has a ~~limited basis~~$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 ~~hedge the prices of certain commodities. There have been no material changes~~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 ~~commodity market risk information~~$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.

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 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, 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 ~~Annual Report~~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 ~~Form 10-K~~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 ~~year ended December 31, 2020.~~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.

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.

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 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.

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)	%

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)

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.


	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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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

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.

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 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, 2021.

The Company purchases commodities for the use in the production of motorcycles. As a result, Motorcycles segment operating income is affected by changes in commodity prices. The Company uses derivative financial instruments on a limited basis to hedge the prices of certain commodities. 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, 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

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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 ~~debt transactions,~~medium-term 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 ~~September 26, 2021,~~March 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 ~~Financial Services segment operating results.~~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 ~~September 26, 2021~~March 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. Previously,~~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, United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea 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 Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European ~~Union (EU) placed a 25% additional tariff (31% total tariff)~~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 ~~motorcycles imported into~~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 ~~EU which was initially set to increase to a 50% additional tariff (56% total tariff) effective June 1, 2021. In May 2021, the EU suspended the increase to December 1, 2021 while the EU~~situation and ~~the U.S. worked towards politically resolving the restrictive tariffs imposed by each country.~~assessing its impact on its business, including its business partners and customers. While the ~~U.S. and EU announced an agreement~~Company has not experienced any material interruptions to its infrastructure, supplies, technology systems or networks needed to support its operations or significant costs due to the conflict, the Company cannot provide assurance that will ~~result in~~remain the ~~removal~~case. The Company has no way to predict the progress or outcome of the ~~additional EU tariffs effective January 1, 2022, trade policies~~conflict in Ukraine or its impacts in Ukraine, Russia or Belarus as the conflict, and ~~changes in trade policies, including~~any resulting government reactions, are rapidly developing and beyond its control. The extent and duration of the ~~imposition or reinstatement of tariffs, their enforcement~~military action, sanctions and ~~downstream consequences, may continue to~~resulting market disruptions could be significant and could potentially have ~~a material adverse~~substantial impact on the global economy and the Company's business ~~results~~for an unknown period of ~~operations and outlook.~~

~~Shipments of motorcycles to the EU are a significant portion~~time. Any of the Company’s total motorcycles sales. Beginning in 2019, the Company obtained regulatory approvals, reflected in five Binding Origin Information (BOI) rulings, that allowed it to supply 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 EU, the Company would be subject to the revocation of the BOI rulings, effective April 19, 2021. Following the revocation, non-electric motorcycles the Company imported into the EU, regardless of origin, were subject to a total tariff rate of 31% from April 19, 2021 to November 30, 2021. This rate would have increased to 56% effective December 1, 2021 if the EU and the U.S. had not reached a political resolution before that date. In May 2021, the Company applied for temporary extended reliance on the 6% tariff rate for motorcycles produced in Thailand and ordered prior to April 19, 2021; however, that application was rejected on July 30, 2021. The Company estimates itfactors mentioned above could have avoided approximately $50 million of additional EU tariffs in 2021 if the application for extended reliance had been granted. To date, the Company continues its appeals of the revocation of the BOIs and the denial of temporary extended reliance although there is no assurance that these appeals will continue or be successful. The remaining impact of the revocation is subject to uncertainties that include whether the Company will continue appealing the revocation of the BOI rulings and the denial of temporary extended reliance and be successful in doing so.

Without limitation, (i) tariffs currently in place, (ii) the imposition or reinstatement by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition or reinstatement by foreign countries of tariffs on U.S. products, including tariffs imposed in response to U.S. tariffs, could materially increase: (a) the cost of 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 ~~September 26, 2021:~~March 27, 2022:
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
June 28 to August 1 1,468 $ 47 1,468 18,246,721
August 2 to August 29 13,811 $ 40 13,811 18,246,721
August 30 to September 26 498 $ 39 498 18,246,721
15,777 $ 40 15,777


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 September 26, 2021, 18.2 million shares remained under these authorizations.~~ The Company repurchased no6.2 million shares on a discretionary basis during the quarter ended ~~September 26, 2021.~~March 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 ~~third~~first quarter of ~~2021,~~2022, the Company acquired ~~15,777~~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.~~

~~Item 5. Other Information~~

~~Item 5.02~~

~~On November 4, 2021, the Company announced the retirement of Darrell Thomas, Vice President and Treasurer. Mr. Thomas will retire from the Company effective March 1, 2022 after 11 years of service.~~

The Company maintains the Harley-Davidson, Inc. Employee Incentive Plan (the Plan) under which it provides its employees and the employees of its participating affiliates with incentive compensation depending upon, among other things, the achievement of corporate or business unit performance that furthers corporate objectives. On October 29, 2021, the Human Resources Committee of the Company's Board of Directors approved an amendment and restatement of the Plan, effective January 1, 2021, to: (i) remove or modify certain restrictions under the Plan that were intended to qualify compensation as “performance-based” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), that are no longer necessary following the changes to the Code Section 162(m) made by the Tax Cuts and Jobs Act; (ii) incorporate state performance-based compensation tax rules; (iii) remove workers compensation payments from the calculation of eligible compensation; and (iv) increase the maximum performance award to $8 million.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
4.1						Officers' Certificate, dated February 14, 2022, pursuant to Sections 102 and 301 of the Indenture, dated December 18, 2020, with the form of 3.050% Medium-Term Notes due 2027
4.2						Second Amended and Restated 5-Year 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 5-year Credit Agreement, dated as of April 1, 2020, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent
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 effective August 31, 2021~~first approved for use in February 2022
10.2*						~~Amended~~Form of Notice of Award of Performance Shares and ~~Restated~~Performance Shares Agreement (Standard) of Harley-Davidson, Inc. ~~Employee~~under the Harley-Davidson, Inc. 2020 Incentive Stock Plan ~~as amended effective January 1, 2021~~first approved for 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: ~~November 4, 2021~~May 5, 2022			/s/ Gina Goetter
			Gina Goetter
			Chief Financial Officer
			(Principal financial officer)


Date: ~~November 4, 2021~~May 5, 2022			/s/ Mark R. Kornetzke
			Mark R. Kornetzke
			Chief Accounting Officer
			(Principal accounting officer)

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	Operating Leases
2021	$	5,017
2022	17,694
2023	9,119
2024	6,907
2025	3,923
Thereafter	3,406
Future lease payments	46,066
Present value discount	(1,581)
Lease liabilities	$	44,485


	2021						2020
	Transfers		Proceeds		Proceeds, net		Transfers		Proceeds		Proceeds, net
First quarter	$	663.1	$	600.0	$	597.4	$	580.2	$	525.0	$	522.7
Second quarter	—		—		—		1,840.5		1,550.2		1,541.8
Third quarter	635.5		575.0		572.5		—		—		—
	$	1,298.6	$	1,175.0	$	1,169.9	$	2,420.7	$	2,075.2	$	2,064.5


	Three months ended September 27, 2020
	Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans		Total
Balance, beginning of period	$	(53,825)	$	(40,740)	$	(457,633)	$	(552,198)
Other comprehensive income, before reclassifications	13,331		55,732		—		69,063
Income tax expense	(594)		(12,299)		—		(12,893)
	12,737		43,433		—		56,170
Reclassifications:

Net gains on derivative financial instruments	—		(58,585)		—		(58,585)
Prior service credits(a)	—		—		(867)		(867)
Actuarial losses(a)	—		—		16,495		16,495
Reclassifications before tax	—		(58,585)		15,628		(42,957)
Income tax benefit (expense)	—		13,051		(3,669)		9,382
	—		(45,534)		11,959		(33,575)
Other comprehensive income (loss)	12,737		(2,101)		11,959		22,595
Balance, end of period	$	(41,088)	$	(42,841)	$	(445,674)	$	(529,603)


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
June 28 to August 1	1,468	$	47	1,468	18,246,721
August 2 to August 29	13,811	$	40	13,811	18,246,721
August 30 to September 26	498	$	39	498	18,246,721
	15,777	$	40	15,777