HARLEY DAVIDSON INC (Form: 10-K, Received: 02/18/2016 16:48:45)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K



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

For the fiscal year ended: December 31, 2015



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

For the transition period from to

Commission file number 1-9183

Harley-Davidson, Inc.

(Exact name of registrant as specified in its charter)



Wisconsin		39-1382325
(State of organization)		(I.R.S. Employer Identification No.)
3700 West Juneau Avenue Milwaukee, Wisconsin		53208
(Address of principal executive offices)		(Zip code)

Registrants telephone number: (414) 342-4680

Securities registered pursuant to Section 12(b) of the Act:



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

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

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 and (2) has been subject to such requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act (check one).

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No ý

Aggregate market value of the voting stock held by non-affiliates of the registrant at June 28, 2015: $11,663,564,377

Number of shares of the registrant’s common stock outstanding at January 29, 2016 : 184,026,026 shares

Documents Incorporated by Reference

Part III of this report incorporates information by reference from registrant’s Proxy Statement for the annual meeting of its shareholders to be held on April 30, 2016 .

Harley-Davidson, Inc.

Form 10-K

For The Year Ended December 31, 2015




		Page
Part I

Item 1.	Business	3
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	19

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 8.	Consolidated Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	107
Item 9A.	Controls and Procedures	107

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	108
Item 11.	Executive Compensation	108
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	108
Item 13.	Certain Relationships and Related Transactions, and Director Independence	109
Item 14.	Principal Accountant Fees and Services	109

Part IV

Item 15.	Exhibits and Financial Statements Schedules	110

Signatures		112

PART I

Note regarding forward-looking statements ⁽¹⁾

The Company intends that certain matters discussed by the Company 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 because the context statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” “estimates,” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including under the caption “Risk Factors” in Item 1A of this report and under “Cautionary Statements” in Item 7 of this report. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made as of the date indicated or, if a date is not indicated, as of the date of the filing of this report ( February 18, 2016 ), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Item 1. Business

General

Harley-Davidson Motor Company was founded in 1903. Harley-Davidson, Inc. was incorporated in 1981, at which time it purchased the Harley-Davidson ^® motorcycle business from AMF Incorporated in a management buyout. In 1986, Harley-Davidson, Inc. became publicly held. Unless the context otherwise requires, all references to the “Company” include Harley-Davidson, Inc. and all of its subsidiaries. Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS).

Segments

The Company operates in two reportable segments: the Motorcycles & Related Products (Motorcycles) segment and the Financial Services segment. While the two segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations, the two segments work closely together as described below.

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

The Financial Services segment consists of HDFS which provides wholesale and retail financing and insurance and insurance-related programs primarily to Harley-Davidson dealers and their retail customers. HDFS conducts business principally in the United States and Canada.

See Note 19 of Notes to Consolidated Financial Statements for financial information related to the Company’s reportable segments and revenue by geographic area.

Strategy

Harley-Davidson's purpose of fulfilling dreams of personal freedom is the foundation for the Company's core strategies, which include:

• delivering high-demand, profitable products and premium retail experiences;

• strengthening Harley-Davidson through agility and responsiveness to be a leader in the global marketplace;

• extending the Harley-Davidson brand's reach beyond core customers and markets; and

• cultivating great talent, leadership and culture to enable a sustainable future.

Motorcycles and Related Products Segment

Motorcycles, Parts and Accessories and General Merchandise – The primary business of the Motorcycles segment is to design, manufacture and sell at wholesale on-road Harley-Davidson motorcycles as well as a line of motorcycle parts, accessories, general merchandise and related services. Parts and Accessories (P&A) products are comprised of replacement

parts (Genuine Motor Parts) and mechanical and cosmetic accessories (Genuine Motor Accessories). General Merchandise includes MotorClothes ^® apparel and riding gear.

The following table includes the percent of total revenue by product line for the Motorcycles and Related Products segment :



	2015		2014		2013
Motorcycles	77.8	%	78.8	%	77.4	%
Parts & Accessories	16.2	%	15.7	%	16.6	%
General Merchandise	5.5	%	5.1	%	5.6	%
Other	0.5	%	0.4	%	0.4	%
	100.0	%	100.0	%	100.0	%

Harley-Davidson manufactures cruiser and touring motorcycles that feature classic styling, innovative design, distinctive sound, and superior quality with the ability to customize. The Company primarily produces on-road motorcycles with engine displacements of 601cc and greater. Its engines range in displacement from 494cc to 1802cc.

The on-road motorcycle market is comprised of the following categories:


•	Cruiser (emphasizes styling and owner customization);


•	Touring (emphasizes rider comfort and load capacity and incorporates features such as saddlebags, fairings, or large luggage compartments);


•	Standard (a basic motorcycle which usually features upright seating for one or two passengers);


•	Sportbike (incorporates racing technology, aerodynamic styling, low handlebars with a “sport” riding position and high performance tires); and


•	Dual (designed with the capability for use on public roads as well as for some off-highway recreational use).

The cruiser and touring categories were pioneered by the Company. In 2014, the Company unveiled Project LiveWire™, an electric motorcycle it is developing and continues to evaluate for possible distribution.

Competition in the motorcycle markets in which the Company competes is based upon a number of factors, including product capabilities and features, styling, price, quality, reliability, warranty, availability of financing, and quality of dealer network. The Company believes its motorcycles continue to generally command a premium price at retail relative to competitors’ motorcycles. The Company emphasizes remarkable styling, customization, innovation, sound, quality, and reliability in its products and generally offers a two-year warranty for its motorcycles. The Company considers the availability of a line of motorcycle parts and accessories and general merchandise, the availability of financing through HDFS and its global network of premium dealers to be competitive advantages.

In 2015 , the U.S. and European markets accounted for approximately 78% of the total annual independent dealer retail sales of new Harley-Davidson motorcycles. The Company also competes in other markets around the world. The most significant other markets for the Company, based on the Company's retail sales data, are Japan, Australia and Canada.

Harley-Davidson has been the historical market share leader in the U.S. 601+cc motorcycle market. According to the Motorcycle Industry Council (MIC), the cruiser and touring categories accounted for approximately 76% of total 2015 601+cc retail unit registrations in the U.S. During 2015 , the 601+cc portion of the market represented approximately 85% of the total U.S. motorcycle market in terms of new units registered.

The following chart includes U.S. retail registration data for 601+cc motorcycles for the years 2013 through 2015 :

U.S. Motorcycle Registration Data ^(a)(b)

601+cc (Units in thousands)



	2015		2014		2013
Total new motorcycle registrations	328.8		313.6		305.9
Harley-Davidson new registrations	165.1		167.1		167.8
	50.2	%	53.3	%	54.9	%


(a)	Data includes on-road 601+cc models. On-road 601+cc models include dual purpose models, three-wheeled vehicles and beginning in 2014, autocycles. Registration data for Harley-Davidson Street 500 ^® motorcycles is not included in this table.

(b)

U.S. industry data is derived from information provided by Motorcycle Industry Council (MIC). This third party data is subject to revision and update. The retail registration data for Harley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in Item 7 of this report. The Company’s source for retail sales data in Item 7 of this report is sales and warranty registrations provided by Harley-Davidson dealers as compiled by the Company. The retail sales data in Item 7 includes sales of Street 500 motorcycles which are excluded from the 601+cc units included in the retail registration data in this table. In addition, small differences may arise related to the timing of data submissions to the independent sources.

The European 601+cc motorcycle market is slightly larger than the U.S. market and customer preferences differ from those of U.S. customers. The touring and cruiser category represented approximately 52% of the European 601+cc market in 2015 compared to approximately 76% of the 601+ cc market in the U.S.

The following chart includes European retail registration data for 601+cc motorcycles for the years 2013 through 2015 :

European Motorcycle Registration Data ^(a)(b)

601+cc (Units in thousands)



	2015		2014		2013
Total new motorcycle registrations	351.7		319.8		281.8
Harley-Davidson new registrations	37.0		38.5		36.1
	10.5	%	12.0	%	12.8	%


(a)	On-road 601+cc models include dual purpose models, three-wheeled vehicles and beginning in 2015, autocycles. Registration data for Harley-Davidson Street 500 ^® motorcycles is not included in this table.

(b)

Europe data includes retail sales in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data is derived from information provided by Association des Constructeurs Europeens de Motocycles (ACEM), an independent agency. This third party data is subject to revision and update. The retail registration data for Harley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in Item 7 of this report. The Company’s source for retail sales data in Item 7 of this report is sales and warranty registrations provided by Harley-Davidson dealers as compiled by the Company. The retail sales data in Item 7 includes sales of Street 500 motorcycles which are excluded from the 601+cc units included in the retail registration data in this table. In addition, some differences may arise related to the timing of data submissions to the independent sources.

Licensing – The Company creates an awareness of the Harley-Davidson brand among its customers and the non-riding public through a wide range of products for enthusiasts by licensing the name “Harley-Davidson” and other trademarks owned by the Company. Royalty revenues from licensing, included in Motorcycles segment net revenue, were $46.5 million , $47.1 million and $58.9 million in 2015 , 2014 and 2013 , respectively.

Other Products and Services – The Company provides a variety of services to its independent dealers including motorcycle service and business management training programs and customized dealer software packages.

Patents and Trademarks – The Company strategically manages its portfolio of patents, trade secrets, copyrights, trademarks and other intellectual property.

The Company and its subsidiaries own, and continue to obtain, patent rights that relate to its motorcycles and related products and processes for their production. Certain technology-related intellectual property is also protected, where appropriate, by license agreements, confidentiality agreements or other agreements with suppliers, employees and other third parties. The Company diligently protects its intellectual property, including patents and trade secrets, and its rights to innovative and proprietary technology and designs. This protection, including enforcement, is important as the Company moves forward with investments in new products, designs and technologies. While the Company believes patents are important to its business operations and in the aggregate constitute a valuable asset, the success of the business is not dependent on any one patent or group of patents. The Company’s active patent portfolio has an average age for patents of approximately seven and a half years. A patent review committee manages the patent strategy and portfolio of the Company.

Trademarks are important to the Company’s motorcycle business and licensing activities. The Company has a vigorous worldwide program of trademark registration and enforcement to maintain and strengthen the value of the trademarks and prevent the unauthorized use of those trademarks. The HARLEY-DAVIDSON trademark and the Bar and Shield trademark are each highly recognizable to the public and are very valuable assets. Additionally, the Company uses numerous other trademarks, trade names and logos which are registered worldwide. The following are among the Company’s trademarks:

HARLEY-DAVIDSON, H-D, HARLEY, the Bar & Shield Logo, MOTORCLOTHES, the MotorClothes Logo, HARLEY OWNERS GROUP, H.O.G., the H.O.G. Logo, SOFTAIL, SPORTSTER and V-ROD. The HARLEY-DAVIDSON trademark has been used since 1903 and the Bar and Shield trademark since at least 1910. Substantially all of the Company’s trademarks are owned by H-D U.S.A., LLC, a subsidiary of the Company, which also manages the Company’s trademark strategy and portfolio.

Customers – Harley-Davidson appeals to a diverse range of customers across multiple demographics both in the U.S. and worldwide.

U.S. retail purchasers of new Harley-Davidson motorcycles include both core and outreach customers. The Company defines its U.S. core customers as Caucasian men over the age of 35 and its U.S. outreach customers as women (Caucasian, age 35+), young adults (ages 18-34), African-American adults (age 35+), and Latino adults (age 35+). In 2014 (which is the most recent data available), for the seventh straight year the Company was the market share leader in U.S. new motorcycle registrations (all cc's) within its core-customer segment and in each outreach customer segment. (Based on the Company's analysis of Polk new motorcycle registration data from IHS Automotive)

Outside the U.S., the Company's definition of core and outreach customers varies depending on the profile of its customers in each market. In general, the Company defines it core customers outside the U.S. as men over the age of 35 and its outreach customers outside the U.S. as women and young adults.

Marketing and Customer Experiences – The Company’s products are marketed to retail customers worldwide primarily through digital and experiential activities as well as through more traditional promotional and advertising activities. Additionally, the Company's independent dealers engage in a wide range of local marketing and experiential activities supported by cooperative programs with the Company.

Customer experiences have traditionally been at the center of much of the Company’s marketing. To attract customers and achieve its goals, the Company participates in motorcycle rallies around the world and also in major motorcycle consumer shows, racing activities, music festivals, mixed martial arts activities and other special promotional events.

One of the ways the Company promotes its Harley-Davidson products and the related lifestyle is through the Harley Owners Group (H.O.G. ^® ), which has approximately 1 million members worldwide, is the industry’s largest company-sponsored motorcycle enthusiast organization. H.O.G. ^® also sponsors many motorcycle events, including rallies and rides for Harley-Davidson motorcycle enthusiasts throughout the world.

The Company's Harley-Davidson ^® Riding Academy offers a series of rider education experiences that provide both new and experienced riders with deeper engagement in the sport of motorcycling by teaching basic and advanced motorcycling skills and knowledge. Since its inception, the program has trained more than 445,000 riders. The courses are conducted by a network of participating Harley-Davidson dealerships throughout the U.S., Canada, South Africa, China, Australia, Mexico and Brazil, enabling students to experience the Harley-Davidson lifestyle, environment, people and products as they learn.

The Harley-Davidson Authorized Tours program allows motorcyclists/enthusiasts to experience riding opportunities worldwide. Riders can also rent Harley-Davidson motorcycles worldwide from participating dealers through the Company’s Authorized Rentals Program.

The Company operates the Harley-Davidson Museum (Museum) in Milwaukee, Wisconsin. The Museum is a unique destination that the Company believes builds and strengthens bonds between riders and Harley-Davidson and enhances the Harley-Davidson brand among the public at large.

Distribution – The Company’s products are retailed through a network of independent dealers, of which the majority sell Harley-Davidson motorcycles exclusively. These dealerships stock and sell the Company’s motorcycles, P&A, general merchandise and licensed products, and perform service on Harley-Davidson motorcycles. The Company believes the quality retail experience that its independent dealers provide is a differentiating and strategic advantage for the Company.

P&A, general merchandise and licensed products are also retailed through eCommerce channels in certain markets. In the U.S., the eCommerce model is facilitated by the Company. Retail internet orders are fulfilled and shipped by the Company, which acts as a limited agent for participating authorized U.S. Harley-Davidson dealers who are the merchant of record for all transactions. In China and India, the eCommerce sites are operated by third-parties.

The Company distributes its motorcycles and related products to a network of independent dealers located in over 95 countries worldwide. The following table includes the number of worldwide Harley-Davidson independent dealerships by geographic region as of December 31, 2015 :

Americas Region

EMEA

Region

Asia-Pacific

Region

Total

United States

Canada

Latin America

Dealerships

696

378

232

1,435

Retail Customer and Dealer Financing – The Company believes that HDFS, as well as other financial services companies, provide adequate financing to Harley-Davidson dealers and their retail customers. HDFS provides financing to Harley-Davidson independent dealers and the retail customers of those dealers in the U.S. and Canada. The Company’s independent dealers and their retail customers in EMEA, Asia-Pacific and Latin America are not directly financed by HDFS, but have access to financing through other established financial services companies, some of which have licensing or branding agreements with the Company.

Seasonality – The timing of retail sales made by the Company’s independent dealers tracks closely with regional riding seasons. The seasonality of the Company’s wholesale motorcycle shipments primarily correlates with the timing of retail sales. The Company utilizes its flexible or surge manufacturing capabilities to help align the production and wholesale shipments of its motorcycles with the retail selling season. This allows the Company to minimize inventory levels in the Americas region. In the EMEA and Asia Pacific regions, the Company utilizes a distribution process whereby Company-owned inventory is maintained locally at a level sufficient to fulfill dealer orders as needed.

Motorcycle Manufacturing – The Company has a flexible manufacturing process designed to help ensure it is well-positioned to meet customer demand in a timely and cost-effective manner. ⁽¹⁾ This flexible or surge manufacturing capability allows the Company to increase the production of motorcycles ahead of and during the peak retail selling season to more closely correlate the timing of production and wholesale shipments to the retail selling season.

Most of the Company's manufacturing facilities are located in the U.S. Internationally, the Company operates a CKD (Complete Knock Down) assembly facility in Brazil, which assembles motorcycles sold in Brazil from component kits sourced from the Company’s U.S. plants and its suppliers. The Company also operates a manufacturing facility in India, which includes both CKD assembly of certain motorcycles for sale in India and production of the Company’s Street motorcycles for distribution to markets outside of North America. Like its U.S. manufacturing facilities, the Company’s Brazil and India operations are focused on driving world-class performance with flexible or surge production processes to meet customer demands at reduced lead times. The Company also operates a manufacturing facility in Australia for the purpose of producing certain complex, high-finish wheels for its motorcycles.

Raw Materials and Purchased Components – The Company continues to establish and reinforce long-term, mutually beneficial relationships with its suppliers. Through these collaborative relationships, the Company gains access to technical and commercial resources for application directly to product design, development and manufacturing initiatives. In addition, through a continued focus on collaboration and strong supplier relationships, the Company believes it will be positioned to achieve strategic objectives and deliver cost and quality improvement over the long-term ⁽¹⁾ .

The Company's principal raw materials that are purchased include steel and aluminum castings, forgings, steel sheets, coils and bars. The Company also purchases certain motorcycle components, including, but not limited to, electronic fuel injection systems, batteries, certain wheels, tires, seats, electrical components and instruments. The Company closely monitors the overall viability of its supply base. At this time, the Company does not anticipate difficulties in obtaining raw materials or components ⁽¹⁾ .

Research and Development – The Company incurred research and development expenses of $161.2 million , $138.3 million and $152.2 million during 2015 , 2014 and 2013 , respectively.

Regulation – International, federal, state and local authorities have various environmental control requirements relating to air, water and noise that affect the business and operations of the Company. The Company strives to ensure that its facilities and products comply with all applicable environmental regulations and standards.

The Company’s motorcycles that are sold in the United States are subject to certification by the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) for compliance with applicable emissions and noise standards. Harley-Davidson motorcycle products are designed to comply with EPA and CARB standards and the Company believes it will comply with future requirements when they go into effect ⁽¹⁾ . Additionally, the Company’s motorcycle products must comply with the motorcycle emissions, noise and safety standards of Canada, the European Union, Japan, Brazil and certain other foreign markets where they are sold, and the Company believes its products currently comply with those

standards. Because the Company expects that environmental standards will become more stringent over time, the Company will continue to incur research, development and production costs in this area for the foreseeable future ⁽¹⁾ .

The Company, as a manufacturer of motorcycle products, is subject to the U.S. National Traffic and Motor Vehicle Safety Act, which is administered by the U.S. National Highway Traffic Safety Administration (NHTSA). The Company has certified to NHTSA that its motorcycle products comply fully with all applicable federal motor vehicle safety standards and related regulations. The Company has from time to time initiated certain voluntary recalls. During the last three years, the Company has initiated 27 voluntary recalls related to Harley-Davidson motorcycles at a total cost of $58.1 million . The Company reserves for all estimated costs associated with recalls in the period that management approves and commits to the recall.

Employees – As of December 31, 2015 , the Motorcycles segment had approximately 5,700 employees.

Approximately 2,400 unionized employees at the manufacturing facilities are represented as follows:


•	York, Pennsylvania - represented by International Association of Machinist and Aerospace Workers (IAM), and the collective bargaining agreement will expire on October 15, 2022


•	Kansas City, Missouri - represented by United Steelworkers of America (USW), and IAM and the respective collective bargaining agreements will expire on July 31, 2018


•	Menomonee Falls, Wisconsin - represented by USW, and IAM and the respective collective bargaining agreements will expire on March 31, 2019


•	Tomahawk, Wisconsin - represented by USW, and the collective bargaining agreement will expire on March 31, 2019

Financial Services Segment

HDFS 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 is an agent for certain unaffiliated insurance companies providing motorcycle insurance and protection products to motorcycle owners. HDFS conducts business principally in the United States and Canada. The Company’s independent dealers and their retail customers in EMEA, Asia-Pacific and Latin America are not financed by HDFS, but have access to financing through other third-party financial institutions, some of which have licensing or branding agreements with the Company or HDFS.

Wholesale Financial Services – HDFS provides wholesale financial services to Harley-Davidson dealers, including floorplan and open account financing of motorcycles and motorcycle parts and accessories. HDFS offers wholesale financial services to Harley-Davidson dealers in the United States and Canada, and during 2015 , 100% of such dealers utilized those services at some point during the year. HDFS also previously offered financial services to the Harley-Davidson distributor in Canada. The wholesale finance operations of HDFS are located in Plano, Texas.

Retail Financial Services – HDFS provides retail financing to consumers, consisting primarily of installment lending for the purchase of new and used Harley-Davidson motorcycles. HDFS’ retail financial services are available through most Harley-Davidson dealerships in the United States and Canada. HDFS’ retail finance operations are principally located in Carson City, Nevada and Plano, Texas.

Insurance Services – HDFS operates as an agent for certain unaffiliated insurance companies offering point-of-sale protection products through most Harley-Davidson dealers in both the U.S. and Canada, including motorcycle insurance, extended service contracts, credit protection and motorcycle maintenance protection. HDFS also direct-markets motorcycle insurance and extended service contracts to owners of Harley-Davidson motorcycles. In addition, HDFS markets a comprehensive package of business insurance coverages and services to owners of Harley-Davidson dealerships. The HDFS insurance operations are located in Carson City, Nevada and Chicago, Illinois.

Licensing – HDFS has licensing arrangements with third-party financial institutions that issue credit cards bearing the Harley-Davidson brand. Internationally, HDFS licenses the Harley-Davidson brand to local third-party financial institutions that offer products to the Company’s retail customers such as financing and insurance.

Funding – The Company believes a diversified and cost effective funding strategy is important to meet HDFS’ goal of providing credit while delivering appropriate returns and profitability. Financial Services operations have been funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, term asset-backed securitizations and intercompany borrowings.

Competition – The Company regards its ability to offer a package of wholesale and retail financial services in the U.S. and Canada as a significant competitive advantage. Additionally, as the predominant lender to sub-prime customers for the purchase of motorcycles in the U.S. and Canada, HDFS enables retail sales of Harley-Davidson motorcycles with very attractive financial returns. Competitors in the financial services industry compete for business based largely on price and, to a

lesser extent, service. HDFS competes on convenience, service, brand association, dealer relations, industry experience, terms and price.

In the United States, HDFS financed 62.2% of the new Harley-Davidson motorcycles retailed by independent dealers during 2015 , compared to 56.8% in 2014 . In Canada, HDFS financed 39.2% of the new Harley-Davidson motorcycles retailed by independent dealers during 2015 , compared to 34.0% in 2014 . Competitors for retail motorcycle finance business are primarily banks, credit unions and other financial institutions. In the motorcycle insurance business, competition primarily comes from national insurance companies and from insurance agencies serving local or regional markets. For insurance-related products such as extended service contracts, HDFS faces competition from certain regional and national industry participants as well as dealer in-house programs. Competition for the wholesale motorcycle finance business primarily consists of banks and other financial institutions providing wholesale financing to Harley-Davidson dealers in their local markets.

Trademarks – HDFS uses various trademarks and trade names for its financial services and products which are licensed from H-D U.S.A., LLC, including HARLEY-DAVIDSON, H-D and the Bar & Shield logo.

Seasonality – HDFS experiences seasonal variations in retail financing activities based on the timing of regional riding seasons in the U.S. and Canada. In general, from mid-March through August, retail financing volume is greatest. HDFS wholesale financing volume is affected by inventory levels at Harley-Davidson dealers. Although the Company's surge production capabilities help reduce seasonal fluctuations in dealer inventory levels for new motorcycles, dealers generally have higher inventory levels of new and used motorcycles in the late fall and winter than during the spring and summer riding season. As a result, wholesale financing volume is higher during fall and winter as compared to the rest of the year.

Regulation – The operations of HDFS (both U.S. and foreign) are subject, in certain instances, to supervision and regulation by state and federal administrative agencies and various foreign governmental authorities. Many of the statutory and regulatory requirements imposed by such entities are in place to provide consumer protection as it pertains to the selling and ongoing servicing of financial products and services. Therefore, operations may be subject to various regulations, laws and judicial and/or administrative decisions imposing requirements and restrictions, which among other things: (a) regulate credit granting activities, including establishing licensing requirements, in applicable jurisdictions; (b) establish maximum interest rates, finance charges and other charges; (c) regulate customers’ insurance coverage; (d) require disclosure of credit and insurance terms to customers; (e) govern secured transactions; (f) set collection, foreclosure, repossession and claims handling procedures and other trade practices; (g) prohibit discrimination in the extension of credit and administration of loans; (h) regulate the use and reporting of information related to a borrower; (i) require certain periodic reporting; (j) govern the use and protection of non-public personal information; (k) regulate the use of information reported to the credit reporting agencies; (l) regulate the reporting of information to the credit reporting agencies; and/or (m) regulate insurance solicitation and sales practices.

Such regulatory requirements and associated supervision could limit the discretion of HDFS in operating its business. Noncompliance with applicable statutes or regulations could result in the suspension or revocation of any charter, license or registration at issue, as well as the imposition of civil fines, criminal penalties and administrative sanctions. The Company cannot assure that the applicable laws or regulations will not be amended or construed in ways that are adverse to HDFS, that new laws or regulations will not be adopted in the future, or that laws or regulations will not attempt to limit the interest rates charged by HDFS, any of which may adversely affect the business of HDFS or its results of operations.

A subsidiary of HDFS, Eaglemark Savings Bank (ESB), is a Nevada state thrift chartered as an Industrial Loan Company (ILC). As such, the activities of this subsidiary are governed by federal laws and regulations as well as State of Nevada banking laws, and are subject to examination by the Federal Deposit Insurance Corporation (FDIC) and Nevada state bank examiners. The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed into law in 2010, granted the federal Consumer Financial Protection Bureau (CFPB) significant supervisory, enforcement, and rule-making authority in the area of consumer financial products and services. While direct supervision of ESB will remain with the FDIC and the State of Nevada, certain CFPB regulations will directly impact HDFS and its operations. On September 17, 2014, the CFPB proposed a rule that would expand the scope of its supervisory authority to include non-bank larger participants in the vehicle financing market. This proposed rule became effective on August 31, 2015, giving the CFPB supervisory authority over a non-bank subsidiary of HDFS, allowing the CFPB to conduct comprehensive and rigorous on-site examinations that could result in enforcement

actions, fines, regulatorily-mandated changes to processes and procedures, product-related changes or consumer refunds, or other actions.

ESB originates retail loans and sells the loans to a non-banking subsidiary of HDFS. This process allows HDFS to offer retail products with many common characteristics across the United States and to similarly service loans to U.S. retail customers.

Employees – As of December 31, 2015 , the Financial Services segment had approximately 600 employees.

Internet Access

The Company’s internet website address is www.harley-davidson.com. The Company makes available free of charge (other than an investor’s own internet access charges) through its internet website the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after it electronically files such material with, or furnishes such material to, the United States Securities and Exchange Commission (SEC). In addition, the Company makes available, through its website, the following corporate governance materials: (a) the Company’s Corporate Governance Policy; (b) Committee Charters approved by the Company’s Board of Directors for the Audit Committee, Human Resources Committee, Nominating and Corporate Governance Committee and Sustainability Committee; (c) the Company’s Financial Code of Ethics; (d) the Company’s Code of Business Conduct (the Code of Conduct) in nine languages including English; (e) the Conflict of Interest Process for Directors, Executive Officers and Other Employees (the Conflict Process); (f) a list of the Company’s Board of Directors; (g) the Company’s By-laws; (h) the Company’s Environmental Policy; (i) the Company’s Policy for Managing Disclosure of Material Information; (j) the Company’s Supplier Code of Conduct; (k) the Sustainability Strategy Report; (l) the list of compensation survey participants used as market reference points for various components of compensation as reported in the Company’s Notice of Annual Meeting and Proxy Statement filed with the SEC on March 16, 2015, which compensation relates to the Company’s named executive officers; (m) the California Transparency in Supply Chain Act Disclosure; (n) Statement on Conflict Minerals; (o) Political Engagement and Contributions 2014-2015; and (p) the Company's Clawback Policy. This information is also available from the Company upon request. The Company satisfies the disclosure requirements under the Code of Conduct, the Conflict Process and applicable New York Stock Exchange listing requirements regarding waivers of the Code of Conduct or the Conflict Process by disclosing the information in the Company’s proxy statement for its annual meeting of shareholders or on the Company’s website. The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

Item 1A. Risk Factors

An investment in Harley-Davidson, Inc. involves risks, including those discussed below. These risk factors should be considered carefully before deciding whether to invest in the Company.


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

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

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The Company is exposed to market risk from changes in foreign exchange rates, commodity prices and interest rates. The Company sells its products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, a weakening in those foreign currencies relative to the U.S. dollar can adversely affect the Company's revenue and margin, and cause volatility in results of operations. The Company is also subject to risks associated with changes in prices of commodities. Earnings from the Company’s financial services business are affected by changes in interest rates. Although the Company uses derivative financial instruments to some extent to attempt to manage a portion of its exposure to foreign currency exchange rates and commodity prices, the Company

does not attempt to manage its entire expected exposure, and these instruments generally do not extend beyond one year and may expose the Company to credit risk in the event of counterparty default to the derivative financial instruments. There can be no assurance that in the future the Company will successfully manage these risks.

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The Company sells its products at wholesale and must rely on a network of independent dealers to manage the retail distribution of its products. The Company depends on the capability of its independent dealers to develop and implement effective retail sales plans to create demand among retail purchasers for the motorcycles and related products and services that the dealers purchase from the Company. If the Company’s independent dealers are not successful in these endeavors, then the Company will be unable to maintain or grow its revenues and meet its financial expectations. Further, independent dealers may experience difficulty in funding their day-to-day cash flow needs and paying their obligations resulting from adverse business conditions such as weakened retail sales and tightened credit. If dealers are unsuccessful, they may exit or be forced to exit the business or, in some cases, the Company may seek to terminate relationships with certain dealerships. As a result, the Company could face additional adverse consequences related to the termination of dealer relationships. Additionally, liquidating a former dealer’s inventory of new and used motorcycles can add downward pressure on new and used motorcycle prices. Further, the unplanned loss of any of the Company’s independent dealers may lead to inadequate market coverage for retail sales of new motorcycles and for servicing previously sold motorcycles, create negative impressions of the Company with its retail customers, and adversely impact the Company’s ability to collect wholesale receivables that are associated with that dealer.

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A cybersecurity breach may adversely affect the Company’s reputation, revenue and earnings. The Company and certain of its third-party service providers and vendors receive, store, and transmit digital personal information in connection with the Company’s human resources operations, financial services operations, e-commerce, the Harley Owners Group, dealer management, and other aspects of its business. The Company’s information systems, and those of its third-party service providers and vendors, are vulnerable to the increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to these systems or the information the Company and its third-party service providers and vendors maintain and use through fraud or other means of deceiving our employees and third-party service providers and vendors. Hardware, software or applications the Company develops or obtains from third-parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security and/or the Company’s operations. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or detect. The Company has implemented and regularly reviews and updates processes and procedures to protect against unauthorized access to or use of secured data and to prevent data loss. However, the ever-evolving threats mean the Company and third-party service providers and vendors must continually evaluate and adapt systems and processes, and there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data. The Company has experienced information security attacks, but to date they have not compromised the Company’s computing environment or resulted in a material impact on the Company’s business or operations or the release of confidential information about employees, customers, dealers, suppliers or other third parties. Any future significant compromise or breach of the Company’s data security, whether external or internal, or misuse of customer, employee, dealer, supplier or Company data could result in disruption to the Company’s operations, significant costs, lost sales, fines and lawsuits, and/or damage to the Company’s reputation. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and evolving requirements, compliance could also result in the Company being required to incur additional costs.

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The Company’s marketing strategy of appealing to and growing sales to multi-generational and multi-cultural customers worldwide may not continue to be successful. The Company has been successful in marketing its products in large part by promoting the experience of Harley-Davidson motorcycling. To sustain and grow the business over the long-term, the Company must continue to be successful selling products and promoting the experience of motorcycling to both core customers and outreach customers such as women, young adults and ethnically diverse adults. The Company must also execute its multi-generational and multi-cultural strategy without adversely impacting the strength of the brand with core customers. Failure to successfully drive demand for the Company's products may have a material adverse effect on the Company's business and results of operations.

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The Company’s ability to remain competitive is dependent upon its capability to develop and successfully introduce new, innovative and compliant products. The motorcycle market continues to change in terms of styling preferences and advances in new technology and, at the same time, be subject to increasing regulations related to safety and emissions. The Company must continue to distinguish its products from its competitors’ products with unique styling and new technologies. As the Company incorporates new and different features and technology into its products, the Company must protect its intellectual property from imitators and ensure its products do not infringe the intellectual property of other companies. In addition, these new products must comply with applicable regulations

worldwide and satisfy the potential demand for products that produce lower emissions and achieve better fuel economy. The Company must make product advancements while maintaining the classic look, sound and feel associated with Harley-Davidson products. The Company must also be able to design and manufacture these products and deliver them to a global marketplace in an efficient and timely manner. There can be no assurances that the Company will be successful in these endeavors or that existing and prospective customers will like or want the Company’s new products.

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Expanding international sales and operations subjects the Company to risks that may have a material adverse effect on its business. Expanding international sales and operations is a part of the Company’s long-term business strategy. To support that strategy, the Company must increase its presence outside the U.S., including additional employees and investment in business infrastructure and operations. International operations and sales are subject to various risks, including political and economic instability, local labor market conditions, the imposition of foreign tariffs and other trade barriers, the impact of foreign government laws and regulations and U.S. laws and regulations that apply to international operations, and the effects of income and withholding taxes, governmental expropriation and differences in business practices. The Company may incur increased costs and experience delays or disruptions in product deliveries and payments in connection with international operations and sales that could cause loss of revenues and earnings. Unfavorable changes in the political, regulatory and business climate could have a material adverse effect on the Company’s net sales, financial condition, profitability or cash flows. Violations of laws that apply to the Company's foreign operations, such as the U.S. Foreign Corrupt Practices Act, could result in severe criminal or civil sanctions, could disrupt the Company's business and result in an adverse effect on the Company's reputation, business and results of operations.


•	Retail sales of the Company's independent dealers may be impacted by weather. The Company has observed that abnormally cold and/or wet conditions in a region could have the effect of reducing demand or changing the timing for purchases of new Harley-Davidson motorcycles. Reduced demand for new Harley-Davidson motorcycles ultimately leads to reduced shipments by the Company.

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Retail sales of new motorcycles by the Company’s independent dealers may be adversely impacted by increased supply of and/or declining prices for used motorcycles and excess supply of new motorcycles. The Company has observed that when prices for used Harley-Davidson motorcycles have declined, it can have the effect of reducing demand among retail purchasers for new Harley-Davidson motorcycles (at or near manufacturer’s suggested retail prices). Further, the Company and its independent dealers can and do take actions that influence the markets for new and used motorcycles. For example, introduction of new motorcycle models with significantly different functionality, technology or other customer satisfiers can result in increased supply of used motorcycles, and a decrease in the inventory of used motorcycles available for sale at Harley-Davidson dealers in the U.S. may result in an increased supply or decreased demand in the market for used Harley-Davidson-branded motorcycles, which could result in declining prices for used motorcycles, and prior model-year new motorcycles. Also, while the Company has taken steps designed to balance production volumes for its new motorcycles with demand, those steps may not be effective, or the Company’s competitors could choose to supply new motorcycles to the market in excess of demand at reduced prices which could also have the effect of reducing demand for new Harley-Davidson motorcycles (at or near manufacturer’s suggested retail prices). Ultimately, reduced demand among retail purchasers for new Harley-Davidson motorcycles leads to reduced shipments by the Company.

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

The Company’s domestic sales and operations are subject to governmental policies and regulatory actions of agencies of the United States Government, including the Environmental Protection Agency (EPA), SEC, National Highway Traffic Safety Administration, Department of Labor and Federal Trade Commission. In addition, the Company’s sales and operations are also subject to laws and actions of state legislatures and other local regulators, including dealer statutes and licensing laws. Changes in regulations or the imposition of additional regulations may have a material adverse effect on the Company’s business and results of operations.

Tax - The Company is subject to income and non-income based taxes in the U.S. and in various foreign jurisdictions. Significant judgment is required in determining the Company's worldwide income tax liabilities and other tax liabilities. The Company believes that it complies with applicable tax law. If the governing tax authorities have a different interpretation of the applicable law or if there is a change in tax law, the Company's financial condition and/or results of operations may be adversely affected.

Environmental - The Company’s motorcycle products use internal combustion engines. These motorcycle products are subject to statutory and regulatory requirements governing emissions and noise, including standards imposed by the EPA, state regulatory agencies, such as California Air Resources Board, and regulatory agencies in certain foreign countries where the Company’s motorcycle products are sold. The Company is also subject to statutory and regulatory requirements governing emissions and noise in the conduct of the Company’s manufacturing operations. Any significant change to the regulatory requirements governing emissions and noise may substantially increase the cost of manufacturing the Company’s products. If the Company fails to meet existing or new requirements, then the Company may be unable to sell certain products or may be subject to fines or penalties. Further, in response to concerns about global climate changes and related changes in consumer preferences, the Company may face greater regulatory or customer pressure to develop products that generate less emissions. This may require the Company to spend additional funds on research, product development, and implementation costs and subject the Company to the risk that the Company’s competitors may respond to these pressures in a manner that gives them a competitive advantage.

Financial Services - The Company’s financial services operations are governed by various foreign, federal and state laws that more specifically affect general financial and lending institutions. The financial services operations originate the majority of its consumer loans through its subsidiary, Eaglemark Savings Bank, a Nevada state thrift chartered as an industrial loan company. Congress has previously considered and may in the future impose additional regulation and supervision over the financial services industry.

Depending on the provisions of the applicable laws and regulations, the interpretation of laws and regulations and the specific facts and circumstances involved, violations of or non-compliance with these laws may limit the ability of HDFS to collect all or part of the principal or interest on applicable loans, may entitle the borrower to rescind the loan or obtain a refund of amounts previously paid, could subject HDFS to payment of damages or penalties and administrative sanctions, including "cease and desist" orders, and could limit the number of loans eligible for HDFS securitizations programs. Such regulatory requirements and associated supervision could limit the discretion of HDFS in operating its business. Noncompliance with applicable statutes or regulations could result in the suspension or revocation of any charter, license or registration at issue, as well as the imposition of civil fines, criminal penalties and administrative sanctions. The Company cannot assure that the applicable laws or regulations will not be amended or construed in ways that are adverse to HDFS, that new laws and regulations will not be adopted in the future, or that laws and regulations will not attempt to limit the interest rates charged by HDFS, any of which may adversely affect the business of HDFS or its results of operations.

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was passed into law. The Dodd-Frank Act is a sweeping piece of legislation, and the financial services industry is still assessing the impacts. Congress detailed some significant changes, but the Dodd-Frank Act leaves many details to be determined by regulation and further study. The full impact will not be fully known for years, as regulations that are intended to implement the Dodd-Frank Act are adopted by the appropriate agencies, and the text of the Dodd-Frank Act is analyzed by impacted stakeholders and possibly the courts. The Dodd-Frank Act also created the Consumer Financial Protection Bureau (CFPB), housed in the Federal Reserve. The CFPB has been granted significant enforcement and rule-making authority in the area of consumer financial products and services. The direction that the CFPB will take, the regulations it will adopt, and its interpretation of existing laws and regulations are all elements that are not yet known. Compliance with the law may be costly and could affect operating results as the implementation of new forms, processes, procedures and controls and infrastructure may be required to comply with the regulations. Compliance may create operational constraints and place limits on pricing. Failure to comply with these regulations, changes in these or other regulations, or the imposition of additional regulations, could affect HDFS’ earnings, limit its access to capital, limit the number of loans eligible for HDFS securitization programs and have a material adverse effect on HDFS’ business and results of operations. On September 17, 2014 the CFPB proposed a rule that would expand the scope of its supervisory authority to include non-bank larger participants in the vehicle financing market. This proposed rule became effective on August 31, 2015, giving the CFPB supervisory authority over a non-bank subsidiary of HDFS, allowing the CFPB to conduct comprehensive and rigorous on-site examinations that could result in enforcement actions, fines, regulatorily mandated changes to processes and procedures, product-related changes or consumer refunds, or other actions.

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

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

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The Company must invest in and successfully implement new information systems and technology. The Company is continually modifying and enhancing its systems and technology to increase productivity and efficiency and to mitigate failure risks from older/aged technologies currently in its portfolio. The Company has several large, strategic information system projects in process. As new systems and technologies (and related strategies) are implemented, the Company could experience unanticipated difficulties resulting in unexpected costs and adverse impacts to its manufacturing and other business processes. When implemented, the systems and technology may not provide the benefits anticipated and could add costs and complications to ongoing operations and older technologies may fail, which may have a material adverse effect on the Company’s business and results of operations.

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The Company must prevent and detect issues with its products, components purchased from suppliers, and its and its suppliers’ manufacturing processes to reduce the risk of recall campaigns, increased warranty costs or litigation, increased product liability claims or litigation, delays in new model launches, and inquiries or investigations by regulatory agencies. The Company must also complete any recall campaigns within cost expectations. The Company must continually improve and adhere to product development and manufacturing processes, and ensure that its suppliers and their sub-tier suppliers adhere to product development and manufacturing processes, to ensure high quality products are sold to retail customers. If product designs or manufacturing processes are defective, the Company could experience delays in new model launches, product recalls, inquiries or investigations from regulatory agencies, warranty claims, and product liability claims, which may involve purported class actions. While the Company uses reasonable methods to estimate the cost of warranty, recall and product liability costs and appropriately reflects those in its financial statements, there is a risk the actual costs could exceed estimates. Further, selling products with poor quality and the announcement of recalls may also adversely affect the Company’s reputation and brand strength.

•

The Company relies on third parties to perform certain operating and administrative functions for the Company. Similar to suppliers of raw materials and components, the Company may experience problems with outsourced services, such as unfavorable pricing, untimely delivery of services, or poor quality. Also, these suppliers may experience adverse economic conditions due to difficulties in the global economy that could lead to difficulties supporting the Company's operations. In light of the amount and types of functions that the Company has outsourced, these service provider risks may have a material adverse effect on the Company's business and results of operations.

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The Company manufactures products that create exposure to product liability claims and litigation. To the extent plaintiffs are successful in showing that personal injury or property damage result from defects in the design or manufacture of the Company’s products, the Company may be subject to claims for damages that are not covered by insurance. The costs associated with defending product liability claims, including frivolous lawsuits, and payment of damages could be substantial. The Company’s reputation may also be adversely affected by such claims, whether or not successful.

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The Company is and may in the future become subject to legal proceedings and commercial or contractual disputes. The uncertainty associated with substantial unresolved claims and lawsuits may harm the Company’s business, financial condition, reputation and brand. The defense of the lawsuits may result in the expenditures of significant financial resources and the diversion of management’s time and attention away from business operations. In addition, although the Company is unable to determine the amount, if any, that it may be required to pay in

connection with the resolution of the lawsuits by settlement or otherwise, any such payment may have a material adverse effect on the Company’s business and results of operations. Refer to the Company’s disclosures concerning legal proceedings in the periodic reports that the Company files with the Securities and Exchange Commission (SEC) for additional detail regarding lawsuits and other claims against the Company.

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The Company’s success depends upon the continued strength of the Harley-Davidson brand. The Company believes that the Harley-Davidson brand has significantly contributed to the success of its business and that maintaining and enhancing the brand is critical to expanding its customer base. Failure to protect the brand from infringers or to grow the value of the Harley-Davidson brand may have a material adverse effect on the Company’s business and results of operations.

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The Company must maintain stakeholder confidence in its operating ethics and corporate governance practices. The Company believes it has a history of good corporate governance. Prior to the enactment of the Sarbanes-Oxley Act of 2002, the Company had in place many of the corporate governance procedures and processes now mandated by the Sarbanes-Oxley Act and related rules and regulations, such as Board Committee Charters and a Corporate Governance Policy. In 1992, the Company established a Code of Business Conduct that defines how employees interact with various Company stakeholders and addresses issues such as confidentiality, conflict of interest and fair dealing. Failure to maintain its reputation for good corporate governance may have a material adverse effect on the Company’s business and results of operations.

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

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

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

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

countries have laws and regulations that prohibit motorcycles from being operated on certain roads and highways. These types of laws and regulations could adversely impact the Company’s plans to expand international sales.

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The Company has a number of competitors, some of which have greater financial resources than the Company. Many of the Company’s competitors are more diversified than the Company, and they may compete in all segments of the motorcycle market, other powersports markets and/or the automotive market. Certain competitors appear to be increasing their investment in products that compete with the Company's products. Also, the Company’s manufacturer’s suggested retail price for its motorcycles is generally higher than its competitors, and if price becomes a more important competitive factor for consumers in the markets in which the Company competes, the Company may be at a competitive disadvantage. Furthermore, many competitors headquartered outside the U.S. experience a financial benefit from a strengthening in the U.S. dollar relative to their home currency that can be used to fund discounted prices to U.S. consumers. In addition, the Company’s financial services operations face competition from various banks, insurance companies and other financial institutions that may have access to additional sources of capital at more competitive rates and terms, particularly for borrowers in higher credit tiers. The Company's responses to these competitive pressures, or its failure to adequately address and respond to these competitive pressures, may have a material adverse effect on the Company’s business and results of operations.

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The Company’s operations are dependent upon attracting and retaining skilled employees, including skilled labor, executive officers and other senior leaders. The Company’s future success depends on its continuing ability to identify, hire, develop, motivate, retain and promote skilled personnel for all areas of its organization. The Company’s current and future total compensation arrangements, which include benefits and incentive awards, may not be successful in attracting new employees and retaining and motivating the Company’s existing employees. In addition, the Company must cultivate and sustain a work environment where employees are engaged and energized in their jobs to maximize their performance. If the Company does not succeed in attracting new personnel, retaining existing personnel, implementing effective succession plans and motivating and engaging personnel, including executive officers, the Company may be unable to develop and distribute products and services and effectively execute its plans and strategies.

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

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

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The Financial Services operations are exposed to credit risk on its retail and wholesale receivables. Credit risk is the risk of loss arising from a failure by a customer, including the Company's independent dealers, to meet the terms of any contract with the Company’s financial services operations. Credit losses are influenced by general business and economic conditions, including unemployment rates, bankruptcy filings and other factors that negatively affect household incomes, as well as contract terms and customer credit profiles. Credit losses are also influenced by the markets for new and used motorcycles, and the Company and its independent dealers can and do take actions that impact those markets. For example, the introduction of new models by the Company that represent significant upgrades on previous models or a decrease in the inventory of used motorcycles available for sale at Harley-Davidson dealers in the U.S. may result in increased supply or decreased demand in the market for used Harley-Davidson-branded motorcycles, including motorcycles securing credit that HDFS has extended. This in turn could adversely impact the prices at which those motorcycles may be sold, which may lead to increased credit losses for HDFS.

Negative changes in general business, economic or market factors may have an additional adverse impact on the Company’s financial services credit losses and future earnings. The Company believes HDFS' retail credit losses may continue to increase over time due to changing consumer credit behavior and HDFS' efforts to increase prudently structured loan approvals in the sub-prime lending environment. Increases in the frequency of loss and decreases in the value of repossessed Harley-Davidson branded motorcycles also adversely impact credit losses. If there are adverse circumstances that involve a material decline in values of Harley-Davidson branded motorcycles, those circumstances or any related decline in resale values for Harley-Davidson branded motorcycles could contribute to increased delinquencies and credit losses.

•

The Company’s Motorcycles segment is dependent upon unionized labor . Substantially all of the hourly production employees working in the Motorcycles segment are represented by unions and covered by collective bargaining agreements. Harley-Davidson Motor Company is currently a party to five collective bargaining agreements with local affiliates of the International Association of Machinists and Aerospace Workers and the United Steelworkers of America. Current collective bargaining agreements with hourly employees in Missouri, Wisconsin and Pennsylvania will expire in 2018, 2019 and 2022, respectively. Collective bargaining agreements generally cover wages, healthcare benefits and retirement plans, seniority, job classes and work rules. There is no certainty that the Company will be successful in negotiating new agreements with these unions that extend beyond the current expiration dates or that these new agreements will be on terms that will allow the Company to be competitive. Failure to renew these agreements when they expire or to establish new collective bargaining agreements on terms acceptable to the Company and the unions could result in the relocation of production facilities, work stoppages or other labor disruptions which may have a material adverse effect on customer relationships and the Company’s business and results of operations.

•

The Company’s operations may be affected by greenhouse emissions and climate change and related regulations . Climate change is receiving increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. Congress has previously considered and may in the future implement restrictions on greenhouse gas emissions. In addition, several states, including states where the Company has manufacturing plants, have previously considered and may in the future implement greenhouse gas registration and reduction programs. Energy security and availability and its related costs affect all aspects of the Company’s manufacturing operations in the United States, including the Company’s supply chain. The Company’s manufacturing plants use energy, including electricity and natural gas, and certain of the Company’s plants emit amounts of greenhouse gas that may be affected by these legislative and regulatory efforts. Greenhouse gas regulation could increase the price of the electricity the Company purchases, increase costs for use of natural gas, potentially restrict access to or the use of natural gas, require the Company to purchase allowances to offset the Company’s own emissions or result in an overall increase in costs of raw materials, any one of which could increase the Company’s costs, reduce competitiveness in a global economy or otherwise negatively affect the Company’s business, operations or financial results. Many of the Company’s suppliers face similar circumstances. Physical risks to the Company’s business operations as identified by the Intergovernmental Panel on Climate Change and other expert bodies include scenarios such as sea level rise, extreme weather conditions and resource shortages. Extreme weather may disrupt the production and supply of component parts or other items such as natural gas, a fuel necessary for the manufacture of motorcycles and their components. Supply disruptions would raise market rates and jeopardize the continuity of motorcycle production.

•

Regulations related to conflict minerals and other materials that the Company purchases to use in its products will cause the Company to incur additional expenses and may have other adverse consequences. The SEC adopted inquiry, diligence and disclosure requirements related to certain minerals sourced from the Democratic Republic of Congo and surrounding countries, or "conflict minerals", that are necessary to the functionality of a product manufactured, or contracted to be manufactured, by an SEC reporting company. Compliance with the disclosure requirements could affect the sourcing and availability of some of the minerals that the Company uses in the manufacturing of its products. The Company's supply chain is complex, and if it is not able to determine the source and chain of custody for all conflict minerals used in its products that are sourced from the Democratic Republic of Congo and surrounding countries or determine that its products are "conflict free", then the Company may face reputational challenges with customers, investors or others. Additionally, as there may be only a limited number of suppliers offering "conflict free" minerals, if the Company chooses to use only conflict minerals that are "conflict free", the Company cannot be sure that it will be able to obtain necessary materials from such suppliers in sufficient quantities or at competitive prices. Accordingly, the Company could incur significant costs related to the compliance process, including potential difficulty or added costs in satisfying the disclosure requirements. Other laws or regulations impacting our supply chain, such as the UK Modern Slavery Act, may have similar consequences.

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.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The following is a summary of the principal operating properties of the Company as of December 31, 2015 :

Motorcycles & Related Products Segment



Type of Facility	Location	Approximate Square Feet	Status
Corporate Office	Milwaukee, WI	515,000	Owned
Museum	Milwaukee, WI	130,000	Owned
Manufacturing ⁽¹⁾	Menomonee Falls, WI	915,000	Owned
Product Development Center	Wauwatosa, WI	409,000	Owned
Manufacturing ⁽²⁾	Tomahawk, WI	226,000	Owned
Manufacturing ⁽³⁾	York, PA	616,000	Owned
Manufacturing ⁽⁴⁾	Kansas City, MO	456,000	Owned
Manufacturing ⁽⁵⁾	Manaus, Brazil	100,000	Lease expiring 2020
Regional Office	Oxford, England	39,000	Lease expiring 2017
Manufacturing ⁽⁶⁾	Bawal, India	64,000	Lease expiring 2016
Regional Office	Singapore	24,000	Lease expiring 2020
Manufacturing ⁽⁷⁾	Adelaide, Australia	485,000	Lease expiring 2017


(1)	Motorcycle powertrain production.


(2)	Plastic parts production and painting.


(3)	Motorcycle parts fabrication, painting and Softail ^® and touring model assembly.


(4)	Motorcycle parts fabrication, painting and Dyna ^® , Sportster ^® , Softail ^® , V-Rod ^® and Street platform assembly.


(5)	Assembly of select models for the Brazilian market.


(6)	Assembly of select models for the Indian market and production of the Street platform for non-North American markets.


(7)	Motorcycle wheel production.

Financial Services Segment



Type of Facility	Location	Approximate Square Feet	Status
Office	Chicago, IL	26,000	Lease expiring 2022
Office	Plano, TX	69,321	Lease expiring 2025
Office	Carson City, NV	100,000	Owned

The Financial Services segment has three office facilities: Chicago, Illinois (corporate headquarters); Plano, Texas (wholesale and retail operations); and Carson City, Nevada (retail and insurance operations).

Item 3. Legal Proceedings

The Company is subject to lawsuits and other claims related to environmental, product and other matters. In determining required reserves 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 required reserves are monitored on an ongoing basis and are updated based on new developments or new information in each matter.

Environmental Protection Agency Notice

In December 2009, the Company received formal, written requests for information from the United States Environmental Protection Agency (EPA) regarding: (i) certificates of conformity for motorcycle emissions and related designations and labels, (ii) aftermarket parts, and (iii) warranty claims on emissions related components. The Company promptly submitted written responses to the EPA’s inquiry and has engaged in discussions with the EPA. Since that time, the EPA has delivered various additional requests for information to which the Company has responded. It is probable that a result of the EPA’s investigation will be some form of enforcement action by the EPA that will seek a fine and/or other relief. The Company has a reserve associated with this matter which is included in accrued liabilities in the Consolidated Balance Sheet. However, given the uncertainty that still exists concerning the resolution of this matter, there is a possibility that the actual loss incurred may be materially different than the Company’s current reserve. At this time, the Company cannot reasonably estimate the impact of any remedies the EPA might seek beyond the Company's current reserve for this matter, if any.

York Environmental Matters:

The Company is involved with government agencies and groups of potentially responsible parties in various environmental matters, including a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. Although the Company is not certain as to the full extent of the environmental contamination at the York facility, it has been working with the Pennsylvania Department of Environmental Protection (PADEP) since 1986 in undertaking environmental investigation and remediation activities, including an ongoing site-wide remedial investigation/feasibility study (RI/FS). In January 1995, the Company entered into a settlement agreement (the Agreement) with the Navy, and the parties amended the Agreement in 2013 to address ordnance and explosive waste.

The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of future costs associated with environmental investigation and remediation activities at the York facility (Response Costs). The trust administers the payment of the Response Costs incurred at the York facility as covered by the Agreement.

The Company has a reserve for its estimate of its share of the future Response Costs at the York facility which is included in accrued liabilities in the Condensed Consolidated Balance Sheets. As noted above, the RI/FS is still underway and given the uncertainty that exists concerning the nature and scope of additional environmental investigation and remediation that may ultimately be required under the RI/FS or otherwise at the York facility, the Company is unable to make a reasonable estimate of those additional costs, if any, that may result.

The estimate of the Company’s future Response Costs that will be incurred at the York facility is based on reports of independent environmental consultants retained by the Company, the actual costs incurred to date and the estimated costs to complete the necessary investigation and remediation activities. Response Costs are expected to be paid over the next several years.

Product Liability Matters:

The Company is involved in product liability suits related to the operation of its business. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and that product liability suits will not have a material adverse effect on the Company’s consolidated financial statements.

Item 4. Mine Safety Disclosures

Not Applicable

PART II


Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

Harley-Davidson, Inc. common stock is traded on the New York Stock Exchange, Inc. The high and low market prices for the common stock, reported as New York Stock Exchange, Inc. Composite Transactions, were as follows:



2015	Low		High		2014	Low		High
First quarter	$	58.24	$	66.58	First quarter	$	60.55	$	70.04
Second quarter	$	53.04	$	62.96	Second quarter	$	63.74	$	74.13
Third quarter	$	50.64	$	60.67	Third quarter	$	60.24	$	70.65
Fourth quarter	$	45.00	$	57.10	Fourth quarter	$	54.22	$	70.41

The Company paid the following dividends per share:



	2015		2014		2013
First quarter	$	0.310	$	0.275	$	0.210
Second quarter	0.310		0.275		0.210
Third quarter	0.310		0.275		0.210
Fourth quarter	0.310		0.275		0.210
Total	$	1.240	$	1.100	$	0.840

As of January 29, 2016 , there were 75,729 shareholders of record of Harley-Davidson, Inc. common stock.

The following table contains detail related to the repurchase of common stock based on the date of trade during the quarter ended December 31, 2015 :



2015 Fiscal Period	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
September 28 to November 1	5,720,788	$	53	5,720,788	15,860,592
November 2 to November 29	5,218,675	$	49	5,218,675	10,746,571
November 30 to December 31	1,761,931	$	48	1,761,931	8,986,667
Total	12,701,394	$	51	12,701,394

The Company had an authorization (originally adopted in December 1997) by its Board of Directors to repurchase shares of its outstanding common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (1) the number of shares issued in connection with the exercise of stock options occurring on or after January 1, 2004 plus (2) one percent of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock split (1997 Authorization). The Company made discretionary share repurchases of 0.1 million shares during the fourth quarter ended December 31, 2015 under this authorization. As of December 31, 2015 , there were no shares available under this authorization. In February 2016, the Company's Board of Directors separately authorized the Company to buy back up to 20.0 million shares of its common stock with no dollar limit or expiration date, which superseded the authority granted by the 1997 Authorization.

In December 2007, the Company’s Board of Directors separately authorized the Company to buy back up to 20.0 million shares of its common stock with no dollar limit or expiration date. The Company made no discretionary share repurchases during the fourth quarter ended December 31, 2015 under this authorization. As of December 31, 2015 , no shares remained under this authorization.

In February 2014, the Company's Board of Directors authorized the Company to repurchase up to 20.0 million shares of its common stock with no dollar limit or expiration date. This board authorization is in addition to existing share repurchase authorizations. Six million six hundred thousand shares were repurchased by the Company during the quarter ended December 31, 2015 under this authorization. As of December 31, 2015 , no shares remained under this authorization.

Additionally, in June 2015, the Company's Board of Directors authorized the Company to repurchase up to 15.0 million shares of its common stock with no dollar limit or expiration date. The Company repurchased 6.0 million discretionary shares

during the quarter ended December 31, 2015 under this authorization. As of December 31, 2015 , 9.0 million shares remained under this authorization.

Under the share repurchase authorizations, the Company’s common stock may be purchased through any one or more of a Rule 10b5-1 trading plan and discretionary purchases on the open market, block trades, accelerated share repurchases or privately negotiated transactions. The number of shares repurchased, if any, and the timing of repurchases will depend on a number of factors, including share price, trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors. The repurchase authority has no expiration date but may be suspended, modified or discontinued at any time.

The Harley-Davidson, Inc. 2014 Incentive Stock Plan and predecessor stock plans permit participants to satisfy all or a portion of the statutory federal, state and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares otherwise issuable under the award, (b) tender back shares received in connection with such award or (c) deliver other previously owned shares, in each case having a value equal to the amount to be withheld. During the fourth quarter of 2015 , the Company acquired 398 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock awards.

Item 12 of this Annual Report on Form 10-K contains certain information relating to the Company’s equity compensation plans.

The following information in this Item 5 is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into such a filing: the SEC requires the Company to include a line graph presentation comparing cumulative five year Common Stock returns with a broad-based stock index and either a nationally recognized industry index or an index of peer companies selected by the Company. The Company has chosen to use the Standard & Poor’s 500 Index as the broad-based index and the Standard & Poor’s MidCap 400 Index as a more specific comparison. The Standard & Poor’s MidCap 400 Index was chosen because the Company does not believe that any other published industry or line-of-business index adequately represents the current operations of the Company. The graph assumes a beginning investment of $100 on December 31, 2010 and that all dividends are reinvested.



	2010 ($)	2011 ($)	2012 ($)	2013 ($)	2014 ($)	2015 ($)
Harley-Davidson, Inc.	100	114	145	208	201	142
Standard & Poor’s MidCap 400 Index	100	98	116	152	165	159
Standard & Poor’s 500 Index	100	102	118	157	178	181

Item 6. Selected Financial Data



(In thousands, except per share amounts)	2015		2014		2013		2012		2011
Statement of income data:
Revenue:
Motorcycles & Related Products	$	5,308,744	$	5,567,681	$	5,258,290	$	4,942,582	$	4,662,264
Financial Services	686,658		660,827		641,582		637,924		649,449
Total revenue	$	5,995,402	$	6,228,508	$	5,899,872	$	5,580,506	$	5,311,713
Income from continuing operations	$	752,207	$	844,611	$	733,993	$	623,925	$	548,078
Income from discontinued operations, net of tax	—		—		—		—		51,036
Net income	$	752,207	$	844,611	$	733,993	$	623,925	$	599,114
Weighted-average common shares:
Basic	202,681		216,305		222,475		227,119		232,889
Diluted	203,686		217,706		224,071		229,229		234,918
Earnings per common share from continuing operations:
Basic	$	3.71	$	3.90	$	3.30	$	2.75	$	2.35
Diluted	$	3.69	$	3.88	$	3.28	$	2.72	$	2.33
Earnings per common share from discontinued operations:
Basic	$	—	$	—	$	—	$	—	$	0.22
Diluted	$	—	$	—	$	—	$	—	$	0.22
Earnings per common share:
Basic	$	3.71	$	3.90	$	3.30	$	2.75	$	2.57
Diluted	$	3.69	$	3.88	$	3.28	$	2.72	$	2.55
Dividends paid per common share	$	1.240	$	1.100	$	0.840	$	0.620	$	0.475
Balance sheet data:
Total assets	$	9,991,167	$	9,528,097	$	9,405,040	$	9,170,773	$	9,674,164
Total debt	$	6,890,388	$	5,504,629	$	5,259,170	$	5,102,649	$	5,722,619
Total equity	$	1,839,654	$	2,909,286	$	3,009,486	$	2,557,624	$	2,420,256

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). Unless the context otherwise requires, all references to the "Company" includes Harley-Davidson, Inc. and all its subsidiaries. The Company operates in two business segments: Motorcycles & Related Products (Motorcycles) and Financial Services. The Company’s reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.

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

The “% Change” figures included in the “Results of Operations” section were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented.

Overview

The Company’s net income for 2015 was $752.2 million , or $3.69 per diluted share, compared to $844.6 million , or $3.88 per diluted share, in 2014 . Operating income from the Motorcycles segment was down $127.7 million compared to 2014 . Motorcycles segment operating income was negatively impacted by unfavorable currency exchange rates, lower wholesale shipment volume, unfavorable product mix and higher selling, administrative and engineering expenses. These unfavorable impacts were partially offset by model-year price increases and lower raw material and manufacturing costs. Operating income from the Financial Services segment was up modestly from the prior year, increasing $2.4 million , or 0.9% , on higher net interest income partially offset by a higher provision for credit losses.

Worldwide independent dealer retail sales of new Harley-Davidson motorcycles decreased 1.3% compared to 2014 . Retail sales of new Harley-Davidson motorcycles decreased 1.7% in the U.S. and 0.5% in international markets. Retail sales were below the Company's expectations in 2015. In 2015, retail sales were adversely impacted by a significant increase in competitiveness behind currency-driven discounting and the introduction of new products by a number of our competitors as well as a challenging macro-economic environment.

Please refer to the “Results of Operations 2015 Compared to 2014 ” for additional details concerning the results for 2015 .


(1)	Note Regarding Forward-Looking Statements

The Company intends that certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” or “estimates” or words of similar meaning. Similarly, statements that describe future plans, objectives, outlooks, targets, guidance or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including under the caption “Risk Factors” in Item 1A and under “Cautionary Statements” in Item 7 of this report. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in the Outlook section are only made as of January 28, 2016 and the remaining forward looking statements in this report are only made as the date of the filing of this report ( February 18, 2016 ), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Outlook ⁽¹⁾

In October 2015, the Company laid out its plans for how it intends to increase its focus, investment and resolve to drive demand in 2016 and beyond. The Company has five clear objectives:


•	L ead in every market by achieving and holding the number one market share of the 601+cc motorcycle segment.


•	Grow the sport of motorcycling in the U.S., in part by growing the number of U.S. core customers and growing the U.S. outreach customers at a faster rate.


•	Grow U.S. retail sales and grow international retail sales at a faster rate. The Company has a plan to grow its international dealer network by 150 to 200 new dealerships by 2020.


•	Grow revenue and grow earnings faster than revenue through 2020.


•	Outperform the S&P 500

For 2016 and beyond, the Company plans to significantly increase its spending to drive demand. The Company intends to offset this increased spending by reducing spending in other areas, primarily support functions and through a reorganization of its commercial operations aimed at being both leaner and stronger.

In 2016, the Company expects to increase its spending on customer-facing marketing by approximately 65% from 2015 levels and it expects to increase its spending on new product development by approximately 35% from 2015 levels. This spending reallocation would represent an approximate $70 million increase in the Company's spending to drive demand compared to 2015.

The Company's increased spending will be focused in four key areas:


•	Increase product and brand awareness.


•	Grow new ridership in the U.S. This includes the Company's target to more than double the number of riders trained annually through the Harley-Davidson Riding Academy to 100,000 globally by 2020, with the majority in the U.S.


•	Increase and enhance brand access. The Company intends to continue to expand and enhance its global dealer network, develop new retail formats for urban centers and urban tastes and expand eCommerce.


•	Accelerate the cadence and impact of new products and extend its leadership in features and technology that it believes matter to customers.

On January 28, 2016 the Company announced the following expectations for 2016 .

The Company believes 2016 global retail sales of Harley-Davidson motorcycles will face headwinds as the competition continues to be aggressive with discounting and new product introductions. The Company also anticipates global macro-economic challenges including weakness in oil-dependent areas. Internationally, various markets are experiencing economic challenges. In particular in Brazil, the Company expects significant pressure to continue. In response to the nearly 50% devaluation of the Brazilian real last year, the Company raised prices over 20% in 2016, and it expects lower retail sales in Brazil in 2016.

The Company expects to ship 269,000 to 274,000 Harley-Davidson motorcycles during 2016 , up approximately 1% to 3% over 2015. This includes 78,000 to 83,000 Harley-Davidson motorcycles that it expects to ship in the first quarter of 2016 , approximately down 2% at the low end of the range to up 4% at the high end of the range over the first quarter of 2015 .

The Company expects 2016 global retail motorcycle sales to grow year-over-year with international retail sales growing at a faster rate than the rate of growth in the U.S.

The Company expects the 2016 operating margin percent for the Motorcycles segment to be between 16% and 17% compared to 16.5% in 2015.

The Company expects gross margin as a percent of revenue will be down year-over-year.

The Company expects that the 2016 gross margin percent will benefit from motorcycle pricing and strong productivity gains offset by unfavorable foreign currency exchange and higher year-over-year start-up costs as it implements its enterprise resource planning (ERP) system at its Kansas City manufacturing facility. If foreign currency exchange rates on January 27, 2016 remained constant throughout 2016, which is a hypothetical expectation in what is a very volatile foreign currency exchange environment, the Company estimates the adverse impact to its expected Motorcycle segment revenue from currency exchange in 2016 would be approximately 1%. Under this scenario, the Company would also expect an unfavorable impact to

2016 gross margin of approximately $60 million, or 1 percentage point, driven by lower revenues and the comparison to the more favorable foreign currency contract gains it realized in 2015. In accordance with its practices, the Company has hedged a portion of its 2016 foreign currency exposure; however, the gains it would realize on those hedges at current spot rates would not be as favorable as those it realized in 2015.

Although the Company will invest significantly more in marketing and product development in 2016, the Company expects its full-year selling, administrative and engineering expenses to be flat to up modestly from 2015. As a percent of revenue, the Company expects its selling, administrative and engineering expense will decrease. The Company expects its first quarter of 2016 selling, administrative and engineering expense to be approximately $25 million higher than the first quarter of 2015 as it ramps up its efforts to drive demand.

The Company expects operating income for the Financial Services segment to be down modestly in 2016 as compared to 2015 as a result of increased borrowing costs and unfavorable credit losses, partially offset by higher revenues.

The Company's capital expenditure estimates for 2016 are between $255 million and $275 million as it increases its focus on bringing exciting new products to market and as it continues to invest in its systems infrastructure, most notably expanding the implementation of its ERP system. The Company anticipates it will have the ability to fund all capital expenditures in 2016 with cash flows generated by operations.

The Company also announced on January 28, 2016 that it expects the full year 2016 effective income tax rate to be approximately 34.5% .

Results of Operations 2015 Compared to 2014

Consolidated Results



(in thousands, except earnings per share)	2015		2014		(Decrease) Increase			% Change
Operating income from Motorcycles & Related Products	$	875,490	$	1,003,147	$	(127,657	)	(12.7	)%
Operating income from Financial Services	280,205		277,836		2,369			0.9	%
Operating income	1,155,695		1,280,983		(125,288		)	(9.8	)%
Investment income	6,585		6,499		86			1.3	%
Interest expense	12,117		4,162		7,955			191.1	%
Income before income taxes	1,150,163		1,283,320		(133,157		)	(10.4	)%
Provision for income taxes	397,956		438,709		(40,753		)	(9.3	)%
Net income	$	752,207	$	844,611	$	(92,404	)	(10.9	)%
Diluted earnings per share	$	3.69	$	3.88	$	(0.19	)	(4.9	)%

Consolidated operating income was down 9.8% in 2015 driven by a decrease in operating income from the Motorcycles segment which decreased by $127.7 million compared to 2014 . Operating income for the Financial Services segment increased by $2.4 million during 2015 as compared to 2014 . Please refer to the “Motorcycles and Related Products Segment” and “Financial Services Segment” discussions following for a more detailed discussion of the factors affecting operating income.

Corporate interest expense was higher in 2015 compared to 2014 due to the issuance of corporate debt. The Company issued $750.0 million of senior unsecured notes in the third quarter of 2015 and utilized the proceeds to fund the repurchase of common stock in the third and fourth quarters of 2015.

The effective income tax rate for 2015 was 34.6% compared to 34.2% for 2014 .

Diluted earnings per share were $3.69 in 2015 , down 4.9% compared to 2014 . Diluted earnings per share were adversely impacted by the 10.9% decrease in net income, but benefited from lower diluted weighted average shares outstanding. Diluted weighted average shares outstanding decreased from 217.7 million in 2014 to 203.7 million in 2015 driven by the Company's repurchases of common stock. Please refer to "Liquidity and Capital Resources" for additional information concerning the Company's share repurchase activity.

Motorcycle Retail Sales and Registration Data

Worldwide independent dealer retail sales of Harley-Davidson motorcycles decreased 1.3% during 2015 compared to 2014 . Retail sales of Harley-Davidson motorcycles decreased 1.7% in the United States and 0.5% internationally in 2015 .

The Company believes 2015 U.S. retail sales of its motorcycles were negatively impacted by intense competitive activity behind currency-driven discounting and new competitor products as well as a challenging macro-economic environment.

The Company's U.S. market share of 601+cc motorcycles for 2015 was 50.2%, down 3.1 percentage points compared to 2014 (Source: Motorcycle Industry Council). The Company anticipated some level of market share loss following the 13.4 percentage point increase in recent years; however, the Company's market share over the first three quarters was more severely impacted than expected, which the Company believes is a result of the intense competitive environment and the inclusion of autocycles in the industry numbers.

International retail sales growth during 2015 in the Asia Pacific region was more than offset by declines in the EMEA region, Latin America and Canada. Retail sales in the Asia Pacific region were driven by growth in emerging markets and in Australia, partially offset by declines in Japan. The Company believes the retail sales decrease in the EMEA region was due to the introduction of several performance-oriented models by the competition. International retail sales as a percent of total retail sales in 2015 were 36.4% compared to 36.2% in 2014 .

Despite the volatility in global retail sales, the Company believes it can continue to realize strong international growth opportunities by expanding its distribution network and increasing its brand relevance by delivering exceptional products that inspire riders. In 2015, the Company added 40 international dealerships, and it plans to add an additional 150 to 200 through 2020. ⁽¹⁾

Harley-Davidson Motorcycle Retail Sales ^(a)

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



	2015	2014	(Decrease) Increase		% Change
Americas Region
United States	168,240	171,079	(2,839	)	(1.7	)%
Canada	9,669	9,871	(202	)	(2.0	)
Latin America	11,173	11,652	(479	)	(4.1	)
Total Americas Region	189,082	192,602	(3,520	)	(1.8	)
Europe, Middle East and Africa Region (EMEA)
Europe ^(b)	36,894	38,491	(1,597	)	(4.1	)
Other	6,393	6,832	(439	)	(6.4	)
Total EMEA Region	43,287	45,323	(2,036	)	(4.5	)
Asia Pacific Region
Japan	9,700	10,775	(1,075	)	(10.0	)
Other	22,558	19,299	3,259		16.9
Total Asia Pacific Region	32,258	30,074	2,184		7.3
Total Worldwide Retail Sales	264,627	267,999	(3,372	)	(1.3	)%
Total International Retail Sales	96,387	96,920	(533	)	(0.5	)%


(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 retail sales and this information is subject to revision.


(b)	Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

Motorcycle Registration Data - 601+cc ^(a)

The following table includes industry retail motorcycle registration data:



	2015	2014	Increase	% Change
United States ^(b)	328,818	313,627	15,191	4.8	%
Europe ^(c)	351,735	319,801	31,934	10.0	%


(a)	Data includes on-road 601+cc models. On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Autocycles were included in the U.S. and Europe data beginning in 2014 and 2015, respectively. Registration data for Harley-Davidson Street 500 ^® motorcycles is not included in this table.


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

(c)

Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Industry retail motorcycle registration data includes 601+cc models derived from information provided by Association des Constructeurs Europeens de Motocycles (ACEM), an independent agency. This third-party data is subject to revision and update.

Motorcycles and Related Products Segment

Motorcycle Unit Shipments

The following table includes wholesale motorcycle unit shipments for the Motorcycles segment:



	2015			2014			Unit		Unit
	Units	Mix %		Units	Mix %		(Decrease) Increase		% Change
United States	170,688	64.1	%	173,994	64.3	%	(3,306	)	(1.9	)%
International	95,694	35.9	%	96,732	35.7	%	(1,038	)	(1.1	)
Harley-Davidson motorcycle units	266,382	100.0	%	270,726	100.0	%	(4,344	)	(1.6	)%
Touring motorcycle units	114,768	43.1	%	122,481	45.2	%	(7,713	)	(6.3	)%
Cruiser motorcycle units ^(a)	89,207	33.5	%	91,426	33.8	%	(2,219	)	(2.4	)
Sportster ^® / Street motorcycle units ^(b)	62,407	23.4	%	56,819	21.0	%	5,588		9.8
Harley-Davidson motorcycle units	266,382	100.0	%	270,726	100.0	%	(4,344	)	(1.6	)%


(a)	Category previously referred to as "Custom" motorcycle units, as used in this table, include Dyna ^® , Softail ^® , V-Rod ^® and CVO models.


(b)	Initial shipments of Street motorcycle units began during the first quarter of 2014.

During 2015 , wholesale shipments of Harley-Davidson motorcycles were down 1.6% compared to the prior year. International shipments as a percentage of the total were up slightly in 2015 as compared to 2014. In addition, shipments of Sportster ^® / Street motorcycles as a percentage of total shipments increased in 2015 compared to the prior year driven by the strong acceptance of the Street motorcycles as the Company continued its global rollout of these models in 2015. Touring motorcycle shipments were down in 2015 following a 14.2% increase in shipments of Touring motorcycles in 2014 driven by demand for the new Rushmore models. As the Company expected, dealer retail inventory of new Harley-Davidson motorcycles in the U.S. at the end of 2015 was approximately 2,600 units higher than at the end of 2014, largely due to the initial dealer fill of its new 2016 model-year motorcycles. The Company believes the U.S. year-end 2015 dealer retail inventory level is appropriate as the Company aggressively manages supply in line with demand ⁽¹⁾ .

Segment Results

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



	2015		2014		(Decrease) Increase			% Change
Revenue:
Motorcycles	$	4,127,739	$	4,385,863	$	(258,124	)	(5.9	)%
Parts & Accessories	862,645		875,019		(12,374		)	(1.4	)
General Merchandise	292,310		284,826		7,484			2.6
Other	26,050		21,973		4,077			18.6
Total revenue	5,308,744		5,567,681		(258,937		)	(4.7	)
Cost of goods sold	3,356,284		3,542,601		(186,317		)	(5.3	)
Gross profit	1,952,460		2,025,080		(72,620		)	(3.6	)
Selling & administrative expense	916,669		887,333		29,336			3.3
Engineering expense	160,301		134,600		25,701			19.1
Operating expense	1,076,970		1,021,933		55,037			5.4
Operating income from Motorcycles	$	875,490	$	1,003,147	$	(127,657	)	(12.7	)%

The following table includes the estimated impact of the significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from 2014 to 2015 (in millions):



	Net Revenue			Cost of Goods Sold			Gross Profit
2014	$	5,568		$	3,543		$	2,025
Volume	(59		)	(29		)	(30		)
Price	81			9			72
Foreign currency exchange rates and hedging	(231		)	(110		)	(121		)
Shipment mix	(50		)	(20		)	(30		)
Raw material prices	—			(19		)	19
Manufacturing costs	—			(17		)	17
Total	(259		)	(186		)	(73		)
2015	$	5,309		$	3,357		$	1,952

The following factors affected the comparability of net revenue, cost of goods sold and gross profit from 2014 to 2015:

•

On average, wholesale prices on the Company’s 2015 and 2016 model-year motorcycles were higher than the prior model-years resulting in the favorable impact on revenue during the period. The impact of revenue favorability resulting from model-year price increases on gross profit was partially offset by increases in cost related to the additional content added to the 2015 and 2016 model-year motorcycles.

•

Gross profit was negatively impacted by changes in foreign currency exchange rates during 2015 compared to 2014. Revenue was negatively impacted by a weighted-average devaluation in the Euro, Japanese yen, Brazilian real and Australian dollar of 17% compared to 2014. The negative impact to revenue was partially offset by a positive impact to cost of goods sold as a result of natural hedges, benefits of foreign exchange contracts and a decrease in losses from the revaluation of foreign-denominated assets on the balance sheet.


•	Shipment mix changes negatively impacted gross profit primarily due to changes in motorcycle family mix, driven by higher shipments of Sportster ^® /Street motorcycles. The negative motorcycle family mix was partially offset by positive mix changes within parts and accessories and general merchandise.


•	Raw material prices were lower in 2015 compared to 2014.


•	Manufacturing costs for 2015 benefited from increased manufacturing efficiencies and the absence of Street motorcycles start-up costs that were incurred in 2014.

The net increase in operating expense was primarily due to reorganization charges, expenses associated with the acquisition and operations of its Canadian distribution and higher recall costs.

As discussed in "Outlook", the Company plans to significantly increase its spending in 2016 to drive demand. It plans to offset this increased spending by reducing spending in other areas, primarily support functions and through a reorganization of its commercial operations. To support this planned reallocation of spending, the Company incurred approximately $30 million of reorganization expenses in the fourth quarter of 2015. This included approximately $23 million of operating expense and $5 million of cost of goods sold in the Motorcycles segment. These costs consisted of employee severance benefits, retirement benefits and other reorganization costs. The Company also incurred approximately $2 million of reorganization expenses in the Financial Services segment.

On August 4, 2015, the Company completed its purchase of certain assets and liabilities from Fred Deeley Imports, Ltd (Deeley Imports) including, among other things, the acquisition of the exclusive right to distribute the Company's motorcycles and other products in Canada. As a result of the acquisition, the Company now directly distributes its products in Canada as it does in other countries. The Company incurred approximately $20 million of selling and administrative expense related to its Canada operations in 2015.

Financial Services Segment

Segment Results

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



	2015		2014		Increase (Decrease)			% Change
Interest income	$	605,770	$	585,187	$	20,583		3.5	%
Other income	80,888		75,640		5,248			6.9
Financial services revenue	686,658		660,827		25,831			3.9
Interest expense	161,983		164,476		(2,493		)	(1.5	)
Provision for credit losses	101,345		80,946		20,399			25.2
Operating expenses	143,125		137,569		5,556			4.0
Financial Services expense	406,453		382,991		23,462			6.1
Operating income from Financial Services	$	280,205	$	277,836	$	2,369		0.9	%

Interest income was favorable due to higher average receivables in the retail and wholesale portfolios, partially offset by lower retail yields due to low rate promotions during parts of 2015 and increased competition. Other income was favorable primarily due to increased credit card licensing and insurance revenue. Other income now includes international income which had previously been reported in interest income. Prior period amounts, which were not material, have been adjusted for comparability.

Interest expense benefited from a more favorable cost of funds and a lower loss on the extinguishment of a portion of the Company's 6.80% medium-term notes than in 2014, partially offset by higher average outstanding debt.

The provision for credit losses increased $20.4 million compared to 2014. The retail motorcycle provision increased $18.2 million during 2015 as a result of higher credit losses and portfolio growth. Credit losses were higher as a result of expected increased losses in the subprime portfolio, lower recovery values on repossessed motorcycles, and deterioration in performance in oil-dependent areas of the U.S. in late 2015.

Annual losses on the Company's retail motorcycle loans were 1.42% during 2015 compared to 1.22% in 2014. The 30-day delinquency rate for retail motorcycle loans at December 31, 2015 increased to 3.78% from 3.61% at December 31, 2014.

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



	2015			2014
Balance, beginning of period	$	127,364		$	110,693
Provision for credit losses	101,345			80,946
Charge-offs, net of recoveries	(81,531		)	(64,275		)
Balance, end of period	$	147,178		$	127,364

At December 31, 2015 , the allowance for credit losses on finance receivables was $139.3 million for retail receivables and $7.9 million for wholesale receivables. At December 31, 2014 , the allowance for credit losses on finance receivables was $122.0 million for retail receivables and $5.3 million for wholesale receivables.

The Company's periodic evaluation of the adequacy of the allowance for credit losses on finance receivables is generally based on the Company's past loan loss experience, known and inherent risks in the portfolio, current economic conditions and the estimated value of any underlying collateral. Please refer to Note 5 of Notes to Consolidated Financial Statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.

Results of Operations 2014 Compared to 2013

Consolidated Results



(in thousands, except earnings per share)	2014		2013		Increase (Decrease)			% Change
Operating income from Motorcycles & Related Products	$	1,003,147	$	870,609	$	132,538		15.2	%
Operating income from Financial Services	277,836		283,093		(5,257		)	(1.9	)%
Operating income	1,280,983		1,153,702		127,281			11.0	%
Investment income	6,499		5,859		640			10.9	%
Interest expense	4,162		45,256		(41,094		)	(90.8	)%
Income before income taxes	1,283,320		1,114,305		169,015			15.2	%
Provision for income taxes	438,709		380,312		58,397			15.4	%
Net income	$	844,611	$	733,993	$	110,618		15.1	%
Diluted earnings per share	$	3.88	$	3.28	$	0.60		18.3	%

Consolidated operating income was up 11.0% in 2014 led by an increase in operating income from the Motorcycles segment which improved by $132.5 million compared to 2013 . Operating income for the Financial Services segment decreased by $5.3 million during 2014 as compared to 2013 . Please refer to the “Motorcycles and Related Products Segment” and “Financial Services Segment” discussions following for a more detailed discussion of the factors affecting operating income.

The effective income tax rate for 2014 was 34.2% compared to 34.1% for 2013. The Company's 2014 and 2013 effective tax rate included U.S. Federal Research and Development tax credits that were reinstated by the American Taxpayer Relief Act. The effective tax rate for 2013 also included the full-impact of the 2012 U.S. Federal Research and Development tax credit due to the timing of the enactment of the American Taxpayer Relief Act.

Diluted earnings per share were $3.88 in 2014 , up 18.3% over 2013 . The increase in diluted earnings per share was driven primarily by the 15.1% increase in net income, but also benefited from lower diluted weighted average shares outstanding. Diluted weighted average shares outstanding decreased from 224.1 million in 2013 to 217.7 million in 2014 driven by the Company's repurchases of common stock. Please refer to "Liquidity and Capital Resources" for additional information concerning the Company's share repurchase activity.

Motorcycles Retail Sales and Registration Data

Worldwide independent dealer retail sales of Harley-Davidson motorcycles increased 2.7% during 2014 compared to 2013. Retail sales of Harley-Davidson motorcycles increased 1.3% in the United States and 5.4% internationally in 2014.

The Company believes U.S. retail sales for 2014 benefited from strong sales of Rushmore and Street motorcycles that were partially offset by adverse impacts that resulted from the absence of Road Glide motorcycles for most of 2014 and very difficult weather conditions in the first half of 2014.

International retail sales growth during 2014 in the Asia Pacific region, Latin America region and EMEA region was partially offset by a decline in Canada. Retail sales in the Asia Pacific region were driven by growth in emerging markets, especially India and China. The retail sales growth in the Latin America region was driven by Mexico. The EMEA region retail sales growth was driven by growth in nearly all countries throughout the region. International retail sales as a percent of total retail sales in 2014 were 36.2% of total retail sales compared to 35.3% in 2013.

Harley-Davidson Motorcycle Retail Sales ^(a)

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



	2014	2013	Increase (Decrease)		% Change
North America Region
United States	171,079	168,863	2,216		1.3	%
Canada	9,871	11,062	(1,191	)	(10.8	)
Total North America Region	180,950	179,925	1,025		0.6
Europe, Middle East and Africa Region (EMEA)
Europe ^(b)	38,491	36,076	2,415		6.7
Other	6,832	6,533	299		4.6
Total EMEA Region	45,323	42,609	2,714		6.4
Asia Pacific Region
Japan	10,775	10,751	24		0.2
Other	19,299	16,139	3,160		19.6
Total Asia Pacific Region	30,074	26,890	3,184		11.8
Latin America Region	11,652	11,415	237		2.1
Total Worldwide Retail Sales	267,999	260,839	7,160		2.7	%
Total International Retail Sales	96,920	91,976	4,944		5.4	%


(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 retail sales and this information is subject to revision.


(b)	Data for Europe include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

Motorcycle Registration Data - 601+cc ^(a)

The following table includes industry retail motorcycle registration data:



	2014	2013	Increase	% Change
United States ^(b)	313,627	305,852	7,775	2.5	%
Europe ^(c)	319,801	281,844	37,957	13.5	%


(a)	Data includes on-road 601+cc models. On-road 601+cc models include dual purpose models, three-wheeled motorcycles and beginning in 2014, the U.S. also includes autocycles. Registration data for Harley-Davidson Street 500 ^® motorcycles are not included in this table.


(b)	United States industry data is derived from information provided by Motorcycle Industry Council (MIC). This third party data is subject to revision and update. Prior periods have been adjusted to include all dual purpose models that were previously excluded.

(c)

Motorcycles and Related Products Segment

Motorcycle Unit Shipments

The following table includes wholesale motorcycle unit shipments for the Motorcycles & Related Products segment:



	2014			2013			Unit		Unit
	Units	Mix %		Units	Mix %		Increase (Decrease)		% Change
United States	173,994	64.3	%	167,016	64.1	%	6,978		4.2	%
International	96,732	35.7	%	93,455	35.9	%	3,277		3.5
Harley-Davidson motorcycle units	270,726	100.0	%	260,471	100.0	%	10,255		3.9	%
Touring motorcycle units	122,481	45.2	%	107,213	41.2	%	15,268		14.2	%
Cruiser motorcycle units ^(a)	91,426	33.8	%	102,950	39.5	%	(11,524	)	(11.2	)
Sportster ^® / Street motorcycle units ^(b)	56,819	21.0	%	50,308	19.3	%	6,511		12.9
Harley-Davidson motorcycle units	270,726	100.0	%	260,471	100.0	%	10,255		3.9	%


(a)	Category previously referred to as "Custom" motorcycle units, as used in this table, include Dyna ^® , Softail ^® , V-Rod ^® and CVO models.


(b)	Initial shipments of Street motorcycle units began in the first quarter of 2014.

During 2014, wholesale shipments of Harley-Davidson motorcycles were up 3.9% compared to the prior year. International shipments as a percentage of the total were down slightly in 2014 as compared to 2013. In addition, shipments of touring motorcycles and Sportster ^® / Street motorcycles as a percentage of total shipments increased in 2014 compared to the prior year while shipments of cruiser motorcycles as a percentage of total shipments declined. The Company believes the increase in touring motorcycle shipments, as a percentage of total shipments, was driven by continued demand for model-year 2014 Rushmore motorcycles and demand for model-year 2015 Rushmore motorcycles. Also, the shipment mix of Sportster ^® / Street increased as a result of Street shipments which began in 2014 and totaled approximately 9,900 motorcycles. As expected, retail inventory in the U.S. at the end of 2014 was approximately 2,900 units higher than at the end of 2013 largely due to the initial dealer fill of Street models for retail.

Segment Results

The following table includes the condensed statement of operations for the Motorcycles & Related Products segment (in thousands):



	2014		2013			Increase (Decrease)			% Change
Revenue:
Motorcycles	$	4,385,863	$	4,067,510		$	318,353		7.8	%
Parts & Accessories	875,019		873,075			1,944			0.2
General Merchandise	284,826		295,854			(11,028		)	(3.7	)
Other	21,973		21,851			122			0.6
Total revenue	5,567,681		5,258,290			309,391			5.9
Cost of goods sold	3,542,601		3,395,918			146,683			4.3
Gross profit	2,025,080		1,862,372			162,708			8.7
Selling & administrative expense	887,333		847,927			39,406			4.6
Engineering expense	134,600		145,967			(11,367		)	(7.8	)
Restructuring benefit	—		(2,131		)	2,131			(100.0	)
Operating expense	1,021,933		991,763			30,170			3.0
Operating income from Motorcycles	$	1,003,147	$	870,609		$	132,538		15.2	%

The following table includes the estimated impact of the significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from 2013 to 2014 (in millions):



	Net Revenue			Cost of Goods Sold			Gross Profit
2013	$	5,259		$	3,397		$	1,862
Volume	124			85			39
Price	166			119			47
Foreign currency exchange rates and hedging	(31		)	(19		)	(12		)
Shipment mix	50			(16		)	66
Raw material prices	—			1			(1		)
Manufacturing costs	—			(24		)	24
Total	309			146			163
2014	$	5,568		$	3,543		$	2,025

The following factors affected the comparability of net revenue, cost of goods sold and gross profit from 2013 to 2014:


•	Volume increases were driven by the increase in wholesale motorcycle shipments and parts and accessories sales, partially offset by lower sales volumes for general merchandise. General merchandise revenue was adversely impacted in 2014 by a SKU reduction plan across the apparel offering focused on transforming the retail customer experience with a more targeted assortment of popular styles.


•	On average, wholesale prices on the Company’s 2014 and 2015 model-year motorcycles are higher than the preceding model-year resulting in the favorable impact on revenue during the period. The revenue favorability resulting from model-year price increases was partially offset by an increase in cost related to the significant additional content added to the 2014 and 2015 model-year motorcycles.


•	Net revenue and gross profit were negatively impacted by a devaluation in the Company's key foreign currencies compared to the U.S. dollar, primarily the Euro, Japanese yen, Brazilian real and Australian dollar, which together declined approximately 3% on a weighted-average basis in 2014 compared to 2013.

•

Shipment mix changes between motorcycle families positively impacted net revenue and gross profit as a result of a higher mix of Touring motorcycles which was partially offset by an increase in Street motorcycle shipments. Shipment mix also benefited from favorable model mix within motorcycle families, as well as, favorable mix within the parts and accessories and general merchandise product lines.


•	Raw material prices were slightly higher in 2014 relative to 2013.


•	Manufacturing costs for 2014 benefited from increased year-over-year production, restructuring savings, lower temporary inefficiencies and lower pension costs compared to 2013. The manufacturing cost benefits were partially offset by start-up costs of approximately $15.3 million associated with the launch of the Street platform of motorcycles.

The net increase in operating expense was primarily due to higher selling and administrative expenses and the absence of the restructuring benefit recorded in 2013, partially offset by lower engineering expense. The higher selling and administrative expenses were primarily due to higher spending in support of the Company's growth initiatives and higher recall costs. In 2013, the Company completed work related to its various restructuring activities that were initiated during 2009 through 2011.

Financial Services Segment

Segment Results

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



	2014		2013		Increase (Decrease)			% Change
Interest income	$	585,187	$	575,652	$	9,535		1.7	%
Other income	75,640		65,930		9,710			14.7
Financial services revenue	660,827		641,582		19,245			3.0
Interest expense	164,476		165,491		(1,015		)	(0.6	)
Provision for credit losses	80,946		60,008		20,938			34.9
Operating expenses	137,569		132,990		4,579			3.4
Financial Services expense	382,991		358,489		24,502			6.8
Operating income from Financial Services	$	277,836	$	283,093	$	(5,257	)	(1.9	)%

Interest income was favorable due to higher retail and wholesale outstanding finance receivables, partially offset by lower yields primarily on retail finance receivables due to increased competition. Other income was favorable primarily due to increased credit card licensing and insurance revenue. Other income now includes international income which had previously been reported in interest income. Amounts for 2014 and 2013, which were not material, have been adjusted for comparability.

Interest expense benefited from a more favorable cost of funds and a lower loss on the extinguishment of a portion of the Company's 6.80% medium-term notes than in 2013, partially offset by higher average outstanding debt.

The provision for credit losses increased $20.9 million compared to 2013. The retail motorcycle provision increased $20.0 million during 2014 as a result of higher credit losses, an increase in the retail motorcycle reserve rate, and portfolio growth. Credit losses were impacted by lower recovery values of repossessed motorcycles, the impact of changing consumer behavior, and lower recoveries as a result of fewer charge-offs in prior periods.

Annual losses on the Company's retail motorcycle loans were 1.22% during 2014 compared to 1.09% in 2013. The 30-day delinquency rate for retail motorcycle loans at December 31, 2014 decreased to 3.61% from 3.71% at December 31, 2013.

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



	2014			2013
Balance, beginning of period	$	110,693		$	107,667
Provision for credit losses	80,946			60,008
Charge-offs, net of recoveries	(64,275		)	(56,982		)
Balance, end of period	$	127,364		$	110,693

At December 31, 2014, the allowance for credit losses on finance receivables was $122.0 million for retail receivables and $5.3 million for wholesale receivables. At December 31, 2013, the allowance for credit losses on finance receivables was $106.1 million for retail receivables and $4.6 million for wholesale receivables.

Other Matters

New Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09 Revenue from Contracts with Customers (ASU No. 2014-09). ASU No. 2014-09 is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers: Deferral of Effective Date (ASU No. 2015-14) to defer the effective date of the new revenue recognition standard by one year to fiscal years beginning after December 15, 2017 and for interim periods therein. The Company is currently evaluating the impact of adoption.

In February 2015, the FASB issued ASU No. 2015-02 Amendments to the Consolidation Analysis (ASU 2015-02). ASU No. 2015-02 amends the guidance within Accounting Standards Codification (ASC) Topic 810, "Consolidation,” to change the analysis that a reporting entity must perform to determine whether it should consolidate certain legal entities. The Company is required to adopt ASU No. 2015-02 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The Company believes the adoption of ASU No. 2015-02 will not have an impact on its financial results and will only impact the content of the current disclosure.

In April 2015, the FASB issued ASU No. 2015-03 Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). ASU No. 2015-03 amends the guidance within ASC Topic 835, "Interest " , to require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt premiums and discounts. In August 2015, the FASB further clarified their views on debt costs incurred in connection with a line of credit arrangement by issuing ASU No. 2015-15 Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (ASU 2015-15). ASU No. 2015-15 amends the guidance within ASC Topic 835, “Interest”, to allow an entity to defer and present debt issuance costs associated with a line of credit arrangement as an asset, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The Company plans to adopt both ASUs for fiscal years beginning after December 15, 2015 and for interim periods therein, on a retrospective basis. Upon adoption, the Company will reclassify debt issuance costs, other than debt issuance costs related to line of credit arrangements, from other assets to debt on the balance sheet. The Company intends to continue to classify debt issuance costs related to the line of credit arrangements as an asset, regardless of whether it has any outstanding borrowings on the line of credit arrangements. At December 31, 2015, the Company had $20.4 million of debt issuance costs, which includes $2.1 million of debt issuance costs related to line of credit arrangements, recorded as assets on the consolidated balance sheet.

In September 2015, the FASB issued ASU No. 2015-16 Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (ASU No. 2015-16). ASU No. 2015-16 eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Acquirers must recognize measurement-period adjustments during the period in which they determine the amounts. This would include any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The Company is required to adopt ASU 2015-16 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company does not anticipate any material impacts upon adopting this standard in 2016.

In November 2015, the FASB issued ASU No. 2015-17 Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU No. 2015-17). ASU No. 2015-17 eliminates the requirement for a Company to separate deferred income tax liabilities and assets into current and noncurrent amounts on a classified statement of financial position and requires that deferred tax liabilities and assets be classified as noncurrent. The Company is required to adopt ASU 2015-17 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016 on either a retrospective or prospective basis. Early adoption is permitted. The Company is currently evaluating the timing and basis of adoption.

In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU No. 2016-01). ASU No. 2016-01 enhances the existing financial instruments reporting model by modifying fair value measurement tools, simplifying impairment assessments for certain equity instruments, and modifying overall presentation and disclosure requirements. The Company is required to adopt ASU 2016-01 for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017 on a prospective basis. The Company is currently evaluating the impact of adoption.

Critical Accounting Estimates

The Company’s financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Management believes that the following are some of the more critical judgment areas in the application of accounting policies that currently affect the Company’s financial condition and results of operations. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of the Board of Directors.

Allowance for Credit Losses on Finance Receivables – The allowance for uncollectible accounts is maintained at a level management believes is adequate to cover the losses of principal in the existing finance receivables portfolio.

The retail portfolio consists of a large number of small balance, homogeneous finance receivables. The Company performs a periodic and systematic collective evaluation of the adequacy of the retail allowance. The Company utilizes loss forecast models which consider a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates and current economic conditions including items such as unemployment rates.

The wholesale portfolio is primarily composed of large balance, non-homogeneous finance receivables. The Company's wholesale allowance evaluation is first based on a loan-by-loan review. A specific allowance is established for wholesale finance receivables determined to be individually impaired when management concludes that the borrower will not be able to make full payment of contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive discounted at the loan’s original interest rate or the fair value of the collateral, if the loan is collateral-dependent. In establishing the allowance, management considers a number of factors including the specific borrower’s financial performance as well as ability to repay. Finance receivables in the wholesale portfolio that are not individually evaluated for impairment are segregated, based on similar risk characteristics, according to the Company’s internal risk rating system and collectively evaluated for impairment. The related allowance is based on factors such as the Company’s past loan loss experience, current economic conditions as well as the value of the underlying collateral.

Product Warranty – Estimated warranty costs are reserved for motorcycles, motorcycle parts and motorcycle accessories at the time of sale. The warranty reserve is based upon historical Company claim data used in combination with other known factors that may affect future warranty claims. The Company updates its warranty estimates quarterly to ensure that the warranty reserves are based on the most current information available.

The Company believes that past claim experience is indicative of future claims; however, the factors affecting actual claims can be volatile. As a result, actual claims experience may differ from estimated which could lead to material changes in the Company’s warranty provision and related reserves. The Company’s warranty liability is discussed further in Note 1 of Notes to Consolidated Financial Statements.

Pensions and Other Postretirement Healthcare Benefits – The Company has a defined benefit pension plan and several postretirement healthcare benefit plans, which cover employees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993.

U.S. GAAP requires that companies recognize in their statement of financial position a liability for defined benefit pension and postretirement plans that are underfunded or an asset for defined benefit pension and postretirement benefit plans that are overfunded.

Pension, SERPA and postretirement healthcare obligations and costs are calculated through actuarial valuations. The valuation of benefit obligations and net periodic benefit costs relies on key assumptions including discount rates, mortality, long-term expected return on plan assets, future compensation and healthcare cost trend rates.

The Company determines its discount rate assumptions by referencing high-quality long-term bond rates that are matched to the duration of its own benefit obligations. Based on this analysis, the Company increased the weighted-average discount rate for pension and SERPA obligations from 4.21% as of December 31, 2014 to 4.53% as of December 31, 2015 . The Company increased the weighted-average discount rate for postretirement healthcare obligations from 3.99% to 4.29% . The Company determines its healthcare trend assumption for the postretirement healthcare obligation by considering factors such as estimated healthcare inflation, the utilization of healthcare benefits and changes in the health of plan participants. Based on the Company’s assessment of this data as of December 31, 2015 , the Company set its healthcare cost trend rate at 7.5% as of December 31, 2015 . The Company expects the healthcare cost trend rate to reach its ultimate rate of 5.0% by 2021 . ⁽¹⁾ These assumption changes were reflected immediately in the benefit obligation and will be amortized into net periodic benefit costs over future periods.

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

Changes in the funded status of defined benefit pension and postretirement benefit plans resulting from the difference between assumptions and actual results are initially recognized in other comprehensive income and amortized to expense over future periods. The following information is provided to illustrate the sensitivity of pension and postretirement healthcare obligations and costs to changes in these major assumptions (in thousands):



	Amounts based on current assumptions		Impact of a 1% decrease in the discount rate		Impact of a 1% decrease in the expected return on assets		Impact of a 1% increase in the healthcare cost trend rate
2015 Net periodic benefit costs
Pension and SERPA	$	48,530	$	31,689	$	18,706	n/a
Postretirement healthcare	$	12,295	$	1,334	$	1,404	$	1,620
2015 Benefit obligations
Pension and SERPA	$	2,009,000	$	341,242	n/a		n/a
Postretirement healthcare	$	354,739	$	30,981	n/a		$	12,211

This information should not be viewed as predictive of future amounts. The analysis of the impact of a 1% change in the table above does not take into account the cost related to special termination benefits. The calculation of pension, SERPA and postretirement healthcare obligations and costs is based on many factors in addition to those discussed here. This information should be considered in combination with the information provided in Note 13 of Notes to Consolidated Financial Statements.

Stock Compensation Costs – The total cost of the Company’s share-based equity awards is equal to the grant date fair value per award multiplied by the number of awards granted (adjusted for forfeitures). This cost is recognized as expense on a straight-line basis over the service periods of the awards. Forfeitures are initially estimated based on historical Company information and subsequently updated over the life of the awards to ultimately reflect actual forfeitures. As a result, changes in forfeiture activity can influence the amount of stock compensation cost recognized from period to period.

The Company estimates the fair value of option awards as of the grant date using a lattice-based option valuation model which utilizes ranges of assumptions over the expected term of the options, including stock price volatility, dividend yield and risk-free interest rate.

The valuation model uses historical data to estimate option exercise behavior and employee terminations. The expected term of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding.

The Company uses implied volatility to determine the expected volatility of its stock. The implied volatility is derived from options that are actively traded and the market prices of both the traded options and underlying shares are measured at a similar point in time to each other and on a date reasonably close to the grant date of the employee stock options. In addition, the traded options have exercise prices that are both (a) near-the-money and (b) close to the exercise price of the employee stock options. Finally, the remaining maturities of the traded options on which the estimate is based are at least one year.

Dividend yield was based on the Company’s expected dividend payments and the risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant.

Changes in the valuation assumptions could result in a significant change to the cost of an individual option. However, the total cost of an award is also a function of the number of awards granted, and as result, the Company has the ability to control the cost of its equity awards by adjusting the number of awards granted.

Income Taxes – The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related deferred tax assets and

liabilities. In the ordinary course of the Company’s business, there are transactions and calculations where the ultimate tax determination is uncertain. Accruals for unrecognized tax benefits are provided for in accordance with the requirements of ASC Topic 740. An unrecognized tax benefit represents the difference between the recognition of benefits related to items for income tax reporting purposes and financial reporting purposes. The unrecognized tax benefit is included within other long-term liabilities in the Consolidated Balance Sheets. The Company has a reserve for interest and penalties on exposure items, if applicable, which is recorded as a component of the overall income tax provision. The Company is regularly audited by tax authorities as a normal course of business. Although the outcome of tax audits is always uncertain, management believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

Contractual Obligations

A summary of the Company’s expected payments for significant contractual obligations as of December 31, 2015 is as follows (in thousands):



	2016		2017 - 2018		2019 - 2020		Thereafter		Total
Principal payments on debt	$	2,045,000	$	2,481,191	$	1,617,263	$	746,934	$	6,890,388
Interest payments on debt	159,028		236,972		89,193		425,625		910,818
Operating lease payments	13,727		17,049		11,655		13,098		55,529
	$	2,217,755	$	2,735,212	$	1,718,111	$	1,185,657	$	7,856,735

Interest for floating rate instruments assumes December 31, 2015 rates remain constant.

As of December 31, 2015, the Company generally had no significant purchase obligations, other than those created in the ordinary course of business. Purchase orders issued for inventory and supplies used in product manufacturing generally do not become firm commitments until 90 days prior to expected delivery and can be modified to a certain extent until 30 days prior to expected delivery.

The Company has long-term obligations related to its pension, SERPA and postretirement healthcare plans at December 31, 2015 . During 2015 , the Company contributed $28.5 million to its pension, SERPA and postretirement healthcare plans. No additional contributions were required during 2015 beyond current benefit payments for SERPA and postretirement healthcare plans. In January 2016, the Company voluntarily contributed $25 million to its qualified pension plan to further fund its pension plan and the Company expects that no additional qualified plan contributions will be required in 2016 . ⁽¹⁾ Also, the Company expects it will continue to make on-going contributions related to current benefit payments for SERPA and postretirement healthcare plans. ⁽¹⁾ The Company’s expected future contributions to these plans are provided in Note 13 of Notes to Consolidated Financial Statements.

As described in Note 12 of Notes to Consolidated Financial Statements, the Company has unrecognized tax benefits of $73.1 million and accrued interest and penalties of $28.7 million as of December 31, 2015 . However, the Company cannot make a reasonably reliable estimate for the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.

Commitments and Contingencies

Environmental Protection Agency Notice

materially different than the Company’s current reserve. At this time, the Company cannot reasonably estimate the impact of any remedies the EPA might seek beyond the Company's current reserve for this matter, if any.

York Environmental Matters:

The Company has a reserve for its estimate of its share of the future Response Costs at the York facility which is included in accrued liabilities in the Condensed Consolidated Balance Sheets. ⁽¹⁾ As noted above, the RI/FS is still underway and given the uncertainty that exists concerning the nature and scope of additional environmental investigation and remediation that may ultimately be required under the RI/FS or otherwise at the York facility, the Company is unable to make a reasonable estimate of those additional costs, if any, that may result.

Product Liability Matters:

Liquidity and Capital Resources as of December 31, 2015

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

The Company’s strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and marketable securities and availability under credit facilities. The following table summarizes the Company’s cash and marketable securities and availability under credit facilities (in thousands):



	December 31, 2015
Cash and cash equivalents	$	722,209
Current marketable securities	45,192
Total cash and cash equivalents and marketable securities	767,401

Global credit facilities	148,620
Asset-backed U.S. commercial paper conduit facility ^(a)	600,000
Asset-backed Canadian commercial paper conduit facility ^(b)	19,191
Total availability under credit facilities	767,811
Total	$	1,535,212


(a)	The U.S. commercial paper conduit facility expires on December 14, 2016. The Company anticipates that it will renew this facility prior to expiration. ⁽¹⁾


(b)	The Canadian commercial paper conduit facility expires on June 30, 2016 and is limited to Canadian denominated borrowings. The Company anticipates that it will renew this facility prior to expiration. ⁽¹⁾

The Company recognizes that it must continue to adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding. The Financial Services operations could be negatively affected by higher costs of funding and the increased difficulty of raising, or potential unsuccessful efforts to raise, funding in the short-term and long-term capital markets. ⁽¹⁾ These negative consequences could in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital, reduced funds available through its Financial Services operations to provide loans to independent dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.

Cash Flow Activity

The following table summarizes the cash flow activity of continuing operations for the years ended December 31, 2015 , 2014 and 2013 (in thousands):



	2015			2014			2013
Net cash provided by operating activities	$	1,100,118		$	1,146,677		$	977,093
Net cash used by investing activities	(915,848		)	(744,650		)	(568,867		)
Net cash used by financing activities	(354,064		)	(536,096		)	(393,209		)
Effect of exchange rate changes on cash and cash equivalents	(14,677		)	(25,863		)	(16,543		)
Net decrease in cash and cash equivalents	$	(184,471	)	$	(159,932	)	$	(1,526	)

Operating Activities

The decrease in operating cash flow in 2015 compared to 2014 was due primarily to lower net income and increased wholesale lending. At the end of 2015, inventory was higher, as the Company increased its year-over-year fourth quarter production to maximize manufacturing efficiencies and prepare for the 2016 first quarter shipments.

During 2015 , the Company contributed $28.5 million to its qualified pension, SERPA and postretirement healthcare plans compared to $29.7 million in 2014. In January 2016, the Company voluntarily contributed $25 million to its qualified pension plan to further fund its pension plan, and the Company expects that no additional qualified plan contributions will be required in 2016 . ⁽¹⁾ The Company also expects it will continue to make on-going contributions related to current benefit payments for SERPA and postretirement healthcare plans. The Company’s expected future contributions to these plans are provided in Note 13 of Notes to Consolidated Financial Statements.

The increase in operating cash flow in 2014 compared to 2013 was due primarily to increased earnings and favorable changes in working capital and lower pension contributions, partially offset by higher wholesale finance originations.

Investing Activities

The Company’s investing activities consist primarily of capital expenditures, net changes in retail finance receivables and short-term investment activity. Capital expenditures were $260.0 million , $232.3 million and $208.3 million during 2015 , 2014 and 2013 , respectively.

Net cash flows from finance receivables for 2015 , which consisted primarily of retail finance receivables, were $59.8 million lower than 2014 as a result of an increase in retail motorcycle loan originations during 2015 . Net cash flows from finance receivables for 2014 , which consisted primarily of retail finance receivables, were $143.2 million lower than in 2013 as a result of an increase in retail motorcycle loan originations during 2014 .

Changes in the Company’s investment in marketable securities resulted in cash inflows of $11.5 million , $41.0 million and $35.1 million in 2015 , 2014 and 2013 , respectively.

During 2015, the Company recorded a $59.9 million cash outflow for the purchase of certain assets and liabilities from Fred Deeley Imports, Ltd.

Financing Activities

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

The Company paid dividends of $1.24 per share totaling $249.3 million during 2015 , $1.10 per share totaling $238.3 million during 2014 and $0.84 per share totaling $187.7 million in 2013 .

Cash outflows from share repurchases were $1.54 billion , $615.6 million and $479.2 million for 2015 , 2014 and 2013 , respectively. Share repurchases during 2015 , 2014 and 2013 included 28.0 million , 9.3 million and 8.2 million shares of common stock, respectively, related to discretionary share repurchases and shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock awards. In June 2015, the Company announced that the Company's Board of Directors had authorized the Company to repurchase up to 15 million additional shares of its common stock. In total at December 31, 2015 , the Company had Board-approved authorizations to repurchase 9.0 million shares of its common stock. In February 2016, the Company's Board of Directors separately authorized the Company to buy back up to an additional 20 million shares of its common stock with no dollar limit or expiration date.

The Company’s total outstanding debt consisted of the following as of December 31, 2015 , 2014 and 2013 (in thousands):



	2015		2014		2013
Unsecured commercial paper	$	1,201,380	$	731,786	$	666,317
Asset-backed Canadian commercial paper conduit facility	153,839		166,912		174,241
Medium-term notes	3,325,081		3,334,398		2,858,980
Senior unsecured notes	746,934		—		303,000
Term asset-backed securitization debt	1,463,154		1,271,533		1,256,632
Total debt	$	6,890,388	$	5,504,629	$	5,259,170

To access the debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or withdraw the Company’s ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings as of December 31, 2015 were as follows:



	Short-Term	Long-Term	Outlook
Moody’s	P2	A3	Stable
Standard & Poor’s	A2	A-	Stable
Fitch ^(a)	F1	A	Stable

Global Credit Facilities – In April 2014, the Company entered into a new $ 675.0 million five-year credit facility to refinance and replace a $ 675.0 million four-year credit facility that was due to mature in April 2015. The new five-year credit facility matures in April 2019. The Company also has a $ 675.0 million five-year credit facility which matures in April 2017. The new five-year credit facility and the existing five-year credit facility (together, the Global Credit Facilities) bear interest at various variable interest 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 upon the average daily unused portion of the aggregate commitments under the Global Credit Facilities. The Global Credit Facilities are committed facilities and primarily used to support the Company's unsecured commercial paper program. During July 2015, the Company borrowed C$20 million under the Global Credit Facilities and repaid the borrowings in August 2015. No borrowings were outstanding at December 31, 2015.

Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.35 billion as of December 31, 2015 supported by the Global Credit Facilities. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured commercial paper or through other means, such as borrowing under the Global Credit Facilities, 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 has the following medium-term notes (collectively, the Notes) issued and outstanding at December 31, 2015 (in thousands):



Principal Amount	Rate	Issue Date	Maturity Date
$450,000	3.875%	March 2011	March 2016
$400,000	2.70%	January 2012	March 2017
$400,000	1.55%	November 2014	November 2017
$878,708	6.80%	May 2008	June 2018
$600,000	2.40%	September 2014	September 2019
$600,000	2.15%	February 2015	February 2020

The Notes provide for semi-annual interest payments and principal due at maturity. Unamortized discounts on the Notes reduced the balance by $3.6 million, $3.6 million, and $1.5 million at December 31, 2015 , 2014 and 2013 , respectively.

In February 2015, the Company issued $600.0 million of medium-term notes that mature in 2020 and have an annual interest rate of 2.15%. In September 2014, the Company issued $600.0 million of medium-term notes that mature in September 2019 and have an annual interest rate of 2.40%. In November 2014, the Company issued $400.0 million of medium-term notes which mature in November 2017 and have an annual interest rate of 1.55%.

During 2015, 2014 and 2013, the Company repurchased an aggregate $9.3 million, $22.6 million, and $23.0 million, respectively, of its 6.80% medium-term notes which mature in June 2018. As a result, the Company recognized in financial services interest expense $1.1 million, $3.9 million and $4.9 million, respectively, for losses on the extinguishment of debt, which included unamortized discounts and fees. During September 2015, $600.0 million of 1.15% medium-term notes matured, and the principal and accrued interest were paid in full. During December 2014, $500.0 million of 5.75% medium-term notes matured, and the principal and accrued interest were paid in full.

In January 2016, HDFS issued $600.0 million of medium-term notes that mature in January 2019 and have an annual interest rate of 2.25% and $600.0 million of medium term notes that mature in January 2021 and have an annual interest rate of 2.85%.

Senior Unsecured Notes – In July 2015, the Company issued $750.0 million of senior unsecured notes in an underwritten offering. The senior unsecured notes provide for semi-annual interest payments and principal due at maturity. $450.0 million of the senior unsecured notes mature in July 2025 and have an interest rate of 3.50%, and $300.0 million of the senior unsecured notes mature in July 2045 and have an interest rate of 4.625%. The Company used the proceeds from the debt to repurchase shares of its common stock in 2015.

In February 2009, the Company issued $600.0 million of senior unsecured notes in an underwritten offering. The senior unsecured notes provide for semi-annual interest payments and principal due at maturity. During the fourth quarter of 2010, the Company repurchased $297.0 million of the $600.0 million senior unsecured notes at a price of $380.8 million. The senior unsecured notes matured in February 2014 and the Company repaid the remaining senior unsecured notes outstanding.

Asset-Backed Canadian Commercial Paper Conduit Facility – The Company has a revolving facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase from the Company eligible Canadian retail motorcycle finance receivables for proceeds up to C$240 million. The transferred assets are restricted as collateral for the payment of the debt. The terms for this facility provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$240 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. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of December 31, 2015, the Canadian Conduit has an expiration date of June 30, 2016. The contractual maturity of the debt is approximately 5 years.

During 2015 and 2014, the Company transferred $100.0 million and $97.1 million , respectively, of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $87.5 million and $85.0 million , respectively.

Asset-Backed U.S. Commercial Paper Conduit Facility Variable Interest Entity (VIE) – On December 14, 2015, the Company entered into a new revolving facility agreement (U.S. Conduit) with a third party bank-sponsored asset-backed U.S. commercial paper conduit, which provides for a total aggregate commitment of $600.0 million. The prior agreement expired on December 14, 2015 and had similar terms. At December 31, 2015, 2014, and 2013, the Company had no outstanding borrowings under the U.S. Conduit.

This debt provides for interest on outstanding principal based generally on prevailing commercial paper rates or LIBOR to the extent the advance is not funded by a conduit lender through the issuance of commercial paper plus, in each case, a program fee based on outstanding principal. The U.S. Conduit also provides for an unused commitment fee based on the unused portion of the total aggregate commitment of $600.0 million. There is no amortization schedule; however, the debt will be reduced monthly as available collections on the related finance receivable collateral are applied to outstanding principal. Upon expiration of the U.S. Conduit, any outstanding principal will continue to be reduced monthly through available collections. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of December 31, 2015, the U.S. Conduit expires December 14, 2016.

Term Asset-Backed Securitization VIEs – For all of its term asset-backed securitization transactions, the Company transferred U.S. retail motorcycle finance receivables to separate VIEs, which in turn issued 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 term 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. There is no amortization schedule for the secured notes; however, the debt is reduced monthly as available collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes’ contractual lives have various maturities ranging from 2016 to 2022.

Intercompany Borrowings – HDFS and the Company have had in effect term loan agreements under which HDFS borrowed from the Company. As of December 31, 2015, there were no intercompany loans outstanding and the intercompany loan balance of $250.0 million outstanding as of December 31, 2014 was repaid during the first quarter of 2015. The term loans provide for monthly interest based on the prevailing commercial paper rates and principal due at maturity or upon demand by the Company. The term loan balances and related interest are eliminated in the Company's consolidated financial statements.

During 2014, HDFS and the Company had in effect the following term loan agreements under which HDFS borrowed from the Company (in thousands):



Principal Amount	Issue Date	Maturity Date
$300,000	June 2013	April 2014 *
$150,000	September 2013	April 2014 *
$300,000	April 2014	April 2015 **
$250,000	June 2014	September 2014 *
$150,000	September 2014	April 2015 *

* This loan was repaid on or before the maturity date.

** $50.0 million of this loan was repaid in November 2014

Support Agreement - The Company has a support agreement with HDFS whereby, if required, the Company agrees to provide HDFS with financial support in order to maintain HDFS’ fixed-charge coverage at 1.25 and minimum net worth of $40.0 million. Support may be provided at the Company’s option as capital contributions or loans. Accordingly, certain debt covenants may restrict the Company’s ability to withdraw funds from HDFS outside the normal course of business. No amount has ever been provided to HDFS under the support agreement.

Operating and Financial Covenants – HDFS and the Company are subject to various operating and financial covenants related to the Global Credit Facilities and various operating covenants under the Notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below.

The operating covenants limit the Company’s and HDFS’ ability to:


•	assume or incur certain liens;


•	participate in certain mergers, consolidations, liquidations or dissolutions; and


•	purchase or hold margin stock.

Under the current financial covenants of the Global Credit Facilities, the consolidated debt to equity ratio of HDFS 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 equity, in each case excluding the debt of HDFS and its subsidiaries, cannot exceed 0.65 to 1.0 as of the end of any fiscal quarter. No financial covenants are required under the Notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.

At December 31, 2015 , 2014 and 2013 , HDFS and the Company remained in compliance with all of the existing covenants.

Cautionary Statements

The Company’s ability to meet the targets and expectations noted depends upon, among other factors, the Company’s ability to:


(i)	execute its business strategy,


(ii)	manage through changes in general economic conditions, including changing capital, credit and retail markets, and political events,


(iii)	accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices,


(iv)	continue to develop the capabilities of the Company's dealers and manage the risks that the Company's independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand,


(v)	prevent a cybersecurity breach involving consumer, employee, dealer, supplier or Company data and respond to evolving regulatory requirements regarding data security,


(vi)	drive demand by executing the Company's marketing strategy of appealing to and growing sales to multi-generational and multi-cultural customers worldwide in an increasingly competitive marketplace,


(vii)	develop and introduce products, services and experiences that are successful in the marketplace,


(viii)	manage risks that arise through expanding international manufacturing, operations and sales,


(ix)	manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles,


(x)	balance production volumes for the Company's new motorcycles with consumer demand, including in circumstances where competitors may be supplying new motorcycles to the market in excess of demand at reduced prices,


(xi)	manage the impact that prices for and supply of used motorcycles may have on retail sales of new motorcycles,


(xii)	manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations,


(xiii)	manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters,


(xiv)	prevent and detect any issues with the Company's motorcycles or associated manufacturing processes to avoid delays in new model launches, recall campaigns, increased warranty costs or litigation and adverse effects on the Company's reputation and brand strength,


(xv)	manage the Company's exposure to product liability claims and commercial or contractual disputes,


(xvi)	implement and manage enterprise-wide information technology solutions, including solutions at its manufacturing facilities,


(xvii)	execute its flexible production strategy,


(xviii)	adjust to healthcare inflation and reform, pension reform and tax changes,


(xix)	retain and attract talented employees,


(xx)	successfully access the capital and/or credit markets on terms (including interest rates) that are acceptable to the Company and within its expectations,


(xxi)	manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS’ loan portfolio, and


(xxii)	continue to manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness.

In addition, the Company could experience delays or disruptions in its operations as a result of work stoppages, strikes, natural causes, terrorism or other factors. Other factors are described in “Risk Factors” under Item 1A which includes a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.

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 may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions or other factors.

In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The Company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior and HDFS' efforts to increase prudently structured loan approvals in the sub-prime lending environment.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in foreign exchange rates and interest rates. To reduce such risks, the Company selectively uses derivative financial instruments. All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes. Sensitivity analysis is used to manage and monitor foreign exchange and interest rate risk.

The Company sells its products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, the Company’s earnings can be affected by fluctuations in the value of the U.S. dollar relative to foreign currency. The Company’s most significant foreign currency risk relates to the Euro, the Australian dollar, the Japanese yen, the Brazilian real and the Mexican peso. The Company utilizes foreign currency contracts to mitigate the effect of certain currencies' fluctuations on earnings. The foreign currency contracts are entered into with banks and allow the Company to exchange a specified amount of foreign currency for U.S. dollars at a future date, based on a fixed exchange rate. At December 31, 2015 , the notional U.S. dollar value of outstanding Euro, Australian dollar, Japanese yen, Brazilian real and Mexican peso foreign currency contracts was $436.4 million . The Company estimates that a uniform 10% weakening in the value of the U.S. dollar relative to the currencies underlying these contracts would result in a decrease in the fair value of the contracts of approximately $41.6 million as of December 31, 2015 . Further disclosure relating to the fair value of derivative financial instruments is included in Note 8 of the Notes to Consolidated Financial Statements.

Item 8. Consolidated Financial Statements and Supplementary Data




	Page
Management’s Report on Internal Control Over Financial Reporting	48
Report of the Audit Committee	49
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	50
Report of Independent Registered Public Accounting Firm	51
Consolidated statements of income	52
Consolidated statements of comprehensive income	53
Consolidated balance sheets	54
Consolidated statements of cash flows	56
Consolidated statements of shareholders’ equity	57
Notes to consolidated financial statements	58
Supplementary data
Quarterly financial data (unaudited)	107

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation under the framework in Internal Control – Integrated Framework, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015 . Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on the effectiveness of the Company’s internal control over financial reporting.




Matthew S. Levatich		John A. Olin
President and Chief Executive Officer		Senior Vice President and Chief Financial Officer

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors reviews the Company’s financial reporting process and the audit process. All of the Audit Committee members are independent in accordance with the Audit Committee requirements of the New York Stock Exchange, Inc.

The Audit Committee of the Board of Directors has reviewed and discussed with management its assessment of the effectiveness of the Company’s internal control system over financial reporting as of December 31, 2015 . Management has concluded that the internal control system was effective. Additionally, the Company’s internal control over financial reporting as of December 31, 2015 was audited by Ernst & Young LLP, the Company’s independent registered public accounting firm for the 2015 fiscal year. The Audit Committee has reviewed and discussed the audited financial statements of the Company for the 2015 fiscal year with management as well as with representatives of Ernst & Young LLP. The Audit Committee has also discussed with Ernst & Young LLP matters required to be discussed under Public Company Accounting Oversight Board (PCAOB) No. 16, Communications with Audit Committees. The Audit Committee has received written disclosures from Ernst & Young LLP regarding their independence as required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and has discussed with representatives of Ernst & Young LLP the independence of Ernst & Young LLP. Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements for the 2015 fiscal year be included in the Company’s Annual Report on Form 10-K for the 2015 fiscal year.

Audit Committee of the Board of Directors

Richard I. Beattie

George L. Miles, Jr.

N. Thomas Linebarger

James A. Norling, Chairman

Jochen Zeitz

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL

CONTROL OVER FINANCIAL REPORTING

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

We have audited Harley-Davidson, Inc.’s internal control over financial reporting as of December 31, 2015 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Harley-Davidson, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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

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

In our opinion, Harley-Davidson, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 2015 and 2014 , and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2015 of Harley-Davidson, Inc. and our report dated February 18, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

February 18, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheets of Harley-Davidson, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2015. Our audits also included the financial statement schedule listed in the index at item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Harley-Davidson, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Harley-Davidson, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 18, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

February 18, 2016

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2015 , 2014 and 2013

(In thousands, except per share amounts)



	2015		2014		2013
Revenue:
Motorcycles and Related Products	$	5,308,744	$	5,567,681	$	5,258,290
Financial Services	686,658		660,827		641,582
Total revenue	5,995,402		6,228,508		5,899,872
Costs and expenses:
Motorcycles and Related Products cost of goods sold	3,356,284		3,542,601		3,395,918
Financial Services interest expense	161,983		164,476		165,491
Financial Services provision for credit losses	101,345		80,946		60,008
Selling, administrative and engineering expense	1,220,095		1,159,502		1,124,753
Total costs and expenses	4,839,707		4,947,525		4,746,170
Operating income	1,155,695		1,280,983		1,153,702
Investment income	6,585		6,499		5,859
Interest expense	12,117		4,162		45,256
Income before provision for income taxes	1,150,163		1,283,320		1,114,305
Provision for income taxes	397,956		438,709		380,312
Net income	$	752,207	$	844,611	$	733,993
Earnings per common share:
Basic	$	3.71	$	3.90	$	3.30
Diluted	$	3.69	$	3.88	$	3.28
Cash dividends per common share	$	1.24	$	1.10	$	0.84

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

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2015 , 2014 and 2013

(In thousands)



	2015			2014			2013
Net income	$	752,207		$	844,611		$	733,993
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment	(55,362		)	(36,808		)	(18,009		)
Derivative financial instruments	(13,156		)	20,722			2,157
Marketable securities	(394		)	(424		)	(953		)
Pension and postretirement benefit plans	(31,350		)	(165,757		)	291,807
Total other comprehensive (loss) income, net of tax	(100,262		)	(182,267		)	275,002
Comprehensive income	$	651,945		$	662,344		$	1,008,995

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

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2015 and 2014

(In thousands, except share amounts)



	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	722,209		$	906,680
Marketable securities	45,192			57,325
Accounts receivable, net	247,405			247,621
Finance receivables, net	2,053,582			1,916,635
Inventories	585,907			448,871
Restricted cash	88,267			98,627
Deferred income taxes	102,769			89,916
Other current assets	137,823			182,420
Total current assets	3,983,154			3,948,095
Finance receivables, net	4,814,571			4,516,246
Property, plant and equipment, net	942,418			883,077
Goodwill	54,182			27,752
Deferred income taxes	99,614			77,835
Other long-term assets	97,228			75,092
	$	9,991,167		$	9,528,097
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	235,614		$	196,868
Accrued liabilities	471,964			449,317
Short-term debt	1,201,380			731,786
Current portion of long-term debt	843,620			1,011,315
Total current liabilities	2,752,578			2,389,286
Long-term debt	4,845,388			3,761,528
Pension liability	164,888			76,186
Postretirement healthcare liability	193,659			203,006
Other long-term liabilities	195,000			188,805
Commitments and contingencies (Note 15)
Shareholders’ equity:
Preferred stock, none issued	—			—
Common stock, 344,855,704 and 344,174,653 shares issued, respectively	3,449			3,442
Additional paid-in-capital	1,328,561			1,265,257
Retained earnings	8,961,985			8,459,040
Accumulated other comprehensive loss	(615,205		)	(514,943		)
Treasury stock (160,121,966 and 132,297,840 shares, respectively), at cost	(7,839,136		)	(6,303,510		)
Total shareholders’ equity	1,839,654			2,909,286
	$	9,991,167		$	9,528,097

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS (continued)

December 31, 2015 and 2014

(In thousands, except share amounts)



	2015		2014
Balances held by consolidated variable interest entities (Note 6)
Current finance receivables, net	$	322,768	$	312,645
Other assets	$	4,706	$	3,409
Non-current finance receivables, net	$	1,250,919	$	1,113,801
Restricted cash - current and non-current	$	100,151	$	110,017
Current portion of long-term debt	$	353,363	$	366,889
Long-term debt	$	1,109,791	$	904,644

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

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2015 , 2014 and 2013

(In thousands)



	2015			2014			2013
Net cash provided by operating activities (Note 2)	$	1,100,118		$	1,146,677		$	977,093
Cash flows from investing activities:
Capital expenditures	(259,974		)	(232,319		)	(208,321		)
Origination of finance receivables	(3,751,830		)	(3,568,423		)	(3,244,005		)
Collections on finance receivables	3,136,885			3,013,245			2,831,994
Purchases of marketable securities	—			—			(4,998		)
Sales and redemptions of marketable securities	11,507			41,010			40,108
Acquisition of business	(59,910		)	—			—
Other	7,474			1,837			16,355
Net cash used by investing activities	(915,848		)	(744,650		)	(568,867		)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	595,386			991,835			—
Repayments of medium-term notes	(610,331		)	(526,431		)	(27,858		)
Proceeds from issuance of senior unsecured notes	740,385			—			—
Repayment of senior unsecured notes	—			(303,000		)	—
Proceeds from securitization debt	1,195,668			847,126			647,516
Repayments of securitization debt	(1,008,135		)	(834,856		)	(840,387		)
Borrowings of asset-backed commercial paper	87,442			84,907			88,456
Repayments of asset-backed commercial paper	(72,727		)	(77,800		)	(78,765		)
Net increase in credit facilities and unsecured commercial paper	469,473			63,945			371,085
Net change in restricted cash	11,410			22,755			43,201
Dividends paid	(249,262		)	(238,300		)	(187,688		)
Purchase of common stock for treasury	(1,537,020		)	(615,602		)	(479,231		)
Excess tax benefits from share-based payments	3,468			11,540			19,895
Issuance of common stock under employee stock option plans	20,179			37,785			50,567
Net cash used by financing activities	(354,064		)	(536,096		)	(393,209		)
Effect of exchange rate changes on cash and cash equivalents	(14,677		)	(25,863		)	(16,543		)
Net decrease in cash and cash equivalents	$	(184,471	)	$	(159,932	)	$	(1,526	)
Cash and cash equivalents:
Cash and cash equivalents—beginning of period	$	906,680		$	1,066,612		$	1,068,138
Net decrease in cash and cash equivalents	(184,471		)	(159,932		)	(1,526		)
Cash and cash equivalents—end of period	$	722,209		$	906,680		$	1,066,612

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

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years ended December 31, 2015 , 2014 and 2013

(In thousands, except share amounts)



	Common Stock			Additional paid-in capital			Retained Earnings			Accumulated Other comprehensive loss			Treasury Balance			Total
	Issued Shares	Balance		Additional paid-in capital			Retained Earnings			Accumulated Other comprehensive loss			Treasury Balance			Total
Balance December 31, 2012	341,265,838	$	3,413	$	1,066,069		$	7,306,424		$	(607,678	)	$	(5,210,604	)	$	2,557,624
Net income	—	—		—			733,993			—			—			733,993
Total other comprehensive loss, net of tax (Note 10)	—	—		—			—			275,002			—			275,002
Dividends	—	—		—			(187,688		)	—			—			(187,688		)
Repurchase of common stock	—	—		—			—			—			(479,231		)	(479,231		)
Share-based compensation and 401(k) match made with Treasury shares	—	—		40,724			—			—			784			41,508
Issuance of nonvested stock	492,755	5		(5		)	—			—			—			—
Exercise of stock options	1,398,638	14		50,553			—			—			—			50,567
Tax benefit of stock options and nonvested stock	—	—		17,711			—			—			—			17,711
Balance December 31, 2013	343,157,231	$	3,432	$	1,175,052		$	7,852,729		$	(332,676	)	$	(5,689,051	)	$	3,009,486
Net income	—	—		—			844,611			—			—			844,611
Total other comprehensive income, net of tax (Note 10)	—	—		—			—			(182,267		)	—			(182,267		)
Dividends	—	—		—			(238,300		)	—			—			(238,300		)
Repurchase of common stock	—	—		—			—			—			(615,602		)	(615,602		)
Share-based compensation and 401(k) match made with Treasury shares	—	—		40,848			—			—			1,143			41,991
Issuance of nonvested stock	15,891	—		—			—			—			—			—
Exercise of stock options	1,001,531	10		37,775			—			—			—			37,785
Tax benefit of stock options and nonvested stock	—	—		11,582			—			—			—			11,582
Balance December 31, 2014	344,174,653	$	3,442	$	1,265,257		$	8,459,040		$	(514,943	)	$	(6,303,510	)	$	2,909,286
Net income	—	—		—			752,207			—			—			752,207
Total other comprehensive loss, net of tax (Note 10)	—	—		—			—			(100,262		)	—			(100,262		)
Dividends	—	—		—			(249,262		)	—			—			(249,262		)
Repurchase of common stock	—	—		—			—			—			(1,537,020		)	(1,537,020		)
Share-based compensation and 401(k) match made with Treasury shares	—	—		39,457			—			—			1,394			40,851
Issuance of nonvested stock	162,193	2		(2		)	—			—			—			—
Exercise of stock options	518,858	5		20,174			—			—			—			20,179
Tax benefit of stock options and nonvested stock	—	—		3,675			—			—			—			3,675
Balance December 31, 2015	344,855,704	$	3,449	$	1,328,561		$	8,961,985		$	(615,205	)	$	(7,839,136	)	$	1,839,654

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

HARLEY-DAVIDSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation – The consolidated financial statements include the accounts of Harley-Davidson, Inc. and its wholly-owned subsidiaries (the Company), including the accounts of the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). In addition, certain variable interest entities (VIEs) related to secured financing are consolidated as the Company is the primary beneficiary. All intercompany accounts and transactions are eliminated.

All of the Company’s subsidiaries are wholly owned and are included in the consolidated financial statements. Substantially all of the Company’s international subsidiaries use their respective local currency as their functional currency. Assets and liabilities of international subsidiaries have been translated at period-end exchange rates, and revenues and expenses have been translated using average exchange rates for the period.

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

Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents – The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Marketable Securities – The Company’s marketable securities consisted of the following at December 31 (in thousands):



	2015		2014
Available-for-sale securities: corporate bonds	$	45,192	$	57,325
Trading securities: mutual funds	36,256		33,815
Total marketable securities	$	81,448	$	91,140

The Company’s available-for-sale securities are carried at fair value with any unrealized gains or losses reported in other comprehensive income. During 2015 and 2014 , the Company recognized gross unrealized losses of $0.6 million and $0.7 million , respectively, or losses of $0.4 million and $0.4 million , net of tax, respectively, to adjust amortized cost to fair value. The marketable securities have contractual maturities that generally come due over the next 4 to 16 months.

The Company's trading securities relate to investments held by the Company to fund certain deferred compensation obligations. The trading securities are carried at fair value with gains and losses recorded in net income and investments are included in other long-term assets on the consolidated balance sheets.

Accounts Receivable, Net – The Company’s motorcycles and related products are sold to independent dealers outside the U.S. and Canada generally on open account and the resulting receivables are included in accounts receivable in the Company’s consolidated balance sheets. The allowance for doubtful accounts deducted from total accounts receivable was $2.9 million and $3.5 million as of December 31, 2015 and 2014 , respectively. Accounts receivable are written down once management determines that the specific customer does not have the ability to repay the balance in full. The Company’s sales of motorcycles and related products in the U.S. and Canada are financed by the purchasing dealers through HDFS and the related receivables are included in finance receivables in the consolidated balance sheets.

Finance Receivables, Net – Finance receivables include both retail and wholesale finance receivables, net, including amounts held by VIEs. Finance receivables are recorded in the financial statements at amortized cost net of an allowance for credit losses. The provision for credit losses on finance receivables is charged to earnings in amounts sufficient to maintain the allowance for credit losses at a level that is adequate to cover estimated losses of principal inherent in the existing portfolio. Portions of the allowance for credit losses are specified to cover estimated losses on finance receivables specifically identified for impairment. The unspecified portion of the allowance covers estimated losses on finance receivables which are collectively reviewed for impairment. Finance receivables are considered impaired when management determines it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a periodic and systematic collective evaluation of the adequacy of the retail allowance for credit losses. The

Company utilizes loss forecast models which consider a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates and current economic conditions including items such as unemployment rates. Retail finance receivables are not evaluated individually for impairment prior to charge-off and therefore are not reported as impaired loans.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s wholesale allowance evaluation is first based on a loan-by-loan review. A specific allowance for credit losses is established for wholesale finance receivables determined to be individually impaired when management concludes that the borrower will not be able to make full payment of contractual amounts due based on the original terms of the loan agreement. The impairment is determined based on the cash that the Company expects to receive discounted at the loan’s original interest rate or the fair value of the collateral, if the loan is collateral-dependent. In establishing the allowance, management considers a number of factors including the specific borrower’s financial performance as well as ability to repay. Finance receivables in the wholesale portfolio that are not individually evaluated for impairment are segregated, based on similar risk characteristics, according to the Company’s internal risk rating system and collectively evaluated for impairment. The related allowance is based on factors such as the Company’s past loan loss experience, current economic conditions as well as the value of the underlying collateral.

Impaired finance receivables also include loans that have been modified in troubled debt restructurings as a concession to borrowers experiencing financial difficulty. Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize the economic loss, the Company may modify certain impaired finance receivables in troubled debt restructurings. Total restructured finance receivables are not significant.

Repossessed inventory representing recovered collateral on impaired finance receivables is recorded at the lower of cost or net realizable value. In the period during which the collateral is repossessed, the related finance receivable is adjusted to the fair value of the collateral through a charge to the allowance for credit losses and reclassified to repossessed inventory. Repossessed inventory is included in other current assets and was $17.7 million and $13.4 million at December 31, 2015 and 2014 , respectively.

Asset-Backed Financing – The Company participates in asset-backed financing both through term asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. The Company treats these transactions as secured borrowing because either they are transferred to consolidated VIEs or the Company maintains effective control over the assets and does not meet the accounting sale requirements under ASC Topic 860, "Transfers and Servicing." In the Company's asset-backed financing programs, the Company transfers retail motorcycle finance receivables to special purpose entities (SPE), which are considered VIEs under U.S. GAAP. Each SPE then converts those assets into cash, through the issuance of debt.

The Company is required to consolidate any VIEs in which it is deemed to be the primary beneficiary through having power over the significant activities of the entity and having an obligation to absorb losses or the right to receive benefits from the VIE which are potentially significant to the VIE. The Company is considered to have the power over the significant activities of its term asset-backed securitization and asset-backed U.S. commercial paper conduit facility VIEs due to its role as servicer. Servicing fees are typically not considered potentially significant variable interests in a VIE. However, the Company retains a residual interest in the VIEs in the form of a debt security, which gives the Company the right to receive benefits that could be potentially significant to the VIE. Therefore, the Company is the primary beneficiary and consolidates all of these VIEs within its consolidated financial statements.

The Company is not the primary beneficiary of the asset-backed Canadian commercial paper conduit facility 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 under ASC Topic 860. As such, the Company retains the transferred assets and the related debt within its Consolidated Balance Sheet.

Servicing fees paid by VIEs to the Company are eliminated in consolidation and therefore are not recorded on a consolidated basis. The Company is not required, and does not currently intend, to provide any additional financial support to its VIEs. Investors and creditors only have recourse to the assets held by the VIEs.

Inventories – Inventories are valued at the lower of cost or market. Substantially all inventories located in the United States are valued using the last-in, first-out (LIFO) method. Other inventories totaling $266.6 million at December 31, 2015 and $232.8 million at December 31, 2014 are valued at the lower of cost or market using the first-in, first-out (FIFO) method.

Property, Plant and Equipment – Property, plant and equipment is recorded at cost. Depreciation is determined on the straight-line basis over the estimated useful lives of the assets. The following useful lives are used to depreciate the various classes of property, plant and equipment: buildings – 30 years; building equipment and land improvements – 7 years;

machinery and equipment – 3 to 10 years; furniture and fixtures – 5 years; and software – 3 to 7 years. Accelerated methods of depreciation are used for income tax purposes.

Goodwill – Goodwill represents the excess of acquisition cost over the fair value of the net assets purchased. Goodwill is tested for impairment, based on financial data related to the reporting unit to which it has been assigned, at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The impairment test involves comparing the estimated fair value of the reporting unit associated with the goodwill to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, goodwill must be adjusted to its implied fair value. During 2015 and 2014 , the Company performed a quantitative test on its goodwill balances for impairment and no adjustments were recorded to goodwill as a result of those reviews.

Long-lived Assets – The Company periodically evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such review. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset for assets to be held and used. The Company also reviews the useful life of its long-lived assets when events and circumstances indicate that the actual useful life may be shorter than originally estimated. In the event that the actual useful life is deemed to be shorter than the original useful life, depreciation is adjusted prospectively so that the remaining book value is depreciated over the revised useful life.

Asset groups classified as held for sale are measured at the lower of carrying amount or fair value less cost to sell, and a loss is recognized for any initial adjustment required to reduce the carrying amount to the fair value less cost to sell in the period the held for sale criteria are met. The fair value less cost to sell must be assessed each reporting period the asset group remains classified as held for sale. Gains or losses not previously recognized resulting from the sale of an asset group will be recognized on the date of sale.

Product Warranty and Recall Campaigns – The Company currently provides a standard two -year limited warranty on all new motorcycles sold worldwide, except for Japan, where the Company provides a standard three -year limited warranty on all new motorcycles sold. In addition, the Company offers a one -year warranty for Parts & Accessories (P&A). The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company maintains reserves for future warranty claims using an estimated cost, which are based primarily on historical Company claim information. Additionally, the Company has from time to time initiated certain voluntary recall campaigns. The Company reserves for all estimated costs associated with recalls in the period that management approves and commits to the recall.

Changes in the Company’s warranty and recall liability were as follows (in thousands):



	2015			2014			2013
Balance, beginning of period	$	69,250		$	64,120		$	60,263
Warranties issued during the period	59,259			60,331			59,022
Settlements made during the period	(96,529		)	(74,262		)	(64,462		)
Recalls and changes to pre-existing warranty liabilities	42,237			19,061			9,297
Balance, end of period	$	74,217		$	69,250		$	64,120

The liability for recall campaigns was $10.2 million , $9.8 million and $4.0 million at December 31, 2015 , 2014 and 2013 , respectively.

Derivative Financial Instruments – The Company is exposed to certain risks such as foreign currency exchange rate risk, interest rate risk and commodity price risk. To reduce its exposure to such risks, the Company selectively uses derivative financial instruments. All derivative transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes.

All derivative instruments are recognized on the balance sheet at fair value (see Note 7). In accordance with ASC Topic 815, “Derivatives and Hedging,” the accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings. For derivative instruments that are designated as cash flow hedges, the effective portion of gains and losses that result from changes in the fair value of derivative instruments is initially recorded in other comprehensive income (OCI) and subsequently reclassified into earnings when the hedged item affects income. The Company assesses, at both the inception of each hedge and on an on-going basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Any ineffective portion is immediately recognized in earnings. No component of a hedging derivative instrument’s gain or loss is excluded from the assessment of hedge

effectiveness. Derivative instruments that do not qualify for hedge accounting are recorded at fair value and any changes in fair value are recorded in current period earnings. Refer to Note 9 for a detailed description of the Company’s derivative instruments.

Motorcycles and Related Products Revenue Recognition – Sales are recorded when title and ownership is transferred, which is generally when products are shipped to wholesale customers (independent dealers). The Company may offer sales incentive programs to both wholesale and retail customers designed to promote the sale of motorcycles and related products. The total costs of these programs are generally recognized as revenue reductions and are accrued at the later of the date the related sales are recorded or the date the incentive program is both approved and communicated.

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

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed or the receivable is otherwise deemed uncollectible. All retail finance receivables accrue interest until either collected or charged-off. Accordingly, as of December 31, 2015 and 2014 , all retail finance receivables are accounted for as interest-earning receivables.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once management determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the finance receivable becomes uncollectible and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate.

Insurance and protection product commissions as well as commissions on the sale of extended service contracts are recognized when contractually earned. Deferred revenue related to extended service contracts was $4.6 million and $5.7 million as of December 31, 2015 and 2014 , respectively.

Research and Development Expenses – Expenditures for research activities relating to product development and improvement are charged against income as incurred and included within selling, administrative and engineering expenses in the consolidated statement of income. Research and development expenses were $161.2 million , $138.3 million and $152.2 million for 2015 , 2014 and 2013 , respectively.

Advertising Costs – The Company expenses the production cost of advertising the first time the advertising takes place. Advertising costs relate to the Company’s efforts to promote its products and brands through the use of media. During 2015 , 2014 and 2013 , the Company incurred $119.8 million , $107.4 million and $90.7 million in advertising costs, respectively.

Shipping and Handling Costs – The Company classifies shipping and handling costs as a component of cost of goods sold.

Share-Based Award Compensation Costs – The Company recognizes the cost of its share-based awards in its statement of income. The total cost of the Company’s equity awards is equal to their grant date fair value and is recognized as expense on a straight-line basis over the service periods of the awards. The total cost of the Company’s liability for cash-settled awards is equal to their settlement date fair value. The liability for cash-settled awards is revalued each period based on a recalculated fair value adjusted for vested awards. Total share-based award compensation expense recognized by the Company during 2015 , 2014 and 2013 was $29.4 million , $37.9 million and $41.2 million , respectively, or $18.5 million , $23.9 million and $26.0 million net of taxes, respectively.

Income Tax Expense – The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.

New Accounting Standards

Accounting Standards Not Yet Adopted

amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers: Deferral of Effective Date (ASU No. 2015-14) to defer the effective date of the new revenue recognition standard by one year to fiscal years beginning after December 15, 2017 and for interim periods therein. The Company is currently evaluating the impact of adoption.

2. Additional Balance Sheet and Cash Flow Information

The following information represents additional detail for selected line items included in the consolidated balance sheets at December 31, and the statements of cash flows for the years ended December 31.

Balance Sheet Information:

Inventories, net (in thousands):



	2015			2014
Components at the lower of FIFO cost or market
Raw materials and work in process	$	161,704		$	151,254
Motorcycle finished goods	327,952			230,309
Parts and accessories and general merchandise	145,519			117,210
Inventory at lower of FIFO cost or market	635,175			498,773
Excess of FIFO over LIFO cost	(49,268		)	(49,902		)
Total inventories, net	$	585,907		$	448,871

Inventory obsolescence reserves deducted from FIFO cost were $26.7 million and $17.8 million as of December 31, 2015 and 2014 , respectively.

Property, plant and equipment, at cost (in thousands):



	2015			2014
Land and related improvements	$	56,554		$	55,238
Buildings and related improvements	453,433			475,268
Machinery and equipment	1,859,443			1,823,790
Software	524,076			440,703
Construction in progress	280,147			200,708
	3,173,653			2,995,707
Accumulated depreciation	(2,231,235		)	(2,112,630		)
Total property, plant and equipment, net	$	942,418		$	883,077

Accrued liabilities (in thousands):



	2015		2014
Payroll, employee benefits and related expenses	$	160,971	$	165,448
Warranty and recalls	54,894		48,529
Sales incentive programs	37,568		44,423
Tax-related accruals	18,535		28,333
Accrued interest	33,925		19,072
Other	166,071		143,512
Total accrued liabilities	$	471,964	$	449,317

Cash Flow Information:

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



	2015			2014			2013
Cash flows from operating activities:
Net income	$	752,207		$	844,611		$	733,993
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	198,074			179,300			167,072
Amortization of deferred loan origination costs	93,546			94,429			86,181
Amortization of financing origination fees	9,975			8,442			9,376
Provision for long-term employee benefits	60,824			33,709			66,877
Contributions to pension and postretirement plans	(28,490		)	(29,686		)	(204,796		)
Stock compensation expense	29,433			37,929			41,244
Net change in wholesale finance receivables related to sales	(113,970		)	(75,210		)	28,865
Provision for credit losses	101,345			80,946			60,008
Loss on debt extinguishment	1,099			3,942			4,947
Deferred income taxes	(16,484		)	(7,621		)	52,580
Foreign currency adjustments	20,067			21,964			16,269
Other, net	846			(1,491		)	10,123
Changes in current assets and liabilities:
Accounts receivable, net	(13,665		)	(9,809		)	(36,653		)
Finance receivables – accrued interest and other	(3,046		)	(2,515		)	(346		)
Inventories	(155,222		)	(50,886		)	(46,474		)
Accounts payable and accrued liabilities	138,823			21,309			(78,665		)
Derivative instruments	(5,615		)	703			(2,189		)
Prepaid and other	30,371			(3,389		)	68,681
Total adjustments	347,911			302,066			243,100
Net cash provided by operating activities	$	1,100,118		$	1,146,677		$	977,093

Cash paid during the period for interest and income taxes (in thousands):



	2015		2014		2013
Interest	$	148,654	$	154,310	$	197,161
Income taxes	$	371,547	$	438,840	$	236,972

Interest paid represents interest payments of HDFS (included in financial services interest expense) and interest payments of the Company (included in interest expense).

3. Acquisition

On August 4, 2015, the Company completed its purchase of certain assets and liabilities from Fred Deeley Imports, Ltd (Deeley Imports) including, among other things, the acquisition of the exclusive right to distribute the Company's motorcycles and other products in Canada (Transaction) for total consideration of $59.9 million . The majority equity owner of Deeley Imports is a member of the Board of Directors of the Company. The Company believes that the acquisition of the Canadian distribution rights will align Harley-Davidson's Canada distribution with the Company's global go-to-market approach.

The financial impact of the acquisition, which is part of the Motorcycles segment, has been included in the Company's consolidated financial statements from the date of acquisition. Proforma information reflecting this acquisition has not been disclosed as the proforma impact on consolidated net income would not be material.

The following table summarizes the preliminary fair values of the Deeley Imports assets acquired and liabilities assumed at the date of acquisition (in thousands):



	August 4, 2015
Current assets	$	11,088
Property, plant and equipment	144
Intangible assets	20,842
Goodwill	28,567
Total assets	60,641
Current liabilities	731
Net assets acquired	$	59,910

As noted above, in conjunction with the acquisition of certain assets and assumption of certain liabilities of Deeley Imports, the Company recorded goodwill of $28.6 million , all of which the Company believes is tax deductible, and intangible assets with an initial fair value of $20.8 million . Of the total intangible assets acquired, $13.3 million was assigned to reacquired distribution rights with a useful life of two years and $7.5 million was assigned to customer relationships with a useful life of twenty years. The Company agreed to reimburse Deeley Imports for certain severance costs associated with the Transaction resulting in $3.3 million of expense included in selling, administrative and engineering expense in the third quarter of 2015. The Company did not acquire any cash as part of the Transaction.

4. Goodwill and Intangible Assets

The following table summarizes changes in the carrying amount of goodwill in the Motorcycles segment for the following years ended December 31 (in thousands):



	2015			2014			2013
Balance, beginning of period	$	27,752		$	30,452		$	29,530
Business acquisitions	28,567			—			—
Currency translation	(2,137		)	(2,700		)	922
Balance, end of period	$	54,182		$	27,752		$	30,452

The following table summarizes the Motorcycles segment intangible assets other than goodwill at December 31 (in thousands):



	2015
	Gross Carrying Amount		Accumulated Amortization			Net		Estimated useful life (years)
Intangible assets other than goodwill
Reacquired distribution rights	$	12,614	$	(2,628	)	$	9,986	2
Customer relationships	7,116		(148		)	6,968		20
Total other intangible assets	$	19,730	$	(2,776	)	$	16,954

Intangible assets other than goodwill are included in other long-term assets on the Company's consolidated balance sheets. The gross carrying amounts at December 31 differs from the acquisition date amounts due to changes in foreign currency exchange rates.

Total amortization expense of other intangible assets for 2015 was $2.8 million . There was no amortization expense of other intangible assets for 2014 . The Company estimates future amortization to be as follows (in thousands):



	Estimated Amortization
2016	6,756
2017	4,091
2018	360
2019	360
2020	360
Thereafter	5,027
Total	$	16,954

The Financial Services segment had no goodwill or intangible assets at December 31, 2015 and December 31, 2014 .

5. Finance Receivables

Finance receivables, net at December 31 for the past five years were as follows (in thousands):



	2015			2014			2013			2012			2011
Wholesale
United States	$	965,379		$	903,380		$	800,491		$	776,633		$	778,320
Canada	58,481			48,941			44,721			39,771			46,320
Total wholesale	1,023,860			952,321			845,212			816,404			824,640
Retail
United States	5,803,071			5,398,006			5,051,245			4,850,450			4,858,781
Canada	188,400			209,918			213,799			222,665			228,709
Total retail	5,991,471			5,607,924			5,265,044			5,073,115			5,087,490
	7,015,331			6,560,245			6,110,256			5,889,519			5,912,130
Allowance for credit losses	(147,178		)	(127,364		)	(110,693		)	(107,667		)	(125,449		)
Total finance receivables, net	$	6,868,153		$	6,432,881		$	5,999,563		$	5,781,852		$	5,786,681

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

HDFS provides retail financial services to customers of the Company’s independent dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between HDFS 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 contracts and are primarily related to sales of motorcycles to the dealers’ customers. HDFS holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts. As of December 31, 2015 and 2014 , approximately 12% of gross outstanding finance receivables were originated in Texas; there were no other states that accounted for more than 10%.

Unused lines of credit extended to the Company's wholesale finance customers totaled $1.27 billion and $1.01 billion at December 31, 2015 and 2014 , respectively. Approved but unfunded retail finance loans totaled $169.6 million and $168.7 million at December 31, 2015 and 2014 , respectively.

Wholesale finance receivables are generally contractually due within one year. On December 31, 2015 , contractual maturities of finance receivables were as follows (in thousands):



	United States		Canada		Total
2016	$	1,991,614	$	93,539	$	2,085,153
2017	1,104,233		37,415		1,141,648
2018	1,234,333		41,339		1,275,672
2019	1,379,791		45,673		1,425,464
2020	1,024,927		28,915		1,053,842
Thereafter	33,552		—		33,552
Total	$	6,768,450	$	246,881	$	7,015,331

The allowance for credit losses on finance receivables is comprised of individual components relating to wholesale and retail finance receivables. Changes in the allowance for credit losses on finance receivables by portfolio for the year ended December 31 were as follows (in thousands):



	2015
	Retail			Wholesale		Total
Balance, beginning of period	$	122,025		$	5,339	$	127,364
Provision for credit losses	98,826			2,519		101,345
Charge-offs	(123,911		)	—		(123,911		)
Recoveries	42,380			—		42,380
Balance, end of period	$	139,320		$	7,858	$	147,178



	2014
	Retail			Wholesale		Total
Balance, beginning of period	$	106,063		$	4,630	$	110,693
Provision for credit losses	80,237			709		80,946
Charge-offs	(102,831		)	—		(102,831		)
Recoveries	38,556			—		38,556
Balance, end of period	$	122,025		$	5,339	$	127,364



	2013
	Retail			Wholesale			Total
Balance, beginning of period	$	101,442		$	6,225		$	107,667
Provision for credit losses	61,603			(1,595		)	60,008
Charge-offs	(97,928		)	—			(97,928		)
Recoveries	40,946			—			40,946
Balance, end of period	$	106,063		$	4,630		$	110,693

There were no finance receivables individually evaluated for impairment on December 31, 2014 or 2015. The allowance for credit losses and finance receivables by portfolio collectively evaluated for impairment, at December 31 were as follows (in thousands):



	2015
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	139,320		7,858		147,178
Total allowance for credit losses	$	139,320	$	7,858	$	147,178
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	5,991,471		1,023,860		7,015,331
Total finance receivables	$	5,991,471	$	1,023,860	$	7,015,331
	2014
	Retail		Wholesale		Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	122,025		5,339		127,364
Total allowance for credit losses	$	122,025	$	5,339	$	127,364
Finance receivables, ending balance:
Individually evaluated for impairment	$	—	$	—	$	—
Collectively evaluated for impairment	5,607,924		952,321		6,560,245
Total finance receivables	$	5,607,924	$	952,321	$	6,560,245

Finance receivables are considered impaired when management determines it is probable that the Company will be unable to collect all amounts due according to the loan agreement. As retail finance receivables are collectively and not individually reviewed for impairment, this portfolio does not have specifically impaired finance receivables. At December 31, 2015 and 2014 , there were no wholesale finance receivables that were on non-accrual status or individually deemed to be impaired under ASC Topic 310, “Receivables”.

An analysis of the aging of past due finance receivables at December 31 was as follows (in thousands):



	2015
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	5,796,003	$	118,996	$	43,680	$	32,792	$	195,468	$	5,991,471
Wholesale	1,022,365		888		530		77		1,495		1,023,860
Total	$	6,818,368	$	119,884	$	44,210	$	32,869	$	196,963	$	7,015,331



	2014
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total Finance Receivables
Retail	$	5,427,719	$	113,007	$	38,486	$	28,712	$	180,205	$	5,607,924
Wholesale	951,660		383		72		206		661		952,321
Total	$	6,379,379	$	113,390	$	38,558	$	28,918	$	180,866	$	6,560,245

The recorded investment of retail and wholesale finance receivables, excluding non-accrual status finance receivables, that were contractually past due 90 days or more at December 31 for the past five years was as follows (in thousands):



	2015		2014		2013		2012		2011
United States	$	31,677	$	27,800	$	23,770	$	26,500	$	27,171
Canada	1,192		1,118		1,031		1,533		1,207
Total	$	32,869	$	28,918	$	24,801	$	28,033	$	28,378

A significant part of managing the Company's finance receivable portfolios includes the assessment of credit risk associated with each borrower. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit risk indicators for each portfolio.

The Company manages retail credit risk through its credit approval policy and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. Retail loans with a FICO score of 640 or above at origination are considered prime, and loans with a FICO score below 640 are considered sub-prime. These credit quality indicators are determined at the time of loan origination and are not updated subsequent to the loan origination date.

The recorded investment of retail finance receivables, by credit quality indicator, at December 31 was as follows (in thousands):



	2015		2014
Prime	$	4,777,448	$	4,435,352
Sub-prime	1,214,023		1,172,572
Total	$	5,991,471	$	5,607,924

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 evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk, for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon management’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated on a quarterly basis.

The recorded investment of wholesale finance receivables, by internal credit quality indicator, at December 31 was as follows (in thousands):



	2015		2014
Doubtful	$	5,169	$	954
Substandard	21,774		7,025
Special Mention	6,271		—
Medium Risk	11,494		11,557
Low Risk	979,152		932,785
Total	$	1,023,860	$	952,321

6. Asset-Backed Financing

The Company participates in asset-backed financing through both term asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. The Company treats these transactions as secured borrowings because assets are either transferred to consolidated VIEs or the Company maintains effective control over the assets and does not meet the accounting sale requirements under ASC Topic 860. See Note 1 for more information on the Company's accounting for asset-backed financings and VIEs.

The following table shows the assets and liabilities related to the Company's asset-backed financings that were included in its financial statements at December 31 (in thousands):



	2015
	Finance receivables		Allowance for credit losses			Restricted cash		Other assets		Total assets		Asset-backed debt
On-balance sheet assets and liabilities
Consolidated VIEs
Term asset-backed securitizations	$	1,611,624	$	(37,937	)	$	100,151	$	4,383	$	1,678,221	$	1,463,154
Asset-backed U.S. commercial paper conduit facility	—		—			—		323		323		—
Unconsolidated VIEs
Asset-backed Canadian commercial paper conduit facility	170,708		(3,061		)	10,491		393		178,531		153,839
Total	$	1,782,332	$	(40,998	)	$	110,642	$	5,099	$	1,857,075	$	1,616,993

	2014
	Finance receivables		Allowance for credit losses			Restricted cash		Other assets		Total assets		Asset-backed debt
On-balance sheet assets and liabilities
Consolidated VIEs
Term asset-backed securitizations	$	1,458,602	$	(32,156	)	$	110,017	$	2,987	$	1,539,450	$	1,271,533
Asset-backed U.S. commercial paper conduit facility	—		—			—		422		422		—
Unconsolidated VIEs
Asset-backed Canadian commercial paper conduit facility	185,099		(2,965		)	12,035		262		194,431		166,912
Total	$	1,643,701	$	(35,121	)	$	122,052	$	3,671	$	1,734,303	$	1,438,445

Term 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 term asset-backed securitization SPE is a separate legal entity and the U.S. retail motorcycle finance receivables included in the term asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the term 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. 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. Restricted cash balances held by the SPEs are used only to support the securitizations.

In 2015 , the Company transferred a total of $1.31 billion of U.S. retail motorcycle finance receivables to two separate SPEs. The SPEs in turn issued $1.20 billion of secured notes. In 2014 , the Company transferred $924.9 million of U.S. retail motorcycle finance receivables to one SPE. The SPE in turn issued $850.0 million of secured notes. At December 31, 2015 , the Company's consolidated balance sheet included outstanding balances related to the following secured notes with the related maturity dates and interest rates (in thousands):



Issue Date	Principal Amount at Date of Issuance	Weighted-Average Rate at Date of Issuance	Contractual Maturity Date
May 2015	$500,000	0.88%	May 2016 - December 2022
January 2015	$700,000	0.89%	February 2016 - August 2022
April 2014	$850,000	0.66%	April 2015 - October 2021
April 2013	$650,000	0.57%	May 2014 - December 2020
July 2012	$675,306	0.59%	August 2013 - June 2018

In addition to the above transactions, during 2012 the Company issued $89.5 million of secured notes through the sale of notes that had been previously retained as part of the December 2009, August 2011 and November 2011 term asset-backed securitization transactions. These notes were sold at a premium. During 2015 , the notes related to the August 2011 and November 2011 term asset-backed securitization transactions were repaid. During 2013 , the notes related to the December 2009 term asset-backed securitization transaction were repaid.

Outstanding balances related to the following secured notes were included in the Company's consolidated balance sheet at December 31, 2014 and the Company completed repayment of those balances during 2015 (in thousands):



Issue Date	Principal Amount at Date of Issuance	Weighted-Average Rate at Date of Issuance	Contractual Maturity Date
Issue Date	Principal Amount at Date of Issuance	Weighted-Average Rate at Date of Issuance	Contractual Maturity Date
November 2011	$513,300	0.88%	November 2012 - February 2018
August 2011	$573,380	0.76%	September 2012 - August 2017

For the year ended December 31, 2015 and 2014 , interest expense on the secured notes was $17.2 million and $13.5 million , respectively, which is included in financial services interest expense. The weighted average interest rate of the outstanding term asset-backed securitization transactions was 1.04% and 0.94% at December 31, 2015 and 2014 , respectively.

Asset-Backed U.S. Commercial Paper Conduit Facility VIE

On December 14, 2015 , the Company entered into a new revolving facility agreement (U.S. Conduit) with a third party bank-sponsored asset-backed U.S. commercial paper conduit, which provides for a total aggregate commitment of up to $600.0 million based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral. The prior facility agreement expired on December 14, 2015 and had similar terms.

Under the facility, the Company may transfer U.S. retail motorcycle finance receivables to a SPE, which in turn may issue debt to third-party bank-sponsored asset-backed commercial paper conduits. The assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates or LIBOR to the extent the advance is not funded by a conduit lender through the issuance of commercial paper plus, in each case, a program fee based on outstanding principal. The U.S. Conduit also provides for an unused commitment fee based on the unused portion of the total aggregate commitment of $600.0 million . There is no amortization schedule; however, the debt will be reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit, any outstanding principal will continue to be reduced monthly through available collections. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, the U.S. Conduit has an expiration date of December 14, 2016 .

The SPE had no borrowings outstanding under the U.S. Conduit at December 31, 2015 or 2014 ; therefore, these assets are restricted as collateral for the payment of fees associated with the unused portion of the total aggregate commitment of $600.0 million .

For both years ended December 31, 2015 and 2014 , the interest expense was $1.1 million related to the unused portion of the total aggregate commitment of $600.0 million . Interest expense on the U.S. Conduit is included in financial services interest expense. There was no weighted average interest rate at December 31, 2015 or 2014 as the Company had no outstanding borrowings under the U.S. Conduit during 2015 or 2014 .

Asset-Backed Canadian Commercial Paper Conduit Facility

In June 2015, the Company amended its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables from the Company for proceeds up to C$240 million . The transferred assets are restricted as collateral for the payment of 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$240 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. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, the Canadian Conduit expires on June 30, 2016 . The contractual maturity of the debt is approximately 5 years.

For the years ended December 31, 2015 and 2014 , the Company recorded interest expense of $3.0 million and $3.5 million , respectively, on the secured notes. Interest expense on the Canadian Conduit is included in financial services interest expense. The weighted average interest rate of the outstanding Canadian Conduit was 1.80% and 2.03% at December 31, 2015 and 2014 .

As the Company participates in and does not consolidate the Canadian bank-sponsored, multi-seller conduit VIE, the maximum exposure to loss associated with this VIE, which would only be incurred in the unlikely event that all the finance receivables and underlying collateral have no residual value, is $24.7 million at December 31, 2015 . The maximum exposure is not an indication of the Company's expected loss exposure.

7. Fair Value Measurements

Certain assets and liabilities are recorded at fair value in the financial statements; some of these are measured on a recurring basis while others are measured on a non-recurring basis. Assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when required by particular events or circumstances. In determining the fair value of assets and liabilities, the Company uses various valuation techniques. The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.

The Company assesses the inputs used to measure fair value using a three-tier hierarchy. The hierarchy indicates the extent to which inputs used in measuring fair value are observable in the market. 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. The Company uses the market approach to derive the fair value for its level 2 fair value measurements. Forward contracts for foreign currency, commodities and interest rates are valued using current quoted forward rates and prices; and investments in marketable securities and cash equivalents are valued using publicly quoted prices.

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

Recurring Fair Value Measurements

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31 (in thousands):



	2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	555,910	$	390,706	$	165,204	$	—
Marketable securities	81,448		36,256		45,192		—
Derivatives	16,235		—		16,235		—
Total	$	653,593	$	426,962	$	226,631	$	—
Liabilities:
Derivatives	$	1,300	$	—	$	1,300	$	—



	2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	737,024	$	482,686	$	254,338	$	—
Marketable securities	91,140		33,815		57,325		—
Derivatives	32,244		—		32,244		—
Total	$	860,408	$	516,501	$	343,907	$	—
Liabilities:
Derivatives	$	2,027	$	—	$	2,027	$	—

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 $17.7 million and $13.4 million at December 31, 2015 and 2014 , for which the fair value adjustment was $8.6 million and $5.0 million at December 31, 2015 and 2014 , respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.

8. Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities, finance receivables, net, debt, foreign currency exchange and commodity contracts (derivative instruments are discussed further in Note 9).

The following table summarizes the fair value and carrying value of the Company’s financial instruments at December 31 (in thousands):



	2015				2014
	Fair Value		Carrying Value		Fair Value		Carrying Value
Assets:
Cash and cash equivalents	$	722,209	$	722,209	$	906,680	$	906,680
Marketable securities	$	81,448	$	81,448	$	91,140	$	91,140
Derivatives	$	16,235	$	16,235	$	32,244	$	32,244
Finance receivables, net	$	6,937,053	$	6,868,153	$	6,519,500	$	6,432,881
Restricted cash	$	110,642	$	110,642	$	122,052	$	122,052
Liabilities:
Derivatives	$	1,300	$	1,300	$	2,027	$	2,027
Unsecured commercial paper	$	1,201,380	$	1,201,380	$	731,786	$	731,786
Asset-backed Canadian commercial paper conduit facility	$	153,839	$	153,839	$	166,912	$	166,912
Medium-term notes	$	3,410,966	$	3,325,081	$	3,502,536	$	3,334,398
Senior unsecured notes	$	737,435	$	746,934	$	—	$	—
Term asset-backed securitization debt	$	1,455,776	$	1,463,154	$	1,270,656	$	1,271,533

Cash and Cash Equivalents and Restricted Cash – With the exception of certain cash equivalents, the carrying value of these items in the financial statements is based on historical cost. The historical cost basis for these amounts is estimated to approximate their respective fair values due to the short maturity of these instruments. Fair value is based on Level 1 or Level 2 inputs.

Marketable Securities – The carrying value of marketable securities in the financial statements is based on fair value. The fair value of marketable securities is determined primarily based quoted prices for identical instruments or on quoted market prices of similar financial assets. Fair value is based on Level 1 or Level 2 inputs.

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

Derivatives – Forward contracts for foreign currency exchange and commodities are derivative financial instruments and are carried at fair value on the balance sheet. The fair value of these contracts is determined using quoted forward rates and prices. Fair value is calculated using Level 2 inputs.

Debt – The carrying value of debt in the financial statements is generally amortized cost. The carrying value of unsecured commercial paper approximates fair value due to its short maturity. Fair value is calculated using Level 2 inputs.

The carrying value of debt provided under the Canadian Conduit approximates fair value since the interest rates charged under the facility are tied directly to market rates and fluctuate as market rates change. Fair value is calculated using Level 2 inputs.

The fair values of the medium-term notes are estimated based upon rates currently available for debt with similar terms and remaining maturities. Fair value is calculated using Level 2 inputs.

The fair value of the senior unsecured notes was estimated based upon rates then available for debt with similar terms and remaining maturities. Fair value was calculated using Level 2 inputs.

The fair value of the debt related to term asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities. Fair value is calculated using Level 2 inputs.

9. Derivative Instruments and Hedging Activities

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

All derivative instruments are recognized on the balance sheet at fair value (see Note 8). In accordance with ASC Topic 815, "Derivatives and Hedging," the accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings. For derivative instruments that are designated as cash flow hedges, the effective portion of gains and losses that result from changes in the fair value of derivative instruments is initially recorded in other comprehensive income (OCI) and subsequently reclassified into earnings when the hedged item affects income. The Company assesses, both at the inception of each hedge and on an on-going basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Any ineffective portion is immediately recognized in earnings. No component of a hedging derivative instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative instruments that do not qualify for hedge accounting are recorded at fair value and any changes in fair value are recorded in current period earnings.

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

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

During the second quarter of 2015, the Company entered into treasury rate locks to fix the interest rate on a portion of the principal related to its anticipated issuance of senior unsecured debt during the third quarter of 2015. The treasury rate lock

contracts were settled in July 2015. The loss at settlement was recorded in accumulated other comprehensive loss and will be reclassified into earnings over the life of the debt.

The Company utilized interest rate swaps to reduce the impact of fluctuations in interest rates on its unsecured commercial paper by converting a portion from a floating rate basis to a fixed rate basis. The interest rate swaps expired during the second quarter of 2013, and as of December 31, 2013, there were no interest rate swaps outstanding.

The following tables summarize the fair value of the Company’s derivative financial instruments at December 31 (in thousands):



	2015						2014
Derivatives Designated As Hedging Instruments Under ASC Topic 815	Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)		Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)
	Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)		Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)
Foreign currency contracts ^(c)	$	436,352	$	16,167	$	181	$	339,077	$	32,244	$	—
Commodities contracts ^(c)	968		—		159		1,728		—		414
Total	$	437,320	$	16,167	$	340	$	340,805	$	32,244	$	414
	2015						2014
Derivatives Not Designated As Hedging Instruments Under ASC Topic 815	Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)		Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)
	Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)		Notional Value		Asset Fair Value ^(a)		Liability Fair Value ^(b)
Commodities contracts	$	6,510	$	68	$	960	$	11,804	$	—	$	1,613
Total	$	6,510	$	68	$	960	$	11,804	$	—	$	1,613


(a)	Included in other current assets


(b)	Included in accrued liabilities


(c)	Derivative designated as a cash flow hedge

The following tables summarize the amount of gains and losses for the following years ended December 31 related to derivative financial instruments designated as cash flow hedges (in thousands):



	Amount of Gain/(Loss) Recognized in OCI, before tax
Cash Flow Hedges	2015			2014			2013
Foreign currency contracts	$	45,810		$	47,037		$	3,468
Commodities contracts	(421		)	(262		)	39
Treasury rate locks	(7,381		)	—			—
Interest rate swaps – unsecured commercial paper	—			—			(2		)
Total	$	38,008		$	46,775		$	3,505



	Amount of Gain/(Loss) Reclassified from AOCL into Income
Cash Flow Hedges	2015			2014		2013			Expected to be Reclassified Over the Next Twelve Months
Cash Flow Hedges	2015			2014		2013			Expected to be Reclassified Over the Next Twelve Months
Foreign currency contracts ^(a)	$	59,730		$	13,635	$	482		$	16,738
Commodities contracts ^(a)	(677		)	228		(51		)	(159		)
Treasury rate locks ^(b)	(151		)	—		—			(362		)
Interest rate swaps – unsecured commercial paper ^(c)	—			—		(345		)	—
Total	$	58,902		$	13,863	$	86		$	16,217


(a)	Gain/(loss) reclassified from accumulated other comprehensive loss (AOCL) to income is included in cost of goods sold.


(b)	Gain/(loss) reclassified from AOCL to income is included in interest expense


(c)	Gain/(loss) reclassified from AOCL to income is included in financial services interest expense.

For the years ended December 31, 2015 and 2014 , the cash flow hedges were highly effective and, as a result, the amount of hedge ineffectiveness was not material. No amounts were excluded from effectiveness testing.

The following table summarizes the amount of gains and losses for the years ended December 31 related to derivative financial instruments not designated as hedging instruments (in thousands):



	Amount of Gain/(Loss) Recognized in Income on Derivative
Derivatives not Designated as Hedges	2015			2014			2013
Commodities contracts ^(a)	$	(648	)	$	(1,969	)	$	(572	)
Total	$	(648	)	$	(1,969	)	$	(572	)


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

10. Accumulated Other Comprehensive Loss

The following table sets forth the changes in accumulated other comprehensive loss (AOCL) for the years ended December 31 (in thousands):



	2015
	Foreign currency translation adjustments			Marketable securities			Derivative financial instruments			Pension and postretirement benefit plans			Total
Balance, beginning of period	$	(3,482	)	$	(700	)	$	19,042		$	(529,803	)	$	(514,943	)
Other comprehensive (loss) income before reclassifications	(48,309		)	(626		)	38,008			(106,059		)	(116,986		)
Income tax	(7,053		)	232			(14,079		)	39,284			18,384
Net other comprehensive (loss) income before reclassifications	(55,362		)	(394		)	23,929			(66,775		)	(98,602		)
Reclassifications:
Realized (gains) losses - foreign currency contracts ^(a)	—			—			(59,730		)	—			(59,730		)
Realized (gains) losses - commodities contracts ^(a)	—			—			677			—			677
Realized (gains) losses - treasury rate lock ^(b)							151						151
Prior service credits ^(c)	—			—			—			(2,782		)	(2,782		)
Actuarial losses ^(c)	—			—			—			58,680			58,680
Curtailment and settlement losses	—			—			—			368			368
Total before tax	—			—			(58,902		)	56,266			(2,636		)
Income tax expense (benefit)	—			—			21,817			(20,841		)	976
Net reclassifications	—			—			(37,085		)	35,425			(1,660		)
Other comprehensive loss	(55,362		)	(394		)	(13,156		)	(31,350		)	(100,262		)
Balance, end of period	$	(58,844	)	$	(1,094	)	$	5,886		$	(561,153	)	$	(615,205	)



	2014
	Foreign currency translation adjustments			Marketable securities			Derivative financial instruments			Pension and postretirement benefit plans			Total
Balance, beginning of period	$	33,326		$	(276	)	$	(1,680	)	$	(364,046	)	$	(332,676	)
Other comprehensive (loss) income before reclassifications	(50,310		)	(673		)	46,775			(301,832		)	(306,040		)
Income tax	13,502			249			(17,325		)	111,799			108,225
Net other comprehensive (loss) income before reclassifications	(36,808		)	(424		)	29,450			(190,033		)	(197,815		)
Reclassifications:
Realized (gains) losses - foreign currency contracts ^(a)	—			—			(13,635		)	—			(13,635		)
Realized (gains) losses - commodities contracts ^(a)	—			—			(228		)	—			(228		)
Prior service credits ^(c)	—			—			—			(2,734		)	(2,734		)
Actuarial losses ^(c)	—			—			—			41,292			41,292
Total before tax	—			—			(13,863		)	38,558			24,695
Income tax expense (benefit)	—			—			5,135			(14,282		)	(9,147		)
Net reclassifications	—			—			(8,728		)	24,276			15,548
Other comprehensive (loss) income	(36,808		)	(424		)	20,722			(165,757		)	(182,267		)
Balance, end of period	$	(3,482	)	$	(700	)	$	19,042		$	(529,803	)	$	(514,943	)



	2013
	Foreign currency translation adjustments			Marketable securities			Derivative financial instruments			Pension and postretirement benefit plans			Total
Balance, beginning of period	$	51,335		$	677		$	(3,837	)	$	(655,853	)	$	(607,678	)
Other comprehensive income (loss) before reclassifications	(20,192		)	(1,514		)	3,505			398,430			380,229
Income tax	2,183			561			(1,298		)	(147,578		)	(146,132		)
Net other comprehensive (loss) income before reclassifications	(18,009		)	(953		)	2,207			250,852			234,097
Reclassifications:
Realized (gains) losses - foreign currency contracts ^(a)	—			—			(482		)	—			(482		)
Realized (gains) losses - commodities contracts ^(a)	—			—			51			—			51
Realized (gains) losses - interest rate swaps ^(d)	—			—			345			—			345
Prior service credits ^(c)	—			—			—			(2,107		)	(2,107		)
Actuarial losses ^(c)	—			—			—			67,157			67,157
Total before tax	—			—			(86		)	65,050			64,964
Income tax expense (benefit)	—			—			36			(24,095		)	(24,059		)
Net reclassifications	—			—			(50		)	40,955			40,905
Other comprehensive (loss) income	(18,009		)	(953		)	2,157			291,807			275,002
Balance, end of period	$	33,326		$	(276	)	$	(1,680	)	$	(364,046	)	$	(332,676	)


(a)	Amounts reclassified to net income are included in motorcycles and related products cost of goods sold.


(b)	Amounts reclassified to net income are presented in interest expense.


(c)	Amounts reclassified are included in the computation of net periodic cost. See Note 13 for information related to pension and postretirement benefit plans.


(d)	Amounts reclassified to net income are presented in financial services interest expense.

11. Debt

Debt with contractual terms less than one year is generally classified as short-term debt and consisted of the following as of December 31 (in thousands):



	2015		2014
Unsecured commercial paper	$	1,201,380	$	731,786

Debt with a contractual term greater than one year is generally classified as long-term debt and consisted of the following as of December 31 (in thousands):



	2015			2014
Secured debt
Asset-backed Canadian commercial paper conduit facility	$	153,839		$	166,912
Term asset-backed securitization debt	1,463,154			1,271,533
Unsecured notes
1.15% Medium-term notes due in 2015 ($600.0 million par value)	—			599,817
3.88% Medium-term notes due in 2016 ($450.0 million par value)	449,991			449,937
2.70% Medium-term notes due in 2017 ($400.0 million par value)	399,980			399,963
1.55% Medium-term notes due in 2017 ($400.0 million par value)	399,650			399,464
6.80% Medium-term notes due in 2018 ($879.0 million par value)	878,308			887,381
2.40% Medium-term notes due in 2019 ($600.0 million par value)	598,296			597,836
2.15% Medium-term notes due in 2020 ($600.0 million par value)	598,856			—
3.50% Senior unsecured notes due in 2025 ($450.0 million par value)	447,608			—
4.625% Senior unsecured notes due in 2045 ($300.0 million par value)	299,326			—
Gross long-term debt	5,689,008			4,772,843
Less: current portion of long-term debt	(843,620		)	(1,011,315		)
Long-term debt	$	4,845,388		$	3,761,528

A summary of the Company’s expected principal payments for debt obligations as of December 31, 2015 is as follows (in thousands):



	2016		2017		2018		2019		2020		Thereafter		Total
Principal payments on debt	$	2,045,000	$	1,177,493	$	1,303,698	$	934,386	$	682,877	$	746,934	$	6,890,388

Commercial paper maturities may range up to 365 days from the issuance date. The weighted-average interest rate of outstanding commercial paper balances was 0.56% and 0.30% at December 31, 2015 and 2014 , respectively.

In April 2014, the Company entered into a new $675.0 million five -year credit facility to refinance and replace a $675 million four-year credit facility that was due to mature in April 2015. The new five-year credit facility matures in April 2019. The Company also has a $675.0 million five-year credit facility which matures in April 2017. The new five-year credit facility and the existing five-year credit facility (together, the Global Credit Facilities) bear interest at various variable interest 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 upon the average daily unused portion of the aggregate commitments under the Global Credit Facilities. The Global Credit Facilities are committed facilities and primarily used to support the Company's unsecured commercial paper program. During July 2015, the Company borrowed C$20 million under the Global Credit Facilities and repaid the borrowings in August 2015. No borrowings were outstanding at December 31, 2015 and 2014 .

In December 2015, the Company entered into a new revolving facility agreement (U.S. Conduit) with a third party bank-sponsored asset-backed U.S. commercial paper conduit, which provides for a total aggregate commitment of $600.0 million . The prior facility agreement expired on December 14, 2015 and had similar terms. At December 31, 2015 and 2014 , the Company had no outstanding borrowings under the U.S. Conduit. Refer to Note 6 for further discussion on the U.S. Conduit.

In June 2015, the Company amended its revolving facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase from the Company eligible Canadian retail motorcycle financial receivables for proceeds up

to C$240 million . During 2015 and 2014, the Company transferred $100.0 million and $97.1 million , respectively, of Canadian retail motorcycle finance receivables for proceeds of $87.5 million and $85.0 million , respectively. Approximately $40.3 million and $44.6 million of the debt was classified as current portion of long-term debt at December 31, 2015 and 2014 . Refer to Note 6 for further discussion on the Canadian Conduit.

During 2015 , the Company issued $1.20 billion of secured notes through two term asset-backed securitization transactions. During 2014 , the Company issued $850.0 million of secured notes through a term asset-backed securitization transaction. Approximately $353.4 million and $366.9 million of the obligations under the secured notes were classified as current at December 31, 2015 and 2014 , respectively, based on the contractual maturities of the restricted finance receivables. The term-asset backed securitization transactions are further discussed in Note 6.

In February 2015 , the Company issued $600.0 million of medium-term notes which mature in February 2020 and have an annual interest rate of 2.15% . In September 2014 , the Company issued $600.0 million of medium-term notes which mature in September 2019 and have an annual interest rate of 2.40% . In November 2014 , the Company issued $400.0 million of medium-term notes which mature in November 2017 and have an annual interest rate of 1.55% . All of the Company's medium-term notes (collectively, the Notes) provide for semi-annual interest payments and principal due at maturity. Unamortized discounts on the Notes reduced the balance by $3.6 million at December 31, 2015 and 2014 .

During 2015 , 2014 , and 2013 , the Company repurchased an aggregate of $9.3 million , $22.6 million , and $23.0 million respectively, of its 6.80% medium-term notes which mature in June 2018 . As a result, the Company recognized in financial services interest expense $1.1 million , $3.9 million , and $4.9 million of loss on extinguishment of debt, respectively, which included unamortized discounts and fees. During September 2015 , $600.0 million of 1.15% medium-term notes matured, and the principal and accrued interest were paid in full. During December 2014 , $500.0 million of the 5.75% medium-term notes matured, and the principal and accrued interest were paid in full.

In July 2015, the Company issued $450.0 million of senior unsecured notes that mature in July 2025 that have an interest rate of 3.50% and $300.0 million of senior unsecured notes that mature in July 2045 that have an interest rate of 4.625% in an underwritten offering. The senior unsecured notes provide for semi-annual interest payments and principal due at maturity. The Company is using the proceeds from the issuance to repurchase shares of the Company's common stock. Unamortized discounts on the senior unsecured notes reduced the balance by $3.1 million at December 31, 2015 .

In February 2009 , the Company issued $600.0 million of senior unsecured notes in an underwritten offering. The senior unsecured notes provided for semi-annual interest payments and principal due at maturity. The senior unsecured notes matured in February 2014 and had an annual interest rate of 15% . During the fourth quarter of 2010, the Company repurchased $297.0 million of the $600.0 million senior unsecured notes and the remaining $303.0 million was repaid at maturity in February 2014 .

HDFS and the Company are subject to various operating and financial covenants related to the Global Credit Facilities and various operating covenants under the Notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below.

The operating covenants limit the Company’s and HDFS’ ability to:


•	assume or incur certain liens;


•	participate in certain mergers, consolidations, liquidations or dissolutions; and


•	purchase or hold margin stock.

At December 31, 2015 and 2014 , HDFS and the Company remained in compliance with all of these covenants.

12. Income Taxes

Provision for income taxes for the years ended December 31 consists of the following (in thousands):



	2015			2014			2013
Current:
Federal	$	363,803		$	394,904		$	281,938
State	37,811			30,997			23,701
Foreign	12,826			20,429			22,093
	414,440			446,330			327,732
Deferred:
Federal	(15,474		)	(5,743		)	51,509
State	(2,264		)	(3,155		)	(1,471		)
Foreign	1,254			1,277			2,542
	(16,484		)	(7,621		)	52,580
Total	$	397,956		$	438,709		$	380,312

The components of income before income taxes for the years ended December 31 were as follows (in thousands):



	2015		2014		2013
Domestic	$	1,101,427	$	1,196,335	$	1,042,317
Foreign	48,736		86,985		71,988
Total	$	1,150,163	$	1,283,320	$	1,114,305

The provision for income taxes differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate due to the following items for the years ended December 31:



	2015		2014		2013
Provision at statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	1.8		1.7		1.6
Domestic manufacturing deduction	(2.1	)	(2.1	)	(1.7	)
Research and development credit	(0.4	)	(0.4	)	(0.9	)
Unrecognized tax benefits including interest and penalties	1.1		0.2		0.9
Valuation allowance adjustments	(0.1	)	(0.1	)	(0.3	)
Tax audit settlements	—		—		0.1
Adjustments for previously accrued taxes	(0.1	)	(0.3	)	(0.2	)
Other	(0.6	)	0.2		(0.4	)
Provision for income taxes	34.6	%	34.2	%	34.1	%

The principal components of the Company’s deferred tax assets and liabilities as of December 31 include the following (in thousands):



	2015			2014
Deferred tax assets:
Accruals not yet tax deductible	$	129,449		$	120,817
Pension and postretirement benefit plan obligations	126,952			104,723
Stock compensation	20,111			21,089
Net operating loss carryforward	38,250			41,927
Valuation allowance	(20,659		)	(25,462		)
Other, net	47,039			38,465
	341,142			301,559
Deferred tax liabilities:
Depreciation, tax in excess of book	(136,340		)	(128,117		)
Other	(2,419		)	(5,691		)
	(138,759		)	(133,808		)
Total	$	202,383		$	167,751

The Company reviews its deferred tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with any positive or negative evidence such as tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

At December 31, 2015 , the Company had approximately $339.4 million state net operating loss carry-forwards expiring in 2031 . At December 31, 2015 the Company also had Wisconsin research and development credit carryforwards of $13.1 million expiring in 2028 . The Company had a deferred tax asset of $26.0 million as of December 31, 2015 for the benefit of these losses and credits.

The Company has foreign net operating losses (NOL) totaling $12.2 million as of December 31, 2015 . It has a valuation allowance of $20.7 million against the NOLs as well as other associated deferred tax assets of $8.5 million .

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):



	2015			2014
Unrecognized tax benefits, beginning of period	$	64,200		$	63,057
Increase in unrecognized tax benefits for tax positions taken in a prior period	9,149			900
Decrease in unrecognized tax benefits for tax positions taken in a prior period	(1,993		)	(4,989		)
Increase in unrecognized tax benefits for tax positions taken in the current period	6,302			5,876
Statute lapses	(2,465		)	—
Settlements with taxing authorities	(2,093		)	(644		)
Unrecognized tax benefits, end of period	$	73,100		$	64,200

The amount of unrecognized tax benefits as of December 31, 2015 that, if recognized, would affect the effective tax rate was $56.9 million .

The total gross amount of expense related to interest and penalties associated with unrecognized tax benefits recognized during 2015 in the Company’s Consolidated Statements of Income was $3.7 million .

The total gross amount of interest and penalties associated with unrecognized tax benefits recognized at December 31, 2015 in the Company’s Consolidated Balance Sheets was $28.7 million .

The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2016. However, the Company is under regular audit by tax

authorities. The Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

The Company or one of its subsidiaries files income tax returns in the United States federal and Wisconsin state jurisdictions and various other state and foreign jurisdictions. The Company is no longer subject to income tax examinations for Wisconsin state income taxes before 2011 or for United States federal income taxes before 2012.

13. Employee Benefit Plans and Other Postretirement Benefits

The Company has a qualified defined benefit pension plan and several postretirement healthcare benefit plans, which cover employees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees which were instituted to replace benefits lost under the Tax Revenue Reconciliation Act of 1993.

Pension benefits are based primarily on years of service and, for certain plans, levels of compensation. Employees are eligible to receive postretirement healthcare benefits upon attaining age 55 after rendering at least 10 years of service to the Company. Some of the plans require employee contributions to partially offset benefit costs.

Obligations and Funded Status:

The following table provides the changes in the benefit obligations, fair value of plan assets and funded status of the Company’s pension, SERPA and postretirement healthcare plans as of the Company’s December 31, 2015 and 2014 measurement dates (in thousands):



	Pension and SERPA Benefits						Postretirement Healthcare Benefits
	2015			2014			2015			2014
Change in benefit obligation:
Benefit obligation, beginning of period	$	2,069,980		$	1,714,650		$	361,006		$	366,524
Service cost	40,039			31,498			8,259			7,015
Interest cost	87,345			86,923			14,166			16,878
Actuarial (gains) losses	(128,082		)	309,542			(6,757		)	(2,870		)
Plan participant contributions	—			—			2,587			2,368
Plan amendments	6,407			—			—			—
Special early retirement benefits	10,563			—			622			—
Benefits paid, net of Medicare Part D subsidy	(77,252		)	(72,633		)	(25,144		)	(28,909		)
Benefit obligation, end of period	2,009,000			2,069,980			354,739			361,006
Change in plan assets:
Fair value of plan assets, beginning of period	1,992,646			1,920,601			156,840			147,875
Actual return on plan assets	(77,980		)	143,040			(75		)	8,965
Company contributions	4,553			1,638			23,937			28,048
Plan participant contributions	—			—			2,587			2,368
Benefits paid	(77,252		)	(72,633		)	(26,524		)	(30,416		)
Fair value of plan assets, end of period	1,841,967			1,992,646			156,765			156,840
Funded status of the plans, December 31	$	(167,033	)	$	(77,334	)	$	(197,974	)	$	(204,166	)
Amounts recognized in the Consolidated Balance Sheets, December 31:
Accrued benefit liability (current liabilities)	$	(2,145	)	$	(1,148	)	$	(4,315	)	$	(1,160	)
Accrued benefit liability (long-term liabilities)	(164,888		)	(76,186		)	(193,659		)	(203,006		)
Net amount recognized	$	(167,033	)	$	(77,334	)	$	(197,974	)	$	(204,166	)

Benefit Costs:

Components of net periodic benefit costs for the years ended December 31 (in thousands):



	Pension and SERPA Benefits									Postretirement Healthcare Benefits
	2015			2014			2013			2015			2014			2013
Service cost	$	40,039		$	31,498		$	35,987		$	8,259		$	7,015		$	7,858
Interest cost	87,345			86,923			79,248			14,166			16,878			15,599
Special early retirement benefits	10,563			—			—			622			—			—
Expected return on plan assets	(144,929		)	(136,734		)	(127,327		)	(11,506		)	(10,429		)	(9,537		)
Amortization of unrecognized:
Prior service cost (credit)	435			1,119			1,746			(3,217		)	(3,853		)	(3,853		)
Net loss	54,709			36,563			58,608			3,971			4,729			8,549
Settlement loss	368			—			—			—			—			—
Net periodic benefit cost	$	48,530		$	19,369		$	48,262		$	12,295		$	14,340		$	18,616

Net periodic benefit costs are allocated among selling, administrative and engineering expense, cost of goods sold and inventory.

The expected return on plan assets is calculated based on the market-related value of plan assets. The market-related value of plan assets is different from the fair value in that asset gains/losses are smoothed over a five year period.

U nrecognized gains and losses related to plan obligations and assets are initially recorded in other comprehensive income and result from actual experience that differs from assumed or expected results, and the impacts of changes in assumptions. Unrecognized plan asset gains and losses not yet reflected in the market-related value of plan assets are not subject to amortization. Remaining unrecognized gains and losses that exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets are amortized to earnings over the estimated future service period of active plan participants. The impacts of plan amendments, if any, are amortized over the estimated future service period of plan participants at the time of the amendment.

Amounts included in accumulated other comprehensive income, net of tax, at December 31, 2015 which have not yet been recognized in net periodic benefit cost are as follows (in thousands):



	Pension and SERPA Benefits		Postretirement Healthcare Benefits			Total
Prior service cost (credit)	$	5,445	$	(9,044	)	$	(3,599	)
Net actuarial loss	513,107		51,645			564,752
Total	$	518,552	$	42,601		$	561,153

Amounts expected to be recognized in net periodic benefit cost, net of tax, during the year ended December 31, 2016 are as follows (in thousands):



	Pension and SERPA Benefits		Postretirement Healthcare Benefits			Total
Prior service cost (credit)	$	636	$	(1,765	)	$	(1,129	)
Net actuarial loss	29,182		2,227			31,409
Total	$	29,818	$	462		$	30,280

Assumptions:

Weighted-average assumptions used to determine benefit obligations and net periodic benefit cost at December 31 were as follows:



	Pension and SERPA Benefits						Postretirement Healthcare Benefits
	2015		2014		2013		2015		2014		2013
Assumptions for benefit obligations:
Discount rate	4.53	%	4.21	%	5.08	%	4.29	%	3.99	%	4.70	%
Rate of compensation	3.50	%	4.00	%	4.00	%	n/a		n/a		n/a
Assumptions for net periodic benefit cost:
Discount rate	4.21	%	5.08	%	4.23	%	3.99	%	4.70	%	3.93	%
Expected return on plan assets	7.75	%	7.75	%	7.75	%	7.70	%	7.70	%	8.00	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%	n/a		n/a		n/a

Pension and SERPA Accumulated Benefit Obligation:

The Company’s pension and SERPA plans have a separately determined accumulated benefit obligation (ABO) and plan asset value. The ABO is the actuarial present value of benefits based on service rendered and current and past compensation levels. This differs from the projected benefit obligation (PBO) in that it includes no assumption about future compensation levels. The total ABO for all the Company’s pension and SERPA plans combined was $1.92 billion and $1.92 billion as of December 31, 2015 and 2014 , respectively.

The following table summarizes information related to the Company pension plan with a PBO in excess of the fair value of plan assets at December 31 (in millions):



	2015		2014
Pension plan with PBOs in excess of fair value of plan assets:
PBO	$	1,964.0	$	2,023.4
Fair value of plan assets	$	1,842.0	$	1,992.6

The fair value of pension plan assets was greater than the plan's ABO at December 31, 2015 and 2014 .

The Company’s SERPA plans, which can only be funded as claims are paid, had projected and accumulated benefit obligations of $45.0 million and $35.8 million , respectively, as of December 31, 2015 and $46.6 million and $33.6 million , respectively, as of December 31, 2014 .

Plan Assets:

Pension Plan Assets - The Company’s investment objective is to ensure assets are sufficient to pay benefits while mitigating the volatility of retirement plan assets or liabilities recorded in the balance sheet. The Company mitigates volatility through asset diversification and partial asset/liability matching. The investment portfolio for the Company's pension plan assets contains a diversified blend of equity and fixed-income investments. The Company’s current overall targeted asset allocation as a percentage of total market value was approximately 63% equities and 37% fixed-income and cash. Assets are rebalanced regularly to keep the actual allocation in line with targets. Equity holdings primarily include investments in small-, medium- and large-cap companies in the U.S. (including Company stock), investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign obligations. In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews.

Postretirement Healthcare Plan Assets - The Company's investment objective is to maximize the return on assets to help pay the benefits by prudently investing in equities, fixed income and alternative assets. The Company's current overall targeted asset allocation as a percentage of total market value was approximately 69% equities and 31% fixed-income and cash. Equity holdings primarily include investments in small-, medium-, and large-cap companies in the U.S., investments in developed and emerging foreign markets and other investments such as private equity and real estate. Fixed-income holdings consist of U.S. government and agency securities, state and municipal bonds, corporate bonds from diversified industries and foreign

obligations. In addition, cash equivalent balances are maintained at levels adequate to meet near-term plan expenses and benefit payments. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews.

The following tables present the fair values of the plan assets related to the Company’s pension and postretirement healthcare plans within the fair value hierarchy as defined in Note 7.

The fair values of the Company’s pension plan assets as of December 31, 2015 were as follows (in thousands):



	Balance as of December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	33,539	$	1,485	$	32,054	$	—
Equity holdings:
U.S. companies	574,826		571,949		2,877		—
Foreign companies	113,803		113,803		—		—
Harley-Davidson common stock	57,808		57,808		—		—
Pooled equity funds	301,824		301,824		—		—
Private equity/real estate	23,441		109		—		23,332
Total equity holdings	1,071,702		1,045,493		2,877		23,332
Fixed-income holdings:
U.S. Treasuries	42,827		42,827		—		—
Federal agencies	43,695		—		43,695		—
Corporate bonds	388,439		—		388,439		—
Pooled fixed income funds	184,142		49,271		134,871		—
Foreign bonds	64,533		—		64,533		—
Municipal bonds	13,090		—		13,090		—
Total fixed-income holdings	736,726		92,098		644,628		—
Total pension plan assets	$	1,841,967	$	1,139,076	$	679,559	$	23,332

Included in the pension plan assets are 1,273,592 shares of the Company’s common stock with a market value of $57.8 million at December 31, 2015 .

The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3) as of December 31, 2015 (in thousands):



	Private Equity/ Real Estate
Balance, beginning of period	$	31,086
Actual return on plan assets:
Relating to assets still held at the reporting date	2,375
Purchases, sales and settlements	(10,129		)
Balance, end of period	$	23,332

The fair values of the Company’s postretirement healthcare plan assets as of December 31, 2015 , were as follows (in thousands):



	Balance as of December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	6,068	$	2,980	$	3,088	$	—
Equity holdings:
U.S. companies	74,083		74,083		—		—
Foreign companies	17,267		16,849		418		—
Pooled equity funds	17,410		17,410		—		—
Private equity/real estate	4,902		11		—		4,891
Total equity holdings	113,662		108,353		418		4,891
Fixed-income holdings:
U.S. Treasuries	10,531		10,531		—		—
Federal agencies	6,508		—		6,508		—
Corporate bonds	10,270		—		10,270		—
Pooled fixed income funds	8,305		—		8,305		—
Foreign bonds	890		—		890		—
Municipal bonds	531		—		531		—
Total fixed-income holdings	37,035		10,531		26,504		—
Total postretirement healthcare plan assets	$	156,765	$	121,864	$	30,010	$	4,891

The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3) as of December 31, 2015 (in thousands):



	Private Equity/ Real Estate
Balance, beginning of period	$	3,869
Actual return on plan assets:
Relating to assets still held at the reporting date	1,362
Purchases, sales and settlements	(340		)
Balance, end of period	$	4,891

The fair values of the Company’s pension plan assets as of December 31, 2014 were as follows (in thousands):



	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	38,131	$	2,965	$	35,166	$	—
Equity holdings:
U.S. companies	625,174		620,964		4,210		—
Foreign companies	109,088		109,088		—		—
Harley-Davidson common stock	83,942		83,942		—		—
Pooled equity funds	323,613		323,613		—		—
Private equity/real estate	31,227		140		1		31,086
Total equity holdings	1,173,044		1,137,747		4,211		31,086
Fixed-income holdings:
U.S. Treasuries	51,375		51,375		—		—
Federal agencies	45,282		—		45,282		—
Corporate bonds	376,454		—		376,454		—
Pooled fixed income funds	236,024		52,335		183,689		—
Foreign bonds	58,956		—		58,956		—
Municipal bonds	13,380		—		13,380		—
Total fixed-income holdings	781,471		103,710		677,761		—
Total pension plan assets	$	1,992,646	$	1,244,422	$	717,138	$	31,086

Included in the pension plan assets are 1,273,592 shares of the Company’s common stock with a market value of $83.9 million at December 31, 2014 .

The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3) as of December 31, 2014 (in thousands):



	Private Equity/ Real Estate
Balance, beginning of period	$	34,234
Actual return on plan assets:
Relating to assets still held at the reporting date	(3,178		)
Purchases, sales and settlements	30
Balance, end of period	$	31,086

The fair values of the Company’s postretirement healthcare plan assets as of December 31, 2014 , were as follows (in thousands):



	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	8,033	$	7,278	$	755	$	—
Equity holdings:
U.S. companies	75,349		75,349		—		—
Foreign companies	15,571		15,050		521		—
Pooled equity funds	19,138		19,138		—		—
Private equity/real estate	3,884		15		—		3,869
Total equity holdings	113,942		109,552		521		3,869
Fixed-income holdings:
U.S. Treasuries	11,457		11,457		—		—
Federal agencies	1,876		—		1,876		—
Corporate bonds	11,549		—		11,549		—
Pooled fixed income funds	8,996		—		8,996		—
Foreign bonds	770		—		770		—
Municipal bonds	217		—		217		—
Total fixed-income holdings	34,865		11,457		23,408		—
Total postretirement healthcare plan assets	$	156,840	$	128,287	$	24,684	$	3,869

The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3) as of December 31, 2014 (in thousands):



	Private Equity/ Real Estate
Balance, beginning of period	$	—
Actual return on plan assets:
Relating to assets still held at the reporting date	(178		)
Purchases, sales and settlements	4,047
Balance, end of period	$	3,869

No plan assets are expected to be returned to the Company during the fiscal year ending December 31, 2016 .

For 2016 , the Company’s overall expected long-term rate of return is 7.5% for pension assets and 7.5% for postretirement healthcare plan assets. The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based on historical returns adjusted to reflect the current view of the long-term investment market.

Postretirement Healthcare Cost:

The weighted-average healthcare cost trend rate used in determining the accumulated postretirement benefit obligation of the healthcare plans was as follows:



	2015		2014
Healthcare cost trend rate for next year	7.5	%	8.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate rate)	5.0	%	5.0	%
Year that the rate reaches the ultimate trend rate	2021		2021

This healthcare cost trend rate assumption can have a significant effect on the amounts reported. A one-percentage-point change in the assumed healthcare cost trend rate would have the following effects (in thousands):



	One Percent Increase		One Percent Decrease
Total of service and interest cost components in 2015	$	755	$	(605	)
Accumulated benefit obligation as of December 31, 2015	$	12,211	$	(10,875	)

Future Contributions and Benefit Payments:

In January 2016, the Company voluntarily contributed $25.0 million to further fund its qualified pension plan. No pension plan contributions are required in 2016 . The Company expects it will continue to make on-going contributions related to current benefit payments for SERPA and postretirement healthcare plans in 2016 ⁽¹⁾ .

The expected benefit payments for the next five years and thereafter were as follows (in thousands):



	Pension Benefits		SERPA Benefits		Postretirement Healthcare Benefits
2016	$	77,310	$	2,145	$	33,848
2017	$	78,884	$	2,215	$	33,160
2018	$	80,877	$	2,234	$	31,571
2019	$	83,377	$	2,683	$	29,975
2020	$	86,533	$	2,976	$	28,139
2021-2025	$	497,276	$	21,253	$	129,295

Defined Contribution Plans:

The Company has various defined contribution benefit plans that in total cover substantially all full-time employees. Employees can make voluntary contributions in accordance with the provisions of their respective plan, which includes a 401(k) tax deferral option. The Company expensed $18.0 million , $18.1 million and $14.9 million for Company contributions during 2015 , 2014 and 2013 , respectively.

14. Leases

The Company operates certain administrative, manufacturing, warehouse and testing facilities and equipment under lease arrangements that are accounted for as operating leases. Total rental expense was $15.0 million , $12.0 million and $12.5 million for 2015 , 2014 and 2013 , respectively.

Future minimum operating lease payments at December 31, 2015 were as follows (in thousands):



2016	$	13,727
2017	9,324
2018	7,725
2019	6,883
2020	4,772
Thereafter	13,098
Total operating lease payments	$	55,529

15. Commitments and Contingencies

Environmental Protection Agency Notice

York Environmental Matters:

The Agreement calls for the Navy and the Company to contribute amounts into a trust equal to 53% and 47% , respectively, of future costs associated with environmental investigation and remediation activities at the York facility (Response Costs). The trust administers the payment of the Response Costs incurred at the York facility as covered by the Agreement.

The Company has a reserve for its estimate of its share of the future Response Costs at the York facility which is included in accrued liabilities in the Consolidated Balance Sheets. As noted above, the RI/FS is still underway and given the uncertainty that exists concerning the nature and scope of additional environmental investigation and remediation that may ultimately be required under the RI/FS or otherwise at the York facility, the Company is unable to make a reasonable estimate of those additional costs, if any, that may result.

Product Liability Matters:

16. Capital Stock

Common Stock:

The Company is authorized to issue 800,000,000 shares of common stock of $0.01 par value. There were 184.7 million and 211.9 million common shares outstanding as of December 31, 2015 and 2014 , respectively.

During 2015 , the Company repurchased 28.0 million shares of its common stock at a weighted-average price of $55 . This includes 0.2 million shares of common stock that were repurchased from employees that surrendered stock to satisfy withholding taxes in connection with the vesting of restricted stock awards. The remaining repurchases were made pursuant to the following authorizations (in millions of shares):



	Shares Repurchased			Authorization Remaining at December 31, 2015
Board of Directors’ Authorization	2015	2014	2013	Authorization Remaining at December 31, 2015
1997 Authorization	0.9	3.2	—	—
2007 Authorization	0.9	5.8	7.7	—
2014 Authorization	20.0	—	—	—
2015 Authorization	6.0	—	—	9.0
Total	27.8	9.0	7.7	9.0

1997 Authorization – The Company has an authorization from its Board of Directors (originally adopted December 1997) to repurchase shares of its outstanding common stock under which the cumulative number of shares repurchased, at the time of any repurchase, shall not exceed the sum of (1) the number of shares issued in connection with the exercise of stock options occurring on or after January 1, 2004, plus (2) 1% of the issued and outstanding common stock of the Company on January 1 of the current year, adjusted for any stock split.

2007 Authorization – In December 2007, the Company’s Board of Directors separately authorized the Company to buy back up to 20.0 million shares of its common stock with no dollar limit or expiration date.

2014 Authorization – In February 2014, the Company’s Board of Directors separately authorized the Company to buy back up to 20.0 million shares of its common stock with no dollar limit or expiration date.

2015 Authorization – In June 2015, the Company’s Board of Directors separately authorized the Company to buy back up to 15.0 million shares of its common stock with no dollar limit or expiration date.

Preferred Stock:

The Company is authorized to issue 2,000,000 shares of preferred stock of $1.00 par value, none of which is outstanding.

17. Share-Based Awards

The Company has a share-based compensation plan which was approved by its Shareholders in April 2014 (Plan) under which the Board of Directors may grant to employees share-based awards including nonqualified stock options, stock appreciation rights (SARs), shares of restricted stock and restricted stock units (RSUs). The options and SARs granted under the Plan have an exercise price equal to the fair market value of the underlying stock at the date of grant vest ratably over a three -year period with the first one-third of the grant becoming exercisable one year after the date of grant. The options and SARs expire 10 years from the date of grant. Shares of restricted stock and RSUs granted under the Plan vest ratably over a three -year period with the first one-third of the grant vesting one year after the date of grant. Dividends are paid on shares of restricted stock and dividend equivalents are paid on RSUs. At December 31, 2015 , there were 8.3 million shares of common stock available for future awards under the Plan.

Stock Options:

The Company estimates the grant date fair value of its option awards granted using a lattice-based option valuation model. The Company believes that the lattice-based option valuation model provides a more precise estimate of fair value than the Black-Scholes option pricing model. Lattice-based option valuation models utilize ranges of assumptions over the expected term of the options. Prior to 2013, the Company used a weighted-average of implied and historical volatility to determine the expected volatility of its stock. Beginning with awards granted in 2013, the Company uses implied volatility to determine the expected volatility of its stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Assumptions used in calculating the lattice-based fair value of options granted during 2015 , 2014 and 2013 were as follows:



	2015		2014		2013
Expected average term (in years)	6.0		6.1		6.1
Expected volatility	24% - 30%		25% - 34%		27% - 36%
Weighted average volatility	28	%	32	%	33	%
Expected dividend yield	2.0	%	1.8	%	1.6	%
Risk-free interest rate	0.1% - 2.0%		0.1% - 2.8%		0.1% - 2.1%

The following table summarizes the stock option transactions for the year ended December 31, 2015 (in thousands except for per share amounts):



	Options		Weighted- Average Price
Options outstanding, beginning of period	2,717		$	43
Options granted	468		$	63
Options exercised	(517	)	$	39
Options forfeited	(165	)	$	64
Options outstanding, end of period	2,503		$	47
Exercisable, end of period	1,888		$	42

The weighted-average fair value of options granted during the years ended December 31, 2015 , 2014 and 2013 was $13 , $14 and $12 , respectively.

As of December 31, 2015 , there was $3.3 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.7 years.

The following table summarizes the aggregate intrinsic value related to options outstanding, exercisable and exercised as of and for the years ended December 31 (in thousands):



	2015		2014		2013
Exercised	$	9,890	$	31,623	$	28,879
Outstanding	$	16,605	$	61,947	$	100,054
Exercisable	$	16,605	$	54,071	$	81,930

The Company’s policy is to issue new shares of common stock upon the exercise of employee stock options.

Stock options outstanding at December 31, 2015 (options in thousands):



Price Range	Weighted-Average Contractual Life	Options	Weighted-Average Exercise Price
$10.01 to $20	3.1	322	$	13
$20.01 to $30	4.0	200	$	24
$30.01 to $40	2.1	202	$	39
$40.01 to $50	5.1	418	$	44
$50.01 to $60	4.5	464	$	52
$60.01 to $70	6.4	897	$	64
Options outstanding	4.9	2,503	$	47
Options exercisable	3.7	1,888	$	42

Stock Appreciation Rights (SARs)

SARs vest under the same terms and conditions as options; however, they are settled in cash equal to their settlement date fair value. As a result, SARs are recorded in the Company’s consolidated balance sheets as a liability until the date of exercise.

The fair value of each SAR award is estimated using a lattice-based valuation model. In accordance with ASC Topic 718, “Stock Compensation”, the fair value of each SAR award is recalculated at the end of each reporting period and the liability and expense adjusted based on the new fair value and the percent vested.

The assumptions used to determine the fair value of the SAR awards at December 31, 2015 and 2014 were as follows:



	2015		2014
Expected average term (in years)	5.3 - 7.4		3.7 - 5.4
Expected volatility	28% - 30%		25% - 31%
Expected dividend yield	2.7	%	1.7	%
Risk-free interest rate	0.2% - 2.3%		0.0% - 2.3%

The following table summarizes the SAR transactions for the year ended December 31, 2015 (in thousands except for per share amounts):



	SARs		Weighted-Average Price
Outstanding, beginning of period	176		$	30
Granted	12		$	63
Exercised	(26	)	$	26
Forfeited	—		$	—
Outstanding, end of period	162		$	33
Exercisable, end of period	137		$	28

The weighted-average fair value of SARs granted during the years ended December 31, 2015 , 2014 and 2013 was $13 , $14 and $12 , respectively.

Restricted Stock Awards Settled in Stock:

Beginning in 2014, the Company granted certain eligible U.S. employees restricted stock units (RSUs) that settle in Company stock. Prior to 2014, the Company granted restricted, nonvested, stock. The fair value of RSUs settled in stock and restricted stock is determined based on the market price of the Company’s shares on the grant date. The following table summarizes the RSUs settled in stock and restricted stock transactions for the year ended December 31, 2015 (in thousands except for per share amounts):



	Restricted Shares		Grant Date Fair Value Per Share
Nonvested, beginning of period	920		$	54
Granted	472		$	63
Vested	(454	)	$	53
Forfeited	(88	)	$	62
Nonvested, end of period	850		$	59

As of December 31, 2015 , there was $21.7 million of unrecognized compensation cost related to RSUs settled in stock and restricted stock that is expected to be recognized over a weighted-average period of 1.7 years.

Restricted Stock Awards Settled in Cash

Restricted stock units, granted to certain eligible non-U.S. employees (RSUIs) vest under the same terms and conditions as RSUs settled in stock and restricted stock; however, they are settled in cash equal to their settlement date fair value. As a result, RSUIs are recorded in the Company’s consolidated balance sheets as a liability until the date of vesting.

The fair value of RSUIs is determined based on the market price of the Company’s shares on the grant date. The following table summarizes the RSUI transactions for the year ended December 31, 2015 (in thousands except for per share amounts):



	Restricted Stock Unit		Weighted-Average Grant Date Fair Value Per Share
Nonvested, beginning of period	129		$	66
Granted	64		$	47
Vested	(64	)	$	56
Forfeited	(20	)	$	50
Nonvested, end of period	109		$	49

18. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the years ended December 31 (in thousands except per share amounts):



	2015		2014		2013
Numerator :
Income used in computing basic and diluted earnings per share	$	752,207	$	844,611	$	733,993
Denominator :
Denominator for basic earnings per share-weighted-average common shares	202,681		216,305		222,475
Effect of dilutive securities – employee stock compensation plan	1,005		1,401		1,596
Denominator for diluted earnings per share- adjusted weighted-average shares outstanding	203,686		217,706		224,071
Earnings per common share:
Basic	$	3.71	$	3.90	$	3.30
Diluted	$	3.69	$	3.88	$	3.28

Options to purchase 1.0 million , 0.5 million and 0.9 million weighted-average shares of common stock outstanding during 2015 , 2014 and 2013 , respectively, were not included in the Company’s computation of dilutive securities because the exercise price was greater than the market price and therefore the effect would have been anti-dilutive.

The Company has a share-based compensation plan under which employees may be granted share-based awards including shares of restricted stock and restricted stock units (RSUs). Non-forfeitable dividends are paid on unvested shares of restricted stock and non-forfeitable dividend equivalents are paid on unvested RSUs. As such, shares of restricted stock and RSUs are considered participating securities under the two-class method of calculating earnings per share as described in ASC Topic 260, “Earnings per Share.” The two-class method of calculating earnings per share did not have a material impact on the Company’s earnings per share calculation as of December 31, 2015 , 2014 and 2013 .

19. Reportable Segments and Geographic Information

Reportable Segments:

Harley-Davidson, Inc. is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) segment and the Financial Services segment. The Company’s reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.

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

The Financial Services reportable segment consists of HDFS which provides wholesale and retail financing and provides insurance and insurance-related programs primarily to Harley-Davidson dealers and their retail customers. HDFS conducts business principally in the United States and Canada.

Information by segment is set forth below for the years ended December 31 (in thousands):



	2015		2014		2013
Motorcycles net revenue	$	5,308,744	$	5,567,681	$	5,258,290
Gross profit	1,952,460		2,025,080		1,862,372
Selling, administrative and engineering expense	1,076,970		1,021,933		991,763
Operating income from Motorcycles	$	875,490	$	1,003,147	$	870,609
Financial Services revenue	$	686,658	$	660,827	$	641,582
Financial Services expense	406,453		382,991		358,489
Operating income from Financial Services	$	280,205	$	277,836	$	283,093

Financial Services revenue includes $6.9 million , $8.1 million and $10.4 million of interest that HDMC paid to HDFS on wholesale finance receivables in 2015 , 2014 and 2013 , respectively. The offsetting cost of these interest incentives was recorded as a reduction to Motorcycles revenue.

Information by segment is set forth below as of December 31 (in thousands):



	Motorcycles		Financial Services		Consolidated
2015
Total assets	$	2,528,530	$	7,462,637	$	9,991,167
Depreciation and amortization	$	188,926	$	9,148	$	198,074
Capital expenditures	$	249,772	$	10,202	$	259,974
2014
Total assets	$	2,502,190	$	7,025,907	$	9,528,097
Depreciation and amortization	$	171,187	$	8,113	$	179,300
Capital expenditures	$	224,262	$	8,057	$	232,319
2013
Total assets	$	2,793,497	$	6,611,543	$	9,405,040
Depreciation and amortization	$	160,181	$	6,891	$	167,072
Capital expenditures	$	199,354	$	8,967	$	208,321

Geographic Information:

Included in the consolidated financial statements are the following amounts relating to geographic locations for the years ended December 31 (in thousands):



	2015		2014		2013
Revenue from Motorcycles ^(a) :
United States	$	3,768,069	$	3,773,087	$	3,562,847
EMEA region	728,198		869,690		769,864
Japan	162,675		197,792		217,700
Canada	178,042		194,422		204,315
Australia	165,854		190,029		193,081
Other foreign countries	305,906		342,661		310,483
Total revenue from Motorcycles	$	5,308,744	$	5,567,681	$	5,258,290
Revenue from Financial Services ^(a) :
United States	$	656,888	$	627,317	$	609,574
Europe	5,373		5,684		4,274
Canada	21,180		23,707		24,486
Other foreign countries	3,217		4,119		3,248
Total revenue from Financial Services	$	686,658	$	660,827	$	641,582
Long-lived assets ^(b) :
United States	$	915,509	$	865,617	$	874,833
International	26,909		34,328		36,860
Total long-lived assets	$	942,418	$	899,945	$	911,693


(a)	Revenue is attributed to geographic regions based on location of customer.


(b)	Long-lived assets include all long-term assets except those specifically excluded under ASC Topic 280, “Segment Reporting,” such as deferred income taxes and finance receivables.

20. Related Party Transactions

A director of the Company is Chairman and Chief Executive Officer and an equity owner of Fred Deeley Imports Ltd. (Deeley Imports), the exclusive distributor of the Company’s motorcycles in Canada until August 2015. On August 4, 2015, the Company completed its purchase of certain assets and liabilities from Deeley Imports including, among other things, the acquisition of the exclusive right to distribute the Company's motorcycles and other products in Canada. As a result of the acquisition, the Company no longer does business with Deeley Imports. Refer to Note 3 for further details.

In 2015 , the Company recorded $111.3 million Motorcycles and Related Products revenue and Financial Services revenue from Deeley Imports which represents sales to Deeley Imports through August 4, 2015. The Company had no finance receivables balances due from Deeley Imports at December 31, 2015 .

The Company recorded Motorcycles and Related Products revenue and Financial Services revenue from Deeley Imports during 2014 and 2013 of $194.8 million and $204.8 million , respectively, and had finance receivables balances due from Deeley Imports of $7.4 million and $11.5 million at December 31, 2014 and 2013 , respectively.

21. Supplemental Consolidating Data

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



	Year Ended December 31, 2015
	Motorcycles & Related Products Operations		Financial Services Operations		Eliminations			Consolidated
Revenue:
Motorcycles and Related Products	$	5,318,850	$	—	$	(10,106	)	$	5,308,744
Financial Services	—		688,211		(1,553		)	686,658
Total revenue	5,318,850		688,211		(11,659		)	5,995,402
Costs and expenses:
Motorcycles and Related Products cost of goods sold	3,356,284		—		—			3,356,284
Financial Services interest expense	—		161,983		—			161,983
Financial Services provision for credit losses	—		101,345		—			101,345
Selling, administrative and engineering expense	1,078,525		153,229		(11,659		)	1,220,095
Total costs and expenses	4,434,809		416,557		(11,659		)	4,839,707
Operating income	884,041		271,654		—			1,155,695
Investment income	106,585		—		(100,000		)	6,585
Interest expense	12,117		—		—			12,117
Income before provision for income taxes	978,509		271,654		(100,000		)	1,150,163
Provision for income taxes	300,499		97,457		—			397,956
Net income	$	678,010	$	174,197	$	(100,000	)	$	752,207



	Year Ended December 31, 2014
	Motorcycles & Related Products Operations		Financial Services Operations		Eliminations			Consolidated
Revenue:
Motorcycles and Related Products	$	5,577,697	$	—	$	(10,016	)	$	5,567,681
Financial Services	—		662,345		(1,518		)	660,827
Total revenue	5,577,697		662,345		(11,534		)	6,228,508
Costs and expenses:
Motorcycles and Related Products cost of goods sold	3,542,601		—		—			3,542,601
Financial Services interest expense	—		164,476		—			164,476
Financial Services provision for credit losses	—		80,946		—			80,946
Selling, administrative and engineering expense	1,023,450		147,586		(11,534		)	1,159,502
Total costs and expenses	4,566,051		393,008		(11,534		)	4,947,525
Operating income	1,011,646		269,337		—			1,280,983
Investment income	126,499		—		(120,000		)	6,499
Interest expense	4,162		—		—			4,162
Income before provision for income taxes	1,133,983		269,337		(120,000		)	1,283,320
Provision for income taxes	338,453		100,256		—			438,709
Net income	$	795,530	$	169,081	$	(120,000	)	$	844,611



	Year Ended December 31, 2013
	Motorcycles & Related Products Operations		Financial Services Operations		Eliminations			Consolidated
Revenue:
Motorcycles and Related Products	$	5,268,480	$	—	$	(10,190	)	$	5,258,290
Financial Services	—		643,067		(1,485		)	641,582
Total revenue	5,268,480		643,067		(11,675		)	5,899,872
Costs and expenses:
Motorcycles and Related Products cost of goods sold	3,395,918		—		—			3,395,918
Financial Services interest expense	—		165,491		—			165,491
Financial Services provision for credit losses	—		60,008		—			60,008
Selling, administrative and engineering expense	993,247		143,181		(11,675		)	1,124,753
Total costs and expenses	4,389,165		368,680		(11,675		)	4,746,170
Operating income	879,315		274,387		—			1,153,702
Investment income	190,859		—		(185,000		)	5,859
Interest expense	45,256		—		—			45,256
Income before provision for income taxes	1,024,918		274,387		(185,000		)	1,114,305
Provision for income taxes	279,841		100,471		—			380,312
Net income	$	745,077	$	173,916	$	(185,000	)	$	733,993



	December 31, 2015
	Motorcycles & Related Products Operations		Financial Services Operations		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	400,443	$	321,766	$	—		$	722,209
Marketable securities	45,192		—		—			45,192
Accounts receivable, net	390,799		—		(143,394		)	247,405
Finance receivables, net	—		2,053,582		—			2,053,582
Inventories	585,907		—		—			585,907
Restricted cash	—		88,267		—			88,267
Deferred income taxes	56,319		46,450		—			102,769
Other current assets	90,824		49,078		(2,079		)	137,823
Total current assets	1,569,484		2,559,143		(145,473		)	3,983,154
Finance receivables, net	—		4,814,571		—			4,814,571
Property, plant and equipment, net	906,972		35,446		—			942,418
Goodwill	54,182		—		—			54,182
Deferred income taxes	86,075		15,681		(2,142		)	99,614
Other long-term assets	140,034		37,796		(80,602		)	97,228
	$	2,756,747	$	7,462,637	$	(228,217	)	$	9,991,167
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	220,050	$	158,958	$	(143,394	)	$	235,614
Accrued liabilities	387,137		89,048		(4,221		)	471,964
Short-term debt	—		1,201,380		—			1,201,380
Current portion of long-term debt	—		843,620		—			843,620
Total current liabilities	607,187		2,293,006		(147,615		)	2,752,578
Long-term debt	746,934		4,098,454		—			4,845,388
Pension liability	164,888		—		—			164,888
Postretirement healthcare liability	193,659		—		—			193,659
Other long-term liabilities	166,440		28,560		—			195,000
Commitments and contingencies (Note 15)
Total shareholders’ equity	877,639		1,042,617		(80,602		)	1,839,654
	$	2,756,747	$	7,462,637	$	(228,217	)	$	9,991,167



	December 31, 2014
	Motorcycles & Related Products Operations		Financial Services Operations		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	573,895	$	332,785	$	—		$	906,680
Marketable securities	57,325		—		—			57,325
Accounts receivable, net	658,735		—		(411,114		)	247,621
Finance receivables, net	—		1,916,635		—			1,916,635
Inventories	448,871		—		—			448,871
Restricted cash	—		98,627		—			98,627
Deferred income taxes	50,015		39,901		—			89,916
Other current assets	142,278		43,125		(2,983		)	182,420
Total current assets	1,931,119		2,431,073		(414,097		)	3,948,095
Finance receivables, net	—		4,516,246		—			4,516,246
Property, plant and equipment, net	848,661		34,416		—			883,077
Goodwill	27,752		—		—			27,752
Deferred income taxes	75,121		4,863		(2,149		)	77,835
Other long-term assets	113,727		39,309		(77,944		)	75,092
	$	2,996,380	$	7,025,907	$	(494,190	)	$	9,528,097
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	171,098	$	436,884	$	(411,114	)	$	196,868
Accrued liabilities	370,652		83,797		(5,132		)	449,317
Short-term debt	—		731,786		—			731,786
Current portion of long-term debt	—		1,011,315		—			1,011,315
Total current liabilities	541,750		2,263,782		(416,246		)	2,389,286
Long-term debt	—		3,761,528		—			3,761,528
Pension liability	76,186		—		—			76,186
Postretirement healthcare liability	203,006		—		—			203,006
Other long-term liabilities	164,060		24,745		—			188,805
Commitments and contingencies (Note 15)
Total shareholders’ equity	2,011,378		975,852		(77,944		)	2,909,286
	$	2,996,380	$	7,025,907	$	(494,190	)	$	9,528,097

100



	Year Ended December 31, 2015
	Motorcycles & Related Products Operations			Financial Services Operations			Eliminations & Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	678,010		$	174,197		$	(100,000	)	$	752,207
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	188,926			9,148			—			198,074
Amortization of deferred loan origination costs	—			93,546			—			93,546
Amortization of financing origination fees	267			9,708			—			9,975
Provision for long-term employee benefits	60,824			—			—			60,824
Contributions to pension and postretirement plans	(28,490		)	—			—			(28,490		)
Stock compensation expense	26,775			2,658			—			29,433
Net change in wholesale finance receivables	—			—			(113,970		)	(113,970		)
Provision for credit losses	—			101,345			—			101,345
Loss on debt extinguishment	—			1,099			—			1,099
Deferred income taxes	(4,792		)	(11,692		)	—			(16,484		)
Foreign currency adjustments	20,067			—			—			20,067
Other, net	(442		)	1,288			—			846
Change in current assets and current liabilities:
Accounts receivable	4,055			—			(17,720		)	(13,665		)
Finance receivables—accrued interest and other	—			(3,046		)	—			(3,046		)
Inventories	(155,222		)	—			—			(155,222		)
Accounts payable and accrued liabilities	81,929			18,539			38,355			138,823
Derivative instruments	(5,615		)	—			—			(5,615		)
Prepaid and other	33,658			(3,287		)	—			30,371
Total adjustments	221,940			219,306			(93,335		)	347,911
Net cash provided by operating activities	899,950			393,503			(193,335		)	1,100,118
Cash flows from investing activities:
Capital expenditures	(249,772		)	(10,202		)	—			(259,974		)
Origination of finance receivables	—			(7,836,279		)	4,084,449			(3,751,830		)
Collections of finance receivables	—			7,127,999			(3,991,114		)	3,136,885
Sales and redemptions of marketable securities	11,507			—			—			11,507
Acquisition of business	(59,910		)	—			—			(59,910		)
Other	7,474			—			—			7,474
Net cash used by investing activities	(290,701		)	(718,482		)	93,335			(915,848		)

101



	Year Ended December 31, 2015
	Motorcycles & Related Products Operations			Financial Services Operations			Eliminations & Adjustments		Consolidated
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	—			595,386			—		595,386
Repayments of medium-term notes	—			(610,331		)	—		(610,331		)
Proceeds from issuance of senior unsecured notes	740,385			—			—		740,385
Intercompany borrowing activity	250,000			(250,000		)	—		—
Proceeds from securitization debt	—			1,195,668			—		1,195,668
Repayments of securitization debt	—			(1,008,135		)	—		(1,008,135		)
Borrowings of asset-backed commercial paper	—			87,442			—		87,442
Repayments of asset-backed commercial paper	—			(72,727		)	—		(72,727		)
Net increase in credit facilities and unsecured commercial paper	—			469,473			—		469,473
Net change in restricted cash	—			11,410			—		11,410
Dividends	(249,262		)	(100,000		)	100,000		(249,262		)
Purchase of common stock for treasury	(1,537,020		)	—			—		(1,537,020		)
Excess tax benefits from share-based payments	3,468			—			—		3,468
Issuance of common stock under employee stock option plans	20,179			—			—		20,179
Net cash (used by) provided by financing activities	(772,250		)	318,186			100,000		(354,064		)
Effect of exchange rate changes on cash and cash equivalents	(10,451		)	(4,226		)	—		(14,677		)
Net decrease in cash and cash equivalents	$	(173,452	)	$	(11,019	)	$	—	$	(184,471	)

Cash and cash equivalents:
Cash and cash equivalents—beginning of period	$	573,895		$	332,785		$	—	$	906,680
Net decrease in cash and cash equivalents	(173,452		)	(11,019		)	—		(184,471		)
Cash and cash equivalents—end of period	$	400,443		$	321,766		$	—	$	722,209

102



	Year Ended December 31, 2014
	Motorcycles & Related Products Operations			Financial Services Operations			Eliminations & Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	795,530		$	169,081		$	(120,000	)	$	844,611
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	171,187			8,113			—			179,300
Amortization of deferred loan origination costs	—			94,429			—			94,429
Amortization of financing origination fees	59			8,383			—			8,442
Provision for long-term employee benefits	33,709			—			—			33,709
Contributions to pension and postretirement plans	(29,686		)	—			—			(29,686		)
Stock compensation expense	35,064			2,865			—			37,929
Net change in wholesale finance receivables	—			—			(75,210		)	(75,210		)
Provision for credit losses	—			80,946			—			80,946
Loss on debt extinguishment	—			3,942			—			3,942
Deferred income taxes	(191		)	(7,430		)	—			(7,621		)
Foreign currency adjustments	21,964			—			—			21,964
Other, net	20,273			(21,764		)	—			(1,491		)
Change in current assets and current liabilities:
Accounts receivable	(31,740		)	—			21,931			(9,809		)
Finance receivables – accrued interest and other	—			(2,515		)	—			(2,515		)
Inventories	(50,886		)	—			—			(50,886		)
Accounts payable and accrued liabilities	18,255			21,629			(18,575		)	21,309
Derivative instruments	703			—			—			703
Prepaid and other	(17,187		)	13,798			—			(3,389		)
Total adjustments	171,524			202,396			(71,854		)	302,066
Net cash provided by operating activities	967,054			371,477			(191,854		)	1,146,677
Cash flows from investing activities:
Capital expenditures	(224,262		)	(8,057		)	—			(232,319		)
Origination of finance receivables	—			(7,693,884		)	4,125,461			(3,568,423		)
Collections of finance receivables	—			7,066,852			(4,053,607		)	3,013,245
Sales and redemptions of marketable securities	41,010			—			—			41,010
Other	1,837			—			—			1,837
Net cash used by investing activities	(181,415		)	(635,089		)	71,854			(744,650		)

103



	Year Ended December 31, 2014
	Motorcycles & Related Products Operations			Financial Services Operations			Eliminations & Adjustments		Consolidated
Cash flows from financing activities:
Proceeds from issuance medium-term notes	—			991,835			—		991,835
Repayments of medium-term notes	—			(526,431		)	—		(526,431		)
Repayments of senior unsecured note	(303,000		)	—			—		(303,000		)
Intercompany borrowing activity	200,000			(200,000		)	—		—
Proceeds from securitization debt	—			847,126			—		847,126
Repayments of securitization debt	—			(834,856		)	—		(834,856		)
Borrowings of asset-backed commercial paper	—			84,907			—		84,907
Net increase in credit facilities and unsecured commercial paper	—			63,945			—		63,945
Repayments of asset-backed commercial paper	—			(77,800		)	—		(77,800		)
Net change in restricted cash	—			22,755			—		22,755
Dividends paid	(238,300		)	(120,000		)	120,000		(238,300		)
Purchase of common stock for treasury, net of issuances	(615,602		)	—			—		(615,602		)
Excess tax benefits from share based payments	11,540			—			—		11,540
Issuance of common stock under employee stock option plans	37,785			—			—		37,785
Net cash (used by) provided by financing activities	(907,577		)	251,481			120,000		(536,096		)
Effect of exchange rate changes on cash and cash equivalents	(23,079		)	(2,784		)	—		(25,863		)
Net decrease in cash and cash equivalents	$	(145,017	)	$	(14,915	)	$	—	$	(159,932	)
Cash and cash equivalents:
Cash and cash equivalents – beginning of period	$	718,912		$	347,700		$	—	$	1,066,612
Net decrease in cash and cash equivalents	(145,017		)	(14,915		)	—		(159,932		)
Cash and cash equivalents – end of period	$	573,895		$	332,785		$	—	$	906,680

104



	Year Ended December 31, 2013
	Motorcycles & Related Products Operations			Financial Services Operations			Eliminations & Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	745,077		$	173,916		$	(185,000	)	$	733,993
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	160,181			6,891			—			167,072
Amortization of deferred loan origination costs	—			86,181			—			86,181
Amortization of financing origination fees	473			8,903			—			9,376
Provision for long-term employee benefits	66,877			—			—			66,877
Contributions to pension and postretirement plans	(204,796		)	—			—			(204,796		)
Stock compensation expense	38,367			2,877			—			41,244
Net change in wholesale finance receivables	—			—			28,865			28,865
Provision for credit losses	—			60,008			—			60,008
Loss on debt extinguishment	—			4,947			—			4,947
Deferred income taxes	54,568			(1,988		)	—			52,580
Foreign currency adjustments	16,269			—			—			16,269
Other, net	10,942			(819		)	—			10,123
Change in current assets and current liabilities:
Accounts receivable	(24,273		)	—			(12,380		)	(36,653		)
Finance receivables – accrued interest and other	—			(346		)	—			(346		)
Inventories	(46,474		)	—			—			(46,474		)
Accounts payable and accrued liabilities	(85,949		)	(5,096		)	12,380			(78,665		)
Derivative instruments	(2,161		)	(28		)	—			(2,189		)
Prepaid and other	70,900			(2,219		)	—			68,681
Total adjustments	54,924			159,311			28,865			243,100
Net cash provided by operating activities	800,001			333,227			(156,135		)	977,093
Cash flows from investing activities:
Capital expenditures	(199,354		)	(8,967		)	—			(208,321		)
Origination of finance receivables	—			(7,140,533		)	3,896,528			(3,244,005		)
Collections of finance receivables	—			6,757,387			(3,925,393		)	2,831,994
Purchases of marketable securities	(4,998		)	—			—			(4,998		)
Sales and redemptions of marketable securities	40,108			—			—			40,108
Other	16,355			—			—			16,355
Net cash used by investing activities	(147,889		)	(392,113		)	(28,865		)	(568,867		)

105



	Year Ended December 31, 2013
	Motorcycles & Related Products Operations			Financial Services Operations			Eliminations & Adjustments		Consolidated
Cash flows from financing activities:
Repayment of medium-term notes	—			(27,858		)	—		(27,858		)
Intercompany borrowing activity	(50,000		)	50,000			—		—
Proceeds from securitization debt	—			647,516			—		647,516
Repayments of securitization debt	—			(840,387		)	—		(840,387		)
Borrowings of asset-backed commercial paper	—			88,456			—		88,456
Net increase in credit facilities and unsecured commercial paper	—			371,085			—		371,085
Repayments of asset-backed commercial paper	—			(78,765		)	—		(78,765		)
Net change in restricted cash	—			43,201			—		43,201
Dividends paid	(187,688		)	(185,000		)	185,000		(187,688		)
Purchase of common stock for treasury, net of issuances	(479,231		)	—			—		(479,231		)
Excess tax benefits from share based payments	19,895			—			—		19,895
Issuance of common stock under employee stock option plans	50,567			—			—		50,567
Net cash (used by) provided by financing activities	(646,457		)	68,248			185,000		(393,209		)
Effect of exchange rate changes on cash and cash equivalents	(14,459		)	(2,084		)	—		(16,543		)
Net (decrease) increase in cash and cash equivalents	$	(8,804	)	$	7,278		$	—	$	(1,526	)
Cash and cash equivalents:
Cash and cash equivalents – beginning of period	$	727,716		$	340,422		$	—	$	1,068,138
Net (decrease) increase in cash and cash equivalents	(8,804		)	7,278			—		(1,526		)
Cash and cash equivalents – end of period	$	718,912		$	347,700		$	—	$	1,066,612

22. Subsequent Events

In January 2016, HDFS issued $600.0 million of medium-term notes that mature in January 2019 and have an annual interest rate of 2.25% and $600.0 million of medium-term notes that mature in January 2021 and have an annual interest rate of 2.85% .

106

SUPPLEMENTARY DATA

Quarterly financial data (unaudited)

(In millions, except per share data)



	1 ^st Quarter				2 ^nd Quarter				3 ^rd Quarter				4 ^th Quarter
	Mar 29, 2015		Mar 30, 2014		June 28, 2015		June 29, 2014		Sep 27, 2015		Sep 28, 2014		Dec 31, 2015		Dec 31, 2014
Motorcycles:
Revenue	$	1,510.6	$	1,571.7	$	1,650.8	$	1,834.3	$	1,140.3	$	1,130.6	$	1,007.1	$	1,031.2
Operating income	$	345.5	$	347.7	$	380.6	$	473.3	$	143.1	$	146.3	$	6.4	$	35.9
Financial Services:
Revenue	$	162.4	$	154.4	$	173.6	$	166.4	$	177.1	$	171.0	$	173.6	$	169.0
Operating income	$	64.7	$	63.2	$	81.9	$	74.4	$	72.8	$	77.8	$	60.9	$	62.4
Consolidated:
Income before taxes	$	411.4	$	408.9	$	464.0	$	549.1	$	214.2	$	225.5	$	60.6	$	99.9
Net income	$	269.9	$	265.9	$	299.8	$	354.2	$	140.3	$	150.1	$	42.2	$	74.5
Earnings per common share:
Basic	$	1.28	$	1.21	$	1.44	$	1.63	$	0.69	$	0.70	$	0.22	$	0.35
Diluted	$	1.27	$	1.21	$	1.44	$	1.62	$	0.69	$	0.69	$	0.22	$	0.35

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Management’s Report on Internal Control over Financial Reporting

The report of management required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Management’s Report on Internal Control over Financial Reporting.”

Attestation Report of Independent Registered Public Accounting Firm

The attestation report required under this Item 9A is contained in Item 8 of Part II of this Annual Report on Form 10-K under the heading “Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.”

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

107

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information to be included in the Company’s definitive proxy statement for the 2016 annual meeting of shareholders, which will be filed on or about March 21, 2016 (the Proxy Statement), under the captions “Questions and Answers about the Company – Who are our Executive Officers for SEC Purposes?,” “Corporate Governance Principles and Board Matters – Audit Committee,” “Proposal I – Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Audit Committee Report,” and “Corporate Governance Principles and Board Matters – Independence of Directors” is incorporated by reference herein.

The Company has adopted the Harley-Davidson, Inc. Financial Code of Ethics applicable to the Company’s chief executive officer, the chief financial officer, the principal accounting officer and the controller and other persons performing similar finance functions. The Company has posted a copy of the Harley-Davidson, Inc. Financial Code of Ethics on the Company’s website at www.harley-davidson.com. The Company intends to satisfy the disclosure requirements under Item 5.05 of the Securities and Exchange Commission’s Current Report on Form 8-K regarding amendments to, or waivers from, the Harley-Davidson, Inc. Financial Code of Ethics by posting such information on its website at www.harley-davidson.com. The Company is not including the information contained on or available through its website as a part of, or incorporating such information by reference into, this Annual Report on Form 10-K.

Item 11. Executive Compensation

The information to be included in the Proxy Statement under the captions “Executive Compensation” and “Human Resources Committee Report on Executive Compensation” is incorporated by reference herein.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information to be included in the Proxy Statement under the caption “Common Stock Ownership of Certain Beneficial Owners and Management” is incorporated by reference herein.

The following table provides information about the Company’s equity compensation plans (including individual compensation arrangements) as of December 31, 2015 :



Plan Category	Number of securities to be issued upon the exercise of outstanding options	Weighted- average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by shareholders:
Management employees	2,503,201	$	46.67	8,282,271
Equity compensation plans not approved by shareholders:
Union employees:
Kansas City, MO	—	$	—	26,718
York, PA	—	$	—	96,770
Non employees:
Board of Directors	—	$	—	108,797
	—	$	—	232,285
Total all plans	2,503,201			8,514,556

Plan documents for each of the Company’s equity compensation plans have been filed with the Securities and Exchange Commission on a timely basis and are included in the list of exhibits to this annual report on Form 10-K. Equity compensation plans not submitted to shareholders for approval were adopted prior to current regulations requiring such approval and have not been materially altered since adoption.

The material features of the union employees’ stock option awards are the same as those of the management employees’ stock option awards. Under the Company’s management and union plans, stock options have an exercise price equal to the fair

108

market value of the underlying stock at the date of grant and expire ten years from the date of grant. Stock options vest ratably over a three-year period with the first one-third of the grant becoming exercisable one year after the date of grant.

The Director Compensation Policy provides non-employee Directors with compensation that includes an annual retainer as well as a grant of share units. The payment of share units is deferred until a director ceases to serve as a director and the share units are payable at that time in actual shares of common stock. The Director Compensation Policy also provides that a non-employee Director may elect to receive 50% or 100% of the annual retainer to be paid in each calendar year in the form of common stock based upon the fair market value of the common stock at the time of the annual meeting of shareholders. Each Director must receive a minimum of one-half of his or her annual retainer in common stock until the Director reaches the Director stock ownership guidelines defined below.

In August 2002, the Board approved “Director and Senior Executive Stock Ownership Guidelines” (Ownership Guidelines) which were revised in September 2012. The Ownership Guidelines stipulate that all Directors hold 15,000 shares of Common Stock and senior executives hold from 15,000 to 200,000 shares of the common stock, or certain rights to acquire common stock, depending on their level. The Directors and senior executives have five years from the date they are elected a Director or promoted to a senior executive to accumulate the appropriate number of shares of common stock. Restricted stock, restricted stock units, shares held in 401(k) accounts, vested unexercised stock options and stock appreciation rights, and shares of common stock held directly count toward satisfying the guidelines for common stock ownership.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information to be included in the Proxy Statement under the caption “Certain Transactions” and “Corporate Governance Principles and Board Matters – Independence of Directors” is incorporated by reference herein.

Item 14. Principal Accounting Fees and Services

The information to be included in the Proxy Statement under the caption “Ratification of Selection of Independent Registered Public Accounting Firm – Fees Paid to Ernst & Young LLP” is incorporated by reference herein.

109

PART IV

Item 15. Exhibits and Financial Statements

(a) The following documents are filed as part of this Form 10-K:



(1	)	Financial Statements
		Consolidated statements of income for each of the three years in the period ended December 31, 2015	52
		Consolidated statements of comprehensive income for each of the three years in the period ended December 31, 2015	53
		Consolidated balance sheets at December 31, 2015 and December 31, 2014	54
		Consolidated statements of cash flows for each of the three years in the period ended December 31, 2015	56
		Consolidated statements of shareholders’ equity for each of the three years in the period ended December 31, 2015	57
		Notes to consolidated financial statements	58
(2	)	Financial Statement Schedule
		Schedule II – Valuation and qualifying accounts	111
(3	)	Exhibits	114

Reference is made to the separate Index to Exhibits contained on pages 114 through 118 filed herewith.

All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules.

110

Schedule II

HARLEY-DAVIDSON, INC.

CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2015 , 2014 and 2013

(In thousands)



	2015			2014			2013
Accounts receivable – allowance for doubtful accounts
Balance, beginning of period	$	3,458		$	4,960		$	4,954
Provision charged to expense	266			(471		)	245
Reserve adjustments	(276		)	(394		)	(136		)
Write-offs, net of recoveries	(543		)	(637		)	(103		)
Balance, end of period	$	2,905		$	3,458		$	4,960
Finance receivables – allowance for credit losses
Balance, beginning of period	$	127,364		$	110,693		$	107,667
Provision for credit losses	101,345			80,946			60,008
Charge-offs, net of recoveries	(81,531		)	(64,275		)	(56,982		)
Balance, end of period	$	147,178		$	127,364		$	110,693
Inventories – allowance for obsolescence ^(a)
Balance, beginning of period	$	17,775		$	17,463		$	22,936
Provision charged to expense	19,564			19,044			5,254
Reserve adjustments	(1,028		)	(399		)	(1,281		)
Write-offs, net of recoveries	(9,571		)	(18,333		)	(9,446		)
Balance, end of period	$	26,740		$	17,775		$	17,463
Deferred tax assets – valuation allowance
Balance, beginning of period	$	25,462		$	21,818		$	16,314
Adjustments	(4,803		)	3,644			5,504
Balance, end of period	$	20,659		$	25,462		$	21,818


(a)	Inventory obsolescence reserves deducted from cost determined on first-in first-out (FIFO) basis, before deductions for last-in, first-out (LIFO) valuation reserves.

111

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 18, 2016 .




HARLEY-DAVIDSON, INC.

By:		/S/ Matthew S. Levatich
		Matthew S. Levatich
		President and Chief Executive Officer

112

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 18, 2016 .




Name		Title

/S/ Matthew S. Levatich		President and Chief Executive Officer
Matthew S. Levatich		(Principal executive officer)

/S/ John A. Olin		Senior Vice President and Chief Financial Officer
John A. Olin		(Principal financial officer)

/S/ Mark R. Kornetzke		Chief Accounting Officer
Mark R. Kornetzke		(Principal accounting officer)

/S/ R. John Anderson		Director
R. John Anderson

/S/ Richard I. Beattie		Non-Executive Chairman
Richard I. Beattie

/S/ Michael J. Cave		Director
Michael J. Cave

/S/ George H. Conrades		Director
George H. Conrades

/S/ Donald A. James		Director
Donald A. James

/S/ Sara L. Levinson		Director
Sara L. Levinson

/S/ N. Thomas Linebarger		Director
N. Thomas Linebarger

/S/ George L. Miles, Jr.		Director
George L. Miles, Jr.

/S/ James A. Norling		Director
James A. Norling

/S/ Jochen Zeitz		Director
Jochen Zeitz

113



INDEX TO EXHIBITS [Items 15(a)(3) and 15(c)]

Exhibit No		Description
2.1		Asset Purchase Agreement, dated April 30, 2015, among Harley-Davidson Canada LP, Fred Deeley Imports Ltd. and Harley-Davidson Motor Company, Inc., as amended (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2015 (File No. 1-9183))
3.1		Restated Articles of Incorporation as amended through April 27, 2015 (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
3.2		Harley-Davidson, Inc. By-Laws, as amended through April 27, 2015 (incorporated herein by reference by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
4.1		Indenture to provide for the issuance of indebtedness dated as of November 21, 2003 between Harley-Davidson Funding Corp., Issuer, Harley-Davidson Financial Services, Inc. and Harley-Davidson Credit Corp., Guarantors, to BNY Midwest Trust Company, Trustee (incorporated herein by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-9183))
4.2		5-Year Credit Agreement, dated as of April 7, 2014, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Quarterly Current on Form 10-Q for the quarter ended March 30, 2014 (File No. 1-9183))
4.3		5-Year Credit Agreement, dated as of April 13, 2012 among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2012 (File No. 1-9183))
4.4		Amendment No. 1 5-year Credit Agreement, dated as of July 10, 2013, 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, including an Amended and Restated Syndicated Canadian Addendum, in each case relating to the 5-year Credit Agreement, dated as of April 13, 2012 among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as among other things, global administrative agent (incorporated herein by reference to Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September, 29, 2013 (File No. 1-9183))
4.5		Indenture, dated as of March 4, 2011, among Harley-Davidson Financial Services, Inc., Issuer, Harley-Davidson Credit Corp., Guarantor, and Bank of New York Mellon Trust Company, N.A., Trustee (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated March 1, 2011 (File No. 1-9183))
4.6		Officers’ Certificate, dated March 4, 2011, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the forms of 3.875% Medium-Term Notes due 2016 (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated March 1, 2011 (File No. 1-9183))
4.7		Officers’ Certificate, dated January 31, 2012, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the forms of 2.700% Medium-Term Notes due 2017 (incorporated herein by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K dated January 26, 2012 (File No. 1-9183))
4.8		Officers' Certificate, dated September 16, 2014, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the forms of 2.400% Medium-Term Notes due 2019 (incorporated herein by reference to Exhibit 4.14 to the Registrant’s Annual Report of Form 10-K for the year ended December 31, 2014 (File No. 1-9183))
4.9		Officers' Certificate, dated November 18, 2014, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the forms of 1.550% Medium-Term Notes due 2017 (incorporated herein by reference to Exhibit 4.15 to the Registrant’s Annual Report of Form 10-K for the year ended December 31, 2014 (File No. 1-9183))
4.10		Officers' Certificate, dated February 26, 2015, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.150% Medium-Term Notes due 2020
4.11		Indenture, dated July 28, 2015, by and between Haley-Davidson, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee. (incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated July 28, 2015 (File No. 1-9183))
4.12		Officers' Certificate, dated July 28, 2015 establishing the form of 3.500% Senior Notes due 2025 and 4.625% Senior Notes due 2045 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on From 8-K dates July 28, 2015 (File No. 1-9183))

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


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

114



INDEX TO EXHIBITS [Items 15(a)(3) and 15(c)]

Exhibit No		Description
4.13		Officers' Certificate dated January 8, 2016, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.250% Medium-Term Notes due 2019 (incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated January 5, 2016 (File No. 1-9183))
4.14		Officers' certificate dated January 8, 2016, pursuant to Sections 102 and 301 of the Indenture, dated March 4, 2011, with the form of 2.850% Medium-Term Notes due 2021 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K dated January 5, 2016 (File No. 1-9183))
4.15		Amendment No. 2 to 5-Year Credit Agreement, dated as of April 7, 2014, among the Company, certain subsidiaries of the Company, the financial institutions parties thereto and JPMorgan Chase Bank, N.A., as, among other things, global administrative agent, relating to the 5-Year Credit Agreement, dates as of April 13, 2012, 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*		Harley-Davidson, Inc. 1995 Stock Option Plan as amended through April 28, 2007 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2007 (File No. 1-9183))
10.2*		Harley-Davidson, Inc. 2004 Incentive Stock Plan as amended through April 28, 2007 (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2007 (File No. 1-9183))
10.3*		Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held on April 25, 2009 filed on April 3, 2009 (File No. 1-9183))
10.4*		Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Appendix A to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held on April 26, 2014 filed on March 14, 2014 (File No. 1-9183))
10.5*		Amended and Restated Harley-Davidson, Inc. Director Stock Plan as amended effective December 1, 2014 (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 1-9183))
10.6*		Director Compensation Policy approved April 24, 2015 (incorporated herein by reference from Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2015 (File No. 1-9183))
10.7*		Deferred Compensation Plan for Nonemployee Directors as amended and restated effective January 1, 2009 (incorporated herein by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-9183))
10.8*		Harley-Davidson Management Deferred Compensation Plan as amended and restated effective January 1, 2009 and further amended March 2, 2009 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2009 (File No. 1-9183))
10.9*		Harley-Davidson, Inc. Employee Incentive Plan (incorporated herein by reference to the Appendix to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held April 25, 2015 (File No. 1-9183))
10.10*		Harley-Davidson, Inc. Short-Term Incentive Plan for Senior Executives (incorporated herein by reference to Appendix D to the Company’s definitive proxy statement on Schedule 14A for the Company’s Annual Meeting of Shareholders held April 30, 2011 (File No. 1-9183))
10.11*		Harley-Davidson Pension Benefit Restoration Plan as amended and restated effective January 1, 2009 (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-9183))
10.12*		Harley-Davidson Retiree Insurance Allowance Plan, effective January 1, 2009, together with amendments adopted through May 31, 2009 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2009 (File No. 1-9183))
10.13*		Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))


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

115



INDEX TO EXHIBITS [Items 15(a)(3) and 15(c)]

Exhibit No		Description
10.14*		Form of Notice of Grant of Stock Options and Option Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.15*		Form of Notice of Special Grant of Stock Options and Option Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.16*		Form of Notice of Award of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.17*		Form of Notice of Award of Restricted Stock and Restricted Stock Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.18*		Form of Notice of Grant of Stock Appreciation Rights and Stock Appreciation Rights Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.19*		Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.20*		Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.21*		Form of Notice of Award of Restricted Stock Units and Restricted Stock Unit Agreement (International) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 28, 2010 (File No. 1-9183))
10.22*		Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan to each of Messrs. Hund, Levatich, Olin and Wandell (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated May 1, 2009 (File No. 1-9183))
10.23*		Form of Notice of Grant of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2009 Incentive Stock Plan to Mr. Hund (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated May 1, 2009 (File No. 1-9183))
10.24*		Form of Notice of Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-9183))
10.25*		Form of Notice of Special Grant of Stock Options and Option Agreement of Harley-Davidson, Inc. under the Harley-Davidson Inc. 1995 Stock Option Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-9183))
10.26*		Form of Notice of Award of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2009 (File No. 1-9183))
10.27*		Form of Notice of Special Award of Restricted Stock and Restricted Stock Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2007 (File No. 1-9183))


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

116



INDEX TO EXHIBITS [Items 15(a)(3) and 15(c)]

Exhibit No		Description
10.28*		Form of Notice of Award of Restricted Stock Unit and Restricted Stock Unit Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2004 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2007 (File No. 1-9183))
10.29*		Form of Notice of Grant Award of Stock Options and Stock Option Agreement (Standard) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.30*		Form of Notice of Grant Award of Stock Options and Stock Option Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.31*		Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Deferred) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.32*		Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (International) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.33*		Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Special) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.34*		Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Standard) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.35*		Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.36*		Form of Notice of Grant Award of Restricted Stock Units and Restricted Stock Unit Agreement (Deferred) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.37.*		Form of Notice of Grant Award of Stock Appreciation Rights and Stock Appreciation Rights Agreement of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2015 (File No. 1-9183))
10.38*		Form of Severance Benefits Agreement between the Registrant and each of Messrs. Hund, Jones, Levatich and Olin (incorporated herein by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 1-9183))
10.39*		Form of Transition Agreement between the Registrant and each of Messrs. Levatich and Olin (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 1-9183))
10.40*		Transition Agreement between the Registrant and Mr. Hund dated November 30, 2009 (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 (File No. 1-9183))
10.41*		Form of Aircraft Time Sharing Agreement between the Registrant and each of Messrs. Levatich, Olin, Jones and Hund and Mesdames Bischmann and Calaway (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 (File No. 1-9183))
10.42*		Form on Non-competition and Non-solicitation Agreement between Harley-Davidson Canada LP, Fred Deeley Imports Ltd. and Harley-Davidson Motor Company, Inc., as amended (incorporated herein by reference to exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 28,2015 (File No. 1-9183))
10.43*		Form of Notice of Award of Performance Shares and Performance Shares Agreement (Standard) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan
10.44*		Form of Notice of Award of Performance Share Units and Performance Share Unit Agreement (Standard International) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan
10.45*		Form of Notice of Award of Performance Shares and Performance Shares Agreement (Transition Agreement) of Harley-Davidson, Inc. under the Harley-Davidson, Inc. 2014 Incentive Stock Plan


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

117



INDEX TO EXHIBITS [Items 15(a)(3) and 15(c)]

Exhibit No		Description
21		List of Subsidiaries
23		Consent of Independent Registered Public Accounting Firm
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		Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350
101		Financial statements from the annual report on Form 10-K of Harley-Davidson, Inc. for the year ended December 31, 2015, filed on February 18, 2016 formatted in XBRL: (i) the Consolidated Statements of Income; (ii) the Consolidated Statements of Comprehensive Income; (iii) the Consolidated Balance Sheets; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Shareholders' Equity; and (vi) the Notes to Consolidated Financial Statements.


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

118


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

119

OFFICERS’ CERTIFICATE
OF
HARLEY-DAVIDSON FINANCIAL SERVICES, INC.

Pursuant to Sections 102 and 301 of the Indenture

Reference is made to the Indenture dated as of March 4, 2011 (the “Indenture”) among Harley-Davidson Financial Services, Inc. (the “Company”), Harley-Davidson Credit Corp. (the “Guarantor”) and The Bank of New York Mellon Trust Company, N.A., as trustee (“Trustee”). Terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

Pursuant to Sections 102 and 301 of the Indenture, the undersigned, Ryan Green and James Darrell Thomas, in their respective capacities as Vice President and Chief Financial Officer, and Vice President and Treasurer of the Company, hereby certify that:

(1) There has been established a series of Securities under the Indenture titled Medium-Term Notes Due Nine Months or More from Date of Issue (the “Notes”).

(2) The form of note duly completed and attached hereto as Exhibit A is one of the Notes (the “Note”).

(3) In addition to the terms provided in, or established pursuant to, the Indenture and the offering memorandum and the pricing supplement, both dated as of February 23, 2015, relating to the Notes (together referred to as the “Offering Memorandum”), the Note, as authenticated and delivered, shall have the terms set forth in Exhibit A (which terms are incorporated herein by reference and deemed to be set forth herein in full) (in the event of a conflict between the provisions of the Note and the Offering Memorandum, the provisions of the Note shall prevail).

(4) The Note shall be registered in the name set forth on Exhibit A and the Note shall be delivered in the manner specified in the Administrative Procedures attached as Exhibit A to the Company Order delivered as of the date hereof and as described in the Private Placement Agency Agreement dated as of March 1, 2011 (the “Private Placement Agency Agreement”), among the Company, the Guarantor and the agents party thereto.

(5) The issuance of Notes designated as 2.150% Medium-Term Notes due 2020, in an initial aggregate principal amount of $600,000,000, have been approved and authorized in accordance with the provisions of the Indenture pursuant to resolutions adopted by the Board of Directors of the Company by unanimous written consent dated as of February 23, 2015 and by this Officers’ Certificate.

(6) All covenants and conditions precedent provided for in the Indenture relating to the establishment of the Notes, the terms of the Notes and the authentication and issuance of the Notes have been complied with.

(7) No Event of Default has occurred and is continuing and the execution and delivery of the Indenture will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, the certificate of incorporation or bylaws of the Company, or any order of any court or administrative agency entered in any proceeding to which the Company is a party or by which it is bound or to which it is subject.

Each of the undersigned officers of the Company further states (a) that he has read the provisions of Section 301 of the Indenture and the definitions relating thereto, (b) that the statements made in this certificate are based upon an examination of the provisions of the Indenture and upon the relevant books and records of the Company, (c) in the opinion of such officer, he has made such examination or investigation as is necessary to enable such officer to express an informed opinion as to whether or not the conditions set forth in the Indenture have been complied with and (d) in the opinion of such officer, such conditions have been complied with.

[Signature page follows]

IN WITNESS WHEREOF, each of the undersigned officers of the Company has affixed his signature this 26th day of February, 2015.

/s/ Ryan Green
Name: Ryan Green

Title: Vice President and Chief Financial Officer of Harley-Davidson Financial Services, Inc.

/s/ James Darrell Thomas
Name: James Darrell Thomas

Title: Vice President and Treasurer of Harley-Davidson Financial Services, Inc.

[HDFS Officers’ Certificate Pursuant to Sections 102 and 301 of the Indenture]

Exhibit A
to
Officers’ Certificate Pursuant to Sections 102 and 301 of the Indenture

HARLEY-DAVIDSON FINANCIAL SERVICES, INC.
2.150% MEDIUM-TERM NOTES DUE 2020

Fully and Unconditionally Guaranteed
by Harley-Davidson Credit Corp.

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY (AS DEFINED IN THE INDENTURE) OR A NOMINEE THEREOF. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (“ DTC ”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”) OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND, ACCORDINGLY, NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY OTHER APPLICABLE JURISDICTION. BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, AND (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER

ACTIVE 206170557v.1

SUCH SECURITY, PRIOR TO THE DATE (THE “ RESALE RESTRICTION TERMINATION DATE ”) WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE THEREOF WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN OFFSHORE TRANSACTIONS WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN ACCREDITED INVESTOR WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 OF REGULATION D UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY BE COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

THE HOLDER OF THIS SECURITY WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH ABOVE.

HARLEY-DAVIDSON FINANCIAL SERVICES, INC.
2.150% MEDIUM-TERM NOTES DUE 2020

Fully and Unconditionally Guaranteed
by Harley-Davidson Credit Corp.

No. Principal Amount $

CUSIP No. as revised by the Schedule of

ISIN No. Increases and Decreases in Global

Note attached hereto



Issue Price: %	Maturity Date: February 26, 2020
Original Issue Date: February 26, 2015	Index Maturity:
	[ ] Original Issue Discount Note
	Total Amount of OID:
	Yield to Maturity: %
	Initial Accrual Period OID:
[X] Fixed Rate
Interest Rate: 2.150%
[ ] Floating Rate
Interest Rate Basis:
___ CD Rate	Specified Currency (if other than U.S. dollars): N/A
___ CMT Rate [ ] CMT Reuters Page FRBCMT:
[ ] CMT Reuters Page FEDCMT:	Option To Receive Payments In Specified Currency (non-U.S. dollar denominated Note): N/A
___ Commercial Paper Rate
___ Federal Funds Rate
___ LIBOR	Authorized Denomination: Minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof

___ Prime Rate	Place of Payment (if other than as set forth in the Indenture): N/A



___ Treasury Rate
___ Other
Spread (Plus Or Minus):	Initial Redemption Date:
	Initial Redemption Percentage:
	Annual Redemption Percentage Reduction:
	Repayment Date:
Spread Multiplier: %	Renewable: [ ] Yes [ ] No
	Extendible: [ ] Yes [ ] No
Interest Category:
[ ] Regular Floating Rate Note	Final Maturity Date:
[ ] Floating Rate/Fixed Rate Note Fixed Rate Commencement Date:
Fixed Interest Rate: %
[ ] Inverse Floating Rate Note
Initial Interest Reset Date:	Maximum Interest Rate: %
Interest Reset Dates:	Minimum Interest Rate: %
Interest Payment Dates (in the case of a Floating Rate Note and, in the case of a Fixed Rate Note, other than as set forth below): N/A
Regular Record Dates (if other than as set forth below): N/A
Interest Determination Dates (if other than as set forth below): N/A
Additional Amounts applicable for Company:
[ ] Yes
[X] No
Additional Amounts applicable for Guarantor:
[ ] Yes
[X] No
Addendum Attached	Other Provisions:
[ ] Yes
[X] No



Authorized Denomination (only if non-U. S. dollar denominated Note): N/A
Calculation Agent (if other than the Trustee): N/A
Interest Payment Period: N/A

Harley-Davidson Financial Services, Inc., a corporation duly organized under the laws of the State of Delaware (herein called the “ Company ,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the Principal Amount specified above, as revised by the Schedule of Increases and Decreases in Global Note attached hereto, on the Maturity Date specified above and to pay to the registered holder of this Note (the “ Holder ”) interest on said Principal Amount at a rate per annum specified above and upon the terms provided below under either the heading “Provisions Applicable to Fixed Rate Notes Only” or “Provisions Applicable to Floating Rate Notes Only.”

This Note is one of a duly authorized issue of notes of the Company (herein referred to as the “ Notes ”), all issued or to be issued in one or more series under an indenture, dated as of March 4, 2011 (as may be supplemented from time to time, the “ Indenture ”), among the Company, Harley-Davidson Credit Corp. (the “ Guarantor ”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “ Trustee ,” which term includes any successor trustee under the Indenture), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company, the Guarantor and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes of this series are limited (except as otherwise provided in the Indenture) to the aggregate principal amount established from time to time by the Company Board of Directors. The Notes of this series may be issued at various times with different maturity dates and different principal repayment provisions, may bear interest at different rates and may otherwise vary, all as provided in the Indenture. The Notes of this series may be subject to redemption upon notice and in accordance with the provisions of this Note and the Indenture. The Company and the Guarantor may defease the Notes of this series in accordance with the provisions of the Indenture.

To secure the due and punctual payment of principal, any premium, any interest and Additional Amounts (as defined in the Indenture) on this Note by the Company under the Indenture, when and as the same shall become due and payable, whether at the Maturity Date, by declaration of acceleration, call for redemption or otherwise, the Guarantor has unconditionally guaranteed this Note pursuant to the terms of the Guarantee endorsed hereon and in Section 1401 of the Indenture (the “ Guarantee ”).

As used herein, the term “ Business Day ” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in the City of New York; provided , however , that if a Specified Currency is specified above, the day is also not a day on which

commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing such Specified Currency or, if such Specified Currency is the Euro, the day is also a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open; provided further that if LIBOR is indicated above to be an applicable Interest Rate Basis, the day is also a London Banking Day (as defined below).

“ Principal Financial Center ” means, unless otherwise provided in this Note, the capital city of the country issuing the Specified Currency; except that with respect to United States dollars, Australian dollars, Canadian dollars, South African rand and Swiss francs, the “Principal Financial Center” will be the City of New York, Sydney and (solely in the case of the Specified Currency) Melbourne, Toronto, Johannesburg and Zurich, respectively.

“ London Banking Day ” means a day which commercial banks are open for business, including dealings in U.S. dollars, in London.

Provisions Applicable To Fixed Rate Notes Only:

If the “Fixed Rate” line above is checked, unless otherwise specified above, the Company will pay interest semiannually on February 26 and August 26 of each year (each such date fixed for the payment of interest, an “ Interest Payment Date ”) commencing on August 26, 2015, and ending on the Maturity Date or upon earlier redemption or repayment to the person to whom principal is payable. Interest shall accrue from the Original Issue Date, or from the most recent Interest Payment Date to which interest has been paid or duly provided for on this Note to, but excluding, the next following Interest Payment Date, Maturity Date, or earlier date of redemption or repayment, as the case may be. Interest on Fixed Rate Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months.

If any Interest Payment Date or the Maturity Date (or the date of earlier redemption or repayment) of this Fixed Rate Note falls on a day that is not a Business Day, the payment will be made on the next Business Day as if it were made on the date such payment was due, and no interest will accrue on the amount so payable for the period from and after such Interest Payment Date or the Maturity Date (or the date of earlier redemption or repayment), as the case may be.

Provisions Applicable To Floating Rate Notes Only:

If the “Floating Rate” line above is checked, the Company will pay interest on the Interest Payment Dates shown specified above at the Initial Interest Rate specified above until the first Interest Reset Date specified above following the Original Issue Date specified above and thereafter at a rate determined in accordance with the provisions hereinafter set forth under the headings “Determination of CD Rate,” “Determination of CMT Rate,” “Determination of Commercial Paper Rate,” “Determination of Federal Funds Rate,” “Determination of LIBOR,” “Determination of Prime Rate” or “Determination of Treasury Rate,” depending on whether the Interest Rate Basis is the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate, LIBOR, the Prime Rate, the Treasury Rate or other Interest Rate Basis.

An interest payment shall be the amount of interest accrued from and including the Original Issue Date, or from and including the last Interest Payment Date to which interest has been paid, to, but excluding, the next following Interest Payment Date, Maturity Date, or date of earlier redemption or repayment, as the case may be (an “ Interest Period ”). Notwithstanding any provision herein to the contrary, the interest rate hereon shall not be greater than the Maximum Interest Rate, if any, or less than the Minimum Interest Rate, if any, specified above.

If any Interest Payment Date for any Floating Rate Note, other than an Interest Payment Date at maturity, would fall on a day that is not a Business Day, such Interest Payment Date will be the following day that is a Business Day, and interest will continue to accrue to the following Business Day, except that if LIBOR is the applicable Interest Rate Basis, if such Business Day is in the next succeeding calendar month, such Interest Payment Date will be the immediately preceding day that is a Business Day. If the Maturity Date (or date of earlier redemption or repayment) of any Floating Rate Note would fall on a day that is not a Business Day, the payment of interest and principal (and premium, if any) may be made on the next succeeding Business Day, and no interest on such payment will accrue for the period from and after the Maturity Date (or the date of earlier redemption or repayment).

Commencing with the first Interest Reset Date specified above following the Original Issue Date, the rate at which interest on this Note is payable shall be adjusted daily, weekly, monthly, quarterly, semi-annually or annually as specified above under “Interest Reset Dates.”

The interest rate borne by this Note will be determined as follows:

(i) Unless the Interest Category of this Note is specified above as a “Floating Rate/Fixed Rate Note” or an “Inverse Floating Rate Note” or in the event either “Other Provisions” or an Addendum hereto applies, in each case, relating to a different interest rate formula, this Note shall be designated as a “Regular Floating Rate Note” and, except as set forth below or specified above under “Other Provisions” or in an Addendum hereto, shall bear interest at the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier, if any; in each case as specified above. Commencing on the Initial Interest Reset Date, the rate at which interest on this Note shall be payable shall be reset as of each Interest Reset Date specified above; provided, however , that the interest rate in effect for the period, if any, from the Original Issue Date to the Initial Interest Reset Date shall be the Initial Interest Rate.

(ii) If the Interest Category of this Note is specified above as a “Floating Rate/Fixed Rate Note” then, except as set forth below or specified above under “Other Provisions” or in an Addendum hereto, this Note shall bear interest at the rate determined by reference to the applicable Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any, in each case as specified above. Commencing on the Initial Interest Reset Date, the rate at which interest on this Note shall be payable shall be reset as of each Interest Reset Date; provided , however , that (y) the interest rate in effect for the period, if any, from the Original Issue Date to the Initial Interest Reset Date shall be the Initial Interest Rate and (z) the interest rate in effect for the period commencing on, and including, the Fixed Rate Commencement Date specified above to the Maturity Date (or date of earlier

redemption or repayment) shall be the Fixed Interest Rate specified above or, if no Fixed Interest Rate is so specified, the interest rate in effect on the day immediately preceding the Fixed Rate Commencement Date.

(iii) If the Interest Category of this Note is specified above as an “Inverse Floating Rate Note” then, except as set forth below or specified above under “Other Provisions” or in an Addendum hereto, this Note shall bear interest at (a) the Fixed Interest Rate specified above minus (b) the rate determined by reference to the applicable Interest Rate Basis or Bases:

(x) plus or minus the applicable Spread, if any, and/or

(y) multiplied by the applicable Spread Multiplier, if any, in each case as specified above;

provided , however , that, unless otherwise specified above under “Other Provisions” or in an Addendum hereto, the interest rate hereon shall not be less than zero. Commencing on the Initial Interest Reset Date, the rate at which interest on this Note shall be payable shall be reset on each Interest Reset Date; provided , however , that the interest rate in effect for the period, if any, from the Original Issue Date to the Initial Interest Reset Date shall be the Initial Interest Rate set forth above.

The “ Spread ” is the number of basis points (one basis point equals one-hundredth of a percentage point) specified above to be added to or subtracted from the Interest Rate Basis for a Floating Rate Note, and the “ Spread Multiplier ” is the percentage specified above by which the Interest Rate Basis for such Floating Rate Note will be multiplied. Both a Spread and/or a Spread Multiplier may be applicable to the Interest Rate Basis for a particular Floating Rate Note, as set forth above.

Each such adjusted Interest Rate Basis shall be applicable on and after the Interest Reset Date to which it relates but not including the next succeeding Interest Reset Date. If any Interest Reset Date is a day that is not a Business Day, such Interest Reset Date shall be postponed to the next day that is a Business Day, except that if the rate of interest on this Note shall be determined by reference to LIBOR and such Business Day is in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. In addition, if the Treasury Rate is the applicable Interest Rate Basis and the Interest Determination Date would otherwise fall on an Interest Reset Date, then the Interest Reset Date will be postponed to the next succeeding Business Day. Subject to applicable provisions of law (including usury laws) and except as specified in this Note, on each Interest Reset Date, the rate of interest on this Note shall be the rate determined in accordance with the provisions of the applicable heading below.

With respect to a Floating Rate Note, accrued interest shall be calculated by multiplying the principal amount of thereof by an accrued interest factor. Such accrued interest factor will be computed by adding the interest factors calculated for each day in the Interest Period or from the last date from which accrued interest is being calculated. The interest factor for each such day is computed by dividing the interest rate applicable to such day by 360, in the cases of CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate

Notes or by the actual number of days in the year, in the cases of CMT Rate Notes and Treasury Rate Notes. The interest rate applicable to any day that is an Interest Reset Date will be the interest rate effective on such Interest Reset Date. The interest rate applicable to any other day will be the interest rate for the immediately preceding Interest Reset Date (or, if none, the Initial Interest Rate, as specified above).

The “ Calculation Date ,” where applicable, pertaining to an Interest Determination Date will be the earlier of (i) the tenth calendar day after such Interest Determination Date or, if any such day is not a Business Day, the next succeeding Business Day or (ii) the Business Day preceding the applicable Interest Payment Date or the Maturity Date (or the date of earlier redemption or repayment), as the case may be.

For Floating Rate Notes, The Bank of New York Mellon Trust Company, N.A. shall be the calculation agent unless another calculation agent is specified above (the “ Calculation Agent ”). The interest rate applicable to each interest period will be determined by the Calculation Agent on or prior to the applicable Calculation Date. At the request of the Holder, the Calculation Agent will provide the interest rate then in effect and, if determined, the interest rate which will become effective on the next Interest Reset Date.

All percentages resulting from any calculation of the rate of interest on a Floating Rate Note will be rounded, if necessary, to the nearest one hundred-thousandth of a percent (.0000001), with five one-millionths of a percentage point rounded upward, and all dollar amounts used in or resulting from such calculation on Floating Rate Notes will be rounded to the nearest cent (with one-half cent being rounded upward).

Determination of CD Rate. If the Interest Rate Basis, as specified above, is, or is calculated by reference to, the CD Rate, unless otherwise specified above, the “ CD Rate ” for each Interest Reset Date will be determined by the Calculation Agent as of the second Business Day prior to such Interest Reset Date (a “ CD Interest Determination Date ”) and shall be the rate on the applicable CD Interest Determination Date for negotiable United States dollar certificates of deposit having the Index Maturity specified above as published in H.15(519) (as defined below) on such CD Interest Determination Date under the heading “CDs (secondary market).” If the rate referred to in the preceding sentence is not so published by 3:00 p.m., New York City time, on the applicable Calculation Date, the CD Rate shall be the rate on the applicable CD Interest Determination Date for negotiable United States dollar certificates of deposit of the Index Maturity specified above as published in H.15 Daily Update (as defined below), or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “CDs (secondary market).” If the rate referred to in the preceding sentence is not so published by 3:00 p.m., New York City time, on the applicable Calculation Date, the CD Rate shall be the rate on the applicable CD Interest Determination Date calculated by the Calculation Agent on the Notes as the arithmetic mean of the secondary market offered rates as of 10:00 a.m., New York City time, on the applicable CD Interest Determination Date, of three leading non-bank dealers in negotiable United States dollar certificates of deposit in the City of New York selected by the Calculation Agent for negotiable United States dollar certificates of deposit of major United States money market banks with a remaining maturity closest to the Index

Maturity specified above in an amount that is representative for a single transaction in that market at that time. If the dealers selected by the Calculation Agent as provided in the preceding sentence are not quoting as mentioned in such sentence, the CD Rate shall be the CD Rate in effect on the applicable CD Interest Determination Date.

“ H.15(519) ” means the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System.

“ H.15 Daily Update ” means the daily update of H.15(519), available through the world-wide-web site of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/h15/update, or any successor site or publication.

Determination of CMT Rate . If the Interest Rate Basis, as specified above, is, or is calculated by reference to, the CMT Rate, unless otherwise specified above, the “ CMT Rate ” for each Interest Reset Date will be determined by the Calculation Agent as of the second Business Day prior to such Interest Reset Date (a “ CMT Interest Determination Date ”) and shall be, if “CMT Reuters Page FRBCMT” is specified above, the percentage equal to the yield for United States Treasury securities at “constant maturity” having the Index Maturity specified above, as the yield is displayed on Reuters, Inc. (or any successor service), on page FRBCMT (or any other page as may replace the specified page on that service under the caption “Treasury Constant Maturities”) (“ Reuters Page FRBCMT ”). If the rate referred to in the preceding sentence does not appear on Reuters Page FRBCMT, the CMT Rate for such CMT Interest Determination Date will be a percentage equal to the yield for United States Treasury securities at “constant maturity” having the Index Maturity specified above, and for the applicable CMT Interest Determination Date as published in H.15(519) under the caption “Treasury Constant Maturities.” In the event the rate referred to in the preceding sentence does not appear in H.15(519), then the CMT Rate for such CMT Interest Determination Date will be the rate on the applicable CMT Interest Determination Date for the period of the Index Maturity specified above, as may then be published by either the Board of Governors of the Federal Reserve System or the United States Department of the Treasury that the Calculation Agent determines to be comparable to the rate which would otherwise have been published in H.15(519). In the event the rate referred to in the preceding sentence is not published, the CMT Rate on the applicable CMT Interest Determination Date will be calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 p.m., New York City time, on the applicable CMT Interest Determination Date of three leading primary United States government securities dealers in the City of New York, which may include an agent of the Company or such agent’s affiliates (each a “ Reference Dealer ”), selected by the Calculation Agent (from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation (or, in the event of equality, one of the highest), and the lowest quotation (or, in the event of equality, one of the lowest)), for United States Treasury securities with an original maturity equal to the Index Maturity specified above, a remaining term to maturity no more than one year shorter than the Index Maturity specified above and in a principal amount that is representative for a single transaction in the securities in the market at that time. If fewer than five but more than two of the prices referred to in the above sentence are provided as requested, the CMT Rate on the applicable CMT Interest Determination Date will be calculated by the

Calculation Agent based on the arithmetic mean of the bid prices obtained, and neither the highest nor the lowest of the quotations shall be eliminated; provided , however , that if fewer than three prices referred to above are provided as requested, the CMT Rate on the applicable CMT Interest Determination Date will be calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 p.m., New York City time, on the applicable CMT Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation or, in the event of equality, one of the highest and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity greater than the Index Maturity specified above, and a remaining term to maturity closest to the Index Maturity specified above, and in a principal amount that is representative for a single transaction in the securities in the market at that time. However, if fewer than five but more than two prices referred to above are provided as requested, the CMT Rate on the applicable CMT Interest Determination Date will be calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained, and neither the highest nor the lowest of the quotations will be eliminated. If fewer than three prices referred to above are provided as requested, the CMT Rate on the applicable CMT Interest Determination Date will be the CMT Rate in effect on the applicable CMT Interest Determination Date. If the CMT Reuters Page FEDCMT is specified above, the CMT Rate for such CMT Interest Determination Date will be a percentage equal to the one-week or one-month, as specified above, and will be the average yield for United States Treasury securities at “constant maturity” having the Index Maturity specified above, as the yield is displayed on Reuters, Inc. (or any successor service) on page FEDCMT (or any other page as may replace that specified page on that service) (“ Reuters Page FEDCMT ”), for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the related CMT Interest Determination Date falls. If the rate referred to in the preceding sentence does not appear on Reuters Page FEDCMT, then the CMT Rate for such CMT Interest Determination Date will be a percentage equal to the one-week or one-month, as specified above, average yield for United States Treasury securities at “constant maturity” having the Index Maturity specified above, and for the week or month, as applicable, preceding the applicable CMT Interest Determination Date as published in H.15(519) opposite the caption “Treasury Constant Maturities.” If the rate referred to in the preceding sentence does not appear in H.15(519), then the CMT Rate for such CMT Interest Determination Date will be the one-week or one-month, as specified above, average yield for United States Treasury securities at “constant maturity” having the Index Maturity specified above, as otherwise announced by the Federal Reserve Bank of New York for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the related CMT Interest Determination Date falls. If the Federal Reserve Bank of New York does not publish the rate referred to above, the rate on the applicable CMT Interest Determination Date will be calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 p.m., New York City time, on the applicable CMT Interest Determination Date of three Reference Dealers selected by the Calculation Agent (from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation (or, in the event of equality, one of the highest), and the lowest quotation (or, in the event of equality, one of the lowest)), for United States Treasury securities with an original maturity equal to the Index Maturity specified above, and a remaining term to maturity no more

than one year shorter than the Index Maturity specified above, and in a principal amount that is representative for a single transaction in the securities in the market at that time. If fewer than five but more than two of the prices referred to above are provided as requested, the rate on the applicable CMT Interest Determination Date will be calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained, and neither the highest nor the lowest of the quotations shall be eliminated. If fewer than three prices referred to above are provided as requested, the rate on the applicable CMT Interest Determination Date will be calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 p.m., New York City time, on the applicable CMT Interest Determination Date of three Reference Dealers selected by the Calculation Agent (from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation or (in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest)), for United States Treasury securities with an original maturity greater than the Index Maturity specified above, and a remaining term to maturity closest to the Index Maturity specified above and will be in a principal amount that is representative for a single transaction in the securities in the market at that time. If fewer than five but more than two prices referred to above are provided as requested, the rate will be calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained, and neither the highest nor the lowest of the quotations will be eliminated, or if fewer than three prices referred to above are provided as requested, the CMT Rate will be the CMT Rate in effect on the applicable CMT Interest Determination Date. If two United States Treasury securities with an original maturity greater than the Index Maturity as specified above have remaining terms to maturity equally close to the Index Maturity specified above, the quotes for the United States Treasury security with the shorter original remaining term to maturity will be used.

Determination of Commercial Paper Rate . If the Interest Rate Basis, as specified above, is, or is calculated by reference to, the Commercial Paper Rate, unless otherwise specified above, the “Commercial Paper Rate” for each Interest Reset Date will be determined by the Calculation Agent as of the second Business Day prior to such Interest Reset Date (a “ Commercial Paper Interest Determination Date ”) and shall be the Money Market Yield (as defined below) on such date of the rate for commercial paper having the Index Maturity as indicated above, as such rate shall be published in H.15(519) under the caption “Commercial Paper-Nonfinancial.” In the event that such rate is not published prior to 3:00 p.m., New York City time, on the applicable Calculation Date, then the Commercial Paper Rate shall be calculated by the Calculation Agent as the Money Market Yield of the Commercial Paper Rate on the applicable Commercial Paper Interest Determination Date for commercial paper having the Index Maturity specified above, published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Commercial Paper-Nonfinancial.” If by 3:00 p.m., New York City time, on the applicable Calculation Date, such rate is not yet published as provided in the preceding sentence, then the Commercial Paper Rate on the applicable Commercial Paper Interest Determination Date shall be calculated by the Calculation Agent as the Money Market Yield of the arithmetic mean of the offered rates at approximately 11:00 a.m., New York City time, on the applicable Commercial Paper Interest Determination Date of three leading dealers of United States dollar commercial paper in the City of New York, which may include an agent of the Company or such agent’s

affiliates, selected by the Calculation Agent for commercial paper having the Index Maturity specified above, placed for industrial issuers whose bond rating is “Aa,” or the equivalent, from a nationally recognized statistical rating organization; provided , however , that if the dealers selected as aforesaid by the Calculation Agent are not quoting offered rates as mentioned in this sentence, the Commercial Paper Rate will be the Commercial Paper Rate in effect on the applicable Commercial Paper Interest Determination Date.

“ Money Market Yield ” shall be a yield calculated in accordance with the following formula and expressed as a percentage:



Money market yield =	D × 360	× 100
	360 - (D × M)

where “D” refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal; and “M” refers to the actual number of days in the interest period for which interest is being calculated.

Determination of Federal Funds Rate . If the Interest Rate Basis, as specified above, is, or is calculated by reference to the Federal Funds Rate, unless otherwise specified above, the “Federal Funds Rate” with respect to each Interest Reset Date will be determined by the Calculation Agent as of the first Business Day prior to such Interest Reset Date (a “ Federal Funds Interest Determination Date ”) and shall be the rate on that date for United States dollar Federal Funds as published in H.15(519) under the heading “Federal Funds (Effective),” as displayed on Reuters, Inc. (or any successor service) on page FEDFUND01 (or any other page as may replace the applicable page on that service) (“ Reuters Page FEDFUND01 ”) or, if such rate does not appear on Reuters Page FEDFUND01, or is not so published by 3:00 p.m., New York City time, on the applicable Calculation Date, the rate on the applicable Federal Funds Interest Determination Date for United States dollar Federal Funds will be the rate on such Federal Funds Interest Determination Date as published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Federal Funds (Effective).” If such rate is not so published by 3:00 p.m., New York City time, on the applicable Calculation Date, the Federal Funds Rate will be calculated by the Calculation Agent and will be the arithmetic mean of the rates for the last transaction in overnight United States dollar Federal Funds arranged by three leading brokers of United States dollar Federal Funds transactions in the City of New York, which may include an agent of the Company or such agent’s affiliates, selected by the Calculation Agent before 9:00 a.m., New York City time, on the applicable Federal Funds Interest Determination Date; provided , however , that if the brokers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Federal Funds Rate will be the Federal Funds Rate in effect on the applicable Federal Funds Interest Determination Date.

Determination of LIBOR . If the Interest Rate Basis, as specified above, is, or is calculated by reference to, LIBOR, unless otherwise specified above, “LIBOR” for each Interest Reset Date will be determined by the Calculation Agent as of the second London Banking Day prior to such Interest Reset Date (a “ LIBOR Interest Determination Date ”) and shall be the rate

(express as a percentage per annum) for deposits in U.S. dollars having a three-month maturity that appears on Reuters LIBOR01 at approximately 11:00 a.m., London time, on the applicable LIBOR Interest Determination Date, or if Reuters LIBOR01 is not available on such date, the Calculation Agent will obtain such rate from Bloomberg’s page “BBAM.” If such rate does not appear on Reuters LIBOR01 or Bloomberg’s page “BBAM” on such LIBOR Interest Determination Date at approximately 11:00 a.m., London time, then the Calculation Agent will request the principal London office of each of four major banks in the London interbank market, as selected by the Calculation Agent, to provide a quotation of the rate (expressed as a percentage per annum) offered by it to prime banks in the London interbank market for three‑month deposits in U.S. dollars in a principal amount of at least $1,000,000 at approximately 11:00 a.m., London time, on such LIBOR Interest Determination Date. If at least two such offered quotations are so provided, LIBOR determined on the applicable LIBOR Interest Determination Date calculated by the Calculation Agent will be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, the Calculation Agent will request each of three major banks in New York City, as selected by the Calculation Agent, to provide a quotation of the rate (expressed as a percentage per annum), offered by it for loans in U.S. dollars to leading European banks having a three‑month maturity in a principal amount of at least $1,000,000 at approximately 11:00 a.m., New York City time, on such LIBOR Interest Determination Date. If at least two such rates are so provided, LIBOR determined on the applicable LIBOR Interest Determination Date calculated by the Calculation Agent will be the arithmetic mean of such rates. If fewer than two such rates are so provided, then LIBOR determined on the applicable LIBOR Interest Determination Date calculated by the Calculation Agent will be the rate in effect on the applicable LIBOR Interest Determination Date.

“ Reuters LIBOR01 ” means the Capital Markets Report Screen LIBOR01 of Reuters, Inc. (or any successor service or page), for the purpose of displaying the London interbank rates of major banks for U.S. dollars.

Determination of Prime Rate . If the Interest Rate Basis, as specified above, is, or is calculated by reference to, the Prime Rate, unless otherwise specified above, the “Prime Rate” with respect to each Interest Reset Date will be determined by the Calculation Agent as of the first Business Day prior to such Interest Reset Date (a “ Prime Interest Determination Date ”) and shall be the rate set forth on such date as published in H.15(519) under the caption “Bank Prime Loan,” or if not so published prior to 3:00 p.m., New York City time, on the applicable Calculation Date pertaining to such Prime Interest Determination Date, then the Prime Rate. will be as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate under the caption “Bank Prime Loan,” or if not so published prior to 3:00 p.m., New York City time, on the applicable Calculation Date pertaining to such Prime Interest Determination Date, then the Prime Rate will be determined by the Calculation Agent as the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen US PRIME 1 Page (as defined below) as the particular bank’s prime rate or base lending rate as of 11:00 a.m., New York City time, on the applicable Prime Interest Determination Date. If fewer than four such rates are so published by 3:00 p.m., New York City time, on the applicable Calculation Date as shown on the Reuters Screen US PRIME 1 Page for the Prime Interest Determination Date, the Prime Rate will be determined by

the Calculation Agent as the arithmetic mean of the prime rates or base lending rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on the applicable Prime Interest Determination Date by three major banks, which may include an agent of the Company or such agent’s affiliates, in the City of New York selected by the Calculation Agent. However, if the banks selected by the Calculation Agent are not quoting as mentioned in the preceding sentence, the Prime Rate will be the Prime Rate in effect on the applicable Prime Interest Determination Date.

“ Reuters Screen US PRIME 1 Page ” means the display on the Reuter Money 3000 Service or any successor service on the “US PRIME 1 Page” or other page as may replace US PRIME 1 Page on that service for the purpose of displaying prime rates or base lending rates of major United States banks).

Determination of Treasury Rate . If the Interest Rate Basis, as specified above, is, or is calculated by reference to the Treasury Rate, unless otherwise specified above, the “Treasury Rate” for each Interest Reset Date will be the rate from the auction held on the applicable Interest Determination Date (the “ Auction ”) of direct obligations of the United States (“ Treasury Bills ”) having the Index Maturity, as specified above, as published under the caption “INVESTMENT RATE” on the display on Reuters, Inc. or any successor service on page USAUCTION 10 or any other page as may replace page USAUCTION 10 on that service (“ Reuters Page USAUCTION 10 ”) or page USAUCTION 11 on that service (“ Reuters Page USAUCTION 11 ”), or, if the rate is not so published by 3:00 p.m., New York City time, on the applicable Calculation Date pertaining to such Treasury Rate Determination Date (as defined below), the Bond Equivalent Yield of the rate for the applicable Treasury Bills as published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/Treasury Bills/Auction High,” or, if the rate is not so published by 3:00 p.m., New York City time, on the applicable Calculation Date pertaining to such Treasury Rate Determination Date, the Bond Equivalent Yield of the auction rate of the applicable Treasury Bills announced by the United States Department of the Treasury, or, if the rate is not announced by the United States Department of the Treasury, or if the Auction is not held, the Bond Equivalent Yield of the rate on the applicable Treasury Rate Determination Date of Treasury Bills having the Index Maturity specified above, published in H.15(519) under the caption “U.S. Government Securities/Treasury Bills/Secondary Market,” or, if the rate is not so published by 3:00 p.m., New York City time, on the applicable Calculation Date pertaining to such Treasury Rate Determination Date, the rate on the applicable Treasury Rate Determination Date of the applicable Treasury Bills as published in H.15 Daily Update, or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/Treasury Bills/Secondary Market.” In the event that the results of the auction of Treasury Bills having the applicable Index Maturity specified above are not published or reported, as provided above, by 3:00 p.m., New York City time, on the applicable Calculation Date or if no such auction is held on such Treasury Rate Determination Date, then the Treasury Rate on the applicable Treasury Rate Determination Date shall be calculated by the Calculation Agent and shall be the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 p.m., New York City time, on the applicable Treasury Rate Determination Date, of three primary United States government

securities dealers, which may include the agent or its affiliates, selected by the Calculation Agent, for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified above; provided , however , that if the dealers selected as aforesaid by the Calculation Agent are not quoting as mentioned in this sentence, the Treasury Rate will be the Treasury Rate in effect on the applicable Treasury Rate Determination Date.

The “ Treasury Rate Determination Date ” for any Interest Reset Date will be the day of the week in which such Interest Reset Date falls on which Treasury Bills would normally be auctioned. Treasury Bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except such auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Treasury Rate Determination Date pertaining to the Interest Reset Date occurring in the next succeeding week.

“ Bond Equivalent Yield ” means a yield calculated in accordance with the following formula and expressed as a percentage:



Bond Equivalent Yield =	D × N	× 100
	360 - (D × M)

where “D” refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis and expressed as a decimal; “N” refers to 365 or 366, as the case may be, and “M” refers to the actual number of days in the interest period for which interest is being calculated.

Provisions Applicable To Both Fixed Rate Notes And Floating Rate Notes:

The interest so payable on any Interest Payment Date will, subject to certain exceptions in the Indenture hereinafter referred to, be paid to the person in whose name this Note is registered at the close of business on the Regular Record Date (as defined below) immediately preceding such Interest Payment Date or, if the Interest Payment Date is the Maturity Date or the date of earlier redemption or repayment, to the person in whose name this Note is registered at the close of business on the Maturity Date or such earlier date of redemption or repayment; provided , however , that if the Original Issue Date is between a Regular Record Date and an Interest Payment Date or on an Interest Payment Date, interest for the period from and including the Original Issue Date to, but excluding, the Interest Payment Date relating to such Regular Record Date shall be paid on the next succeeding Interest Payment Date to the person in whose name this Note is registered on the close of business on the Regular Record Date preceding such Interest Payment Date. If this Note bears interest at a Fixed Rate, as specified above, unless otherwise specified above, the “ Regular Record Date ” with respect to any Interest Payment Date shall be the eleventh day of February and August, preceding such Interest Payment Date, whether or not such date shall be a Business Day. If this Note bears interest at a Floating Rate, as specified above, the “Regular Record Date” with respect to any Interest Payment Date shall be the fifteenth calendar day next preceding such Interest Payment Date, whether or not such date shall be a Business Day.

Payment of principal, premium, if any, and interest in respect of this Note due on the Maturity Date or any earlier redemption or repayment date will be made in immediately available funds upon presentation and surrender of this Note; provided , however , that if a Specified Currency is specified above and such payment is to be made in such Specified Currency in accordance with the provisions set forth below, such payment will be made by wire transfer of immediately available funds to an account with a bank designated by the Holder hereof at least 15 calendar days prior to the Maturity Date or such earlier redemption or repayment date, as the case may be, provided that such bank has appropriate facilities therefor and that this Note is presented and surrendered at the Place of Payment specified above in time for the Trustee to make such payment in such funds in accordance with its normal procedures. Payment of interest due on any Interest Payment Date, other than the Maturity Date or any earlier redemption or repayment date, will be made at the Place of Payment specified above.

Whenever in this Note or in the Indenture there is a reference, in any context, to the payment of the principal of, or interest, if any, on, or in respect of, the Notes, such payment shall be deemed to include the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect of such payment pursuant to the provisions hereof or thereof and express mention of the payment of Additional Amounts (if applicable) in any provision hereof or thereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made.

The Company is obligated to make payment of principal, premium, if any, and interest in respect of this Note in United States dollars or, if a Specified Currency is indicated above, in such Specified Currency (or, if such Specified Currency is not at the time of such payment legal tender for the payment of public and private debts of the country issuing such currency or, in the case of the Euro, in the member states of the European Union that have adopted the single currency in accordance with the Treaty Establishing the European Community, as amended by the Treaty on European Union, such other currency which is then such legal tender in such country or in the adopting member states of the European Union, as the case may be). If a Specified Currency is specified above, except as otherwise provided below, any such amounts so payable by the Company will be converted by a New York clearing house bank designated by the Company (the “ Exchange Rate Agent ”) into United States dollars for payment to the Holder of this Note.

If a Specified Currency is specified above, the Holder of this Note may elect to receive any amount payable hereunder in such Specified Currency. If the Holder of this Note shall not have duly made an election to receive all or a specified portion of any payment of principal, premium, if any, and/or interest in respect of this Note in such Specified Currency, any United States dollar amount to be received by the Holder of this Note will be based on the highest bid quotation in the City of New York received by the Exchange Rate Agent at approximately 11:00 a.m., New York City time, on the second Business Day preceding the applicable payment date from three recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange Rate Agent and approved by the Company for the purchase by the quoting dealer of the Specified Currency for United States dollars for settlement on such payment date in the aggregate amount of the Specified Currency payable to all Holders of Notes

scheduled to receive United States dollar payments and at which the applicable dealer commits to execute a contract. All currency exchange costs will be borne by the Holder of this Note by deductions from such payments. If three such bid quotations are not available, payments on this Note will be made in the Specified Currency.

If a Specified Currency is specified above, the Holder of this Note may elect to receive all or a specified portion of any payment of principal, premium, if any, and/or interest in respect of this Note in such Specified Currency by submitting a written request for such payment to the Trustee at the Place of Payment on or prior to the applicable Record Date or at least 15 calendar days prior to the Maturity Date (or any earlier redemption or repayment date), as the case may be. Such written request may be mailed or hand delivered or sent by facsimile transmission. The Holder of this Note may elect to receive all or a specified portion of all future payments in the Specified Currency in respect of such principal, premium, if any, and/or interest and need not file a separate election for each payment. Such election will remain in effect until revoked by written notice to the Trustee, but written notice of any such revocation must be received by the Trustee on or prior to the applicable Record Date or at least 15 calendar days prior to the Maturity Date (or any earlier redemption or repayment date), as the case may be.

If a Specified Currency is specified above and the Holder of this Note shall have duly made an election to receive all or a specified portion of any payment of principal, premium, if any, and/or interest in respect of this Note in such Specified Currency, but such Specified Currency is not available for such payment due to the imposition of exchange controls or other circumstances beyond the control of the Company, the Company will be entitled to satisfy its obligations to the Holder of this Note by making such payment in United States dollars on the basis of the Market Exchange Rate (as defined below) determined by the Exchange Rate Agent on the second Business Day prior to such payment date or, if such Market Exchange Rate is not then available, on the basis of the most recently available Market Exchange Rate on or before the date on which such payment is due. The “ Market Exchange Rate ” for the Specified Currency means the noon dollar buying rate in the City of New York for cable transfers of the Specified Currency as certified for customs purposes (or, if not so certified, as otherwise determined) by the Federal Reserve Bank of New York. Any payment made in United States dollars under such circumstances shall not constitute an Event of Default (as defined in the Indenture).

All determinations referred to above made by the Exchange Rate Agent shall be at its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and binding on the Holder of this Note.

In case an Event of Default (as defined in the Indenture) with respect to Notes of this series shall occur and be continuing, the principal amount (or, if the Note is an Original Issue Discount Note, such lesser portion of the principal amount as may be applicable) of the Notes of this series may be declared due and payable, and, with respect to certain Events of Default, shall automatically become due and payable, in each case in the manner and with the effect provided in the Indenture. If this Note is an Original Issue Discount Note, in the event of an acceleration of the Maturity Date hereof, the amount payable to the Holder of this Note upon such

acceleration will be determined by this Note but will be an amount less than the amount payable at the Maturity Date of this Note.

The Indenture permits, with certain exceptions as therein provided, the modification of the rights and obligations of the Company and the Guarantor and the rights of the Holders of the Securities (as defined in the Indenture) of each series to be affected by such modification under the Indenture at any time by the Company and the Guarantor with the consent of the holders of not less than a majority in aggregate principal amount of the Outstanding Securities (as defined in the Indenture) of each series to be affected by such modification. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Outstanding Securities of each series, on behalf of the Holders of all Securities of such series, to waive compliance by the Company and the Guarantor with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.

This Note is issuable only in registered form without coupons in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof or other Authorized Denomination specified above.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note may be registered in the Security Register of this series upon surrender of this Note for registration of transfer at the Place of Payment specified above, duly endorsed by or accompanied by, a written instrument of transfer in form satisfactory to the Company and the Trustee, duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon a new Note or Notes of this series of Authorized Denomination and for the same aggregate principal amount, with the Guarantee endorsed thereon, will be issued to the designated transferee or transferees.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Trustee, and any agent of the Company or the Trustee may treat the person in whose name this Note is registered in the Security Register as the owner of this Note for all purposes (other than for the determination of any Additional Amounts payable) and neither the Company nor the Trustee nor any such agent shall be affected by any notice to the contrary.

If so specified above, this Note will be redeemable at the Company’s option on the date or dates specified prior to the Maturity Date at a price or prices, each as specified above, together with accrued interest to the date of redemption. This Note will not be subject to any sinking fund. If so redeemable, the Company may redeem this Note either in whole or from time to time in part, upon not less than 30, nor more than 60, days’ notice before the date of redemption. If less than all of the Notes with like tenor and terms are to be redeemed, the Notes to be redeemed shall be selected by the Trustee by such method as the Trustee shall deem fair and appropriate.

This Note will be subject to redemption at the option of the Company, in whole or in part at any time prior to January 26, 2020, at a redemption price equal to the greater of (i) 100% of

the principal amount of this Note to be redeemed, and (ii) as determined by the Quotation Agent (as defined below), the sum of the present values of the remaining scheduled payments of principal and interest on this Note to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 10 basis points, and accrued interest on the principal amount redeemed to the date of redemption.

In addition, at any time on or after January 26, 2020, the Company may redeem this Note, in whole or in part, at the option of the Company, at a redemption price equal to 100% of the principal amount of this Note to be redeemed, plus accued and unpaid interest on such principal amount to the date of redemption.

If any redemption date falls on a day that is not a Business Day, the related payment of the redemption price and interest will be made on the next Business Day as if it were made on the date such payment was due, and no interest will accrue on the amounts so payable for the period from and after such date to the next Business Day.

“ Treasury Rate ” means, with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“ Comparable Treasury Issue ” means the U.S. Treasury security selected by the Quotation Agent as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes.

“ Comparable Treasury Price ” means, with respect to any redemption date, (i) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotations, or (ii) if fewer than five such Reference Treasury Dealer Quotations are obtained by the Quotation Agent, the average of all such quotations.

“ Quotation Agent ” means the Reference Treasury Dealer appointed by the Company.

“ Reference Treasury Dealer ” means (i) (1) each of Citigroup Global Markets Inc. and RBS Securities Inc. (and their respective successors), (2) one Primary Treasury Dealer (as defined herein) selected by U.S. Bancorp Investments, Inc. or its successor and (3) two other nationally recognized investment banking firms that are Primary Treasury Dealers specified from time to time by the Company; provided, however , that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in New York City (a “ Primary Treasury Dealer ”), the Company shall substitute therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by the Company.

“ Reference Treasury Dealer Quotations ” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal

amount) quoted in writing to the Quotation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such redemption date.

Notice of any redemption will be-mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to the Holder hereof at its address as such address shall appear in the Security Register of the Company. Unless the Company defaults in the payment of the redemption price on and after the redemption date, interest will cease to accrue on the principal amount of this Note called for redemption.

If an HDI Change of Control Triggering Event (as defined below) occurs, unless the Company has previously or concurrently mailed a redemption notice with respect to this Note as described above, the Company will be required to make an offer (the “ Change of Control Offer ”) to each Holder of the Notes to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that Holder’s Notes on the terms set forth herein. In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased to the date of repurchase (the “ Change of Control Payment ”).

Within 30 days following any HDI Change of Control Triggering Event or, at the Company’s option, prior to any HDI Change of Control (as defined below), but after public announcement by HDI of the transaction that constitutes, or would constitute upon consummation thereof, the HDI Change of Control, a notice will be mailed to Holders of the Notes describing the transaction that constitutes, or would constitute upon consummation thereof, the HDI Change of Control Triggering Event and offering to repurchase the Notes on the date specified in the notice. Such date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the “ Change of Control Payment Date ”). The notice will, if mailed prior to the date of consummation of the HDI Change of Control, state that the offer to purchase is conditioned on the HDI Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

If any Change of Control Payment Date falls on a day that is not a Business Day, the related payment of the Change of Control Payment will be made on the next Business Day as if it were made on the date such payment was due, and no interest will accrue on the amounts so payable for the period from and after such date to the next Business Day.

On the Change of Control Payment Date, the Company will, to the extent lawful, (i) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; (ii) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (iii) deliver or cause to be delivered to the Trustee the Notes properly accepted together with a Company Officers’ Certificate (as defined in the Indenture) stating the aggregate principal amount of Notes or portions of Notes being repurchased.

The Company will not be required to comply with the obligations relating to repurchasing the Notes if a third party instead satisfies them.

The Company will comply with the requirements of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and any other securities laws and regulations applicable to the repurchase of the Notes. To the extent that the provisions of any such securities laws or regulations conflict with the Change of Control Offer provisions of the Notes, the Company will comply with those securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control Offer provisions of the Notes by virtue of any such conflict.

If Holders of not less than 95% in aggregate principal amount of the Notes validly tender and do not withdraw such amount of the Notes in a Change of Control Offer, and the Company, or any third party making an offer to purchase the Notes in connection with an HDI Change of Control Triggering Event in lieu of the Company, purchase such amount of the Notes validly tendered and not withdrawn by such Holders, then the Company will have the right, upon notice described above, given not more than 30 days following the Change of Control Payment Date, to redeem all (but not less than all) of the aggregate principal amount of the Notes that remains outstanding following such purchase at a redemption price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record as of the close of business on the relevant Regular Record Date to receive interest on the applicable Interest Payment Date). If the redemption date falls on a day that is not a Business Day, the related payment of the redemption price and interest will be made on the next Business Day as if it were made on the date such payment was due, and no interest will accrue on the amounts so payable for the period from and after such date to the next Business Day.

For purposes of the Change of Control Offer provisions of the Notes, the following terms will be applicable:

“ Below Investment Grade Rating Event ” means the Notes are rated below an Investment Grade Rating by each of the Rating Agencies on any day within the 60-day period after the earlier of (1) the occurrence of an HDI Change of Control and (2) public notice of the intention of Harley-Davidson, Inc. (“ HDI ”) to effect an HDI Change of Control (which 60-day period will be extended so long as the rating of the Notes is under publicly announced consideration for a possible downgrade by any of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular HDI Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of HDI Change of Control Triggering Event hereunder) if any of the Rating Agencies making the reduction in rating to which this definition would otherwise apply does not announce or publicly confirm or inform the Trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable HDI Change of Control (whether or not the applicable HDI Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).

“ Continuing Director ” means, as of any date of determination, any member of the Board of Directors of HDI who (1) was a member of such Board of Directors on the date the Notes

were issued or (2) was nominated for election, elected or appointed to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination, election or appointment (either by a specific vote or by approval of the proxy statement of HDI in which such member was named as a nominee for election as a director).

“ Fitch ” means Fitch Inc.

“ HDI Change of Control ” means the occurrence of any of the following: (1) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), other than HDI or one of its subsidiaries, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Voting Stock of HDI or other Voting Stock into which the Voting Stock of HDI is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of shares; (2) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of HDI and the assets of the subsidiaries of HDI, taken as a whole, to one or more “persons” (as that term is defined in the Indenture), other than HDI or one of its subsidiaries; or (3) the first day on which a majority of the members of the Board of Directors of HDI are not Continuing Directors. Notwithstanding the foregoing, a transaction will not be deemed to be an HDI Change of Control if (1) HDI becomes a direct or indirect wholly-owned subsidiary of a holding company and (2)(A) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of the Voting Stock of HDI immediately prior to that transaction or (B) immediately following that transaction no “person” (as that term is used in Section 13(d)(3) of the Exchange Act) (other than a holding company satisfying the requirements of this sentence) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company.

“ HDI Change of Control Triggering Event ” means the occurrence of both an HDI Change of Control and a Below Investment Grade Rating Event.

“ Investment Grade Rating ” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s, BBB- (or the equivalent) by S&P and BBB- (or the equivalent) by Fitch, and the equivalent investment grade credit rating from any replacement Rating Agency or Rating Agencies selected by the Company.

“ Moody’s ” means Moody’s Investors Service, Inc.

“ Rating Agencies ” means (1) each of Moody’s, S&P and Fitch, and (2) if any of Moody’s, S&P or Fitch ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the Company’s control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act selected by the Company (as certified by a resolution of the Company’s Board of Directors) as a replacement agency for Moody’s, S&P or Fitch, as the case may be.

“ S&P ” means Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.

“ Voting Stock ” means, with respect to any specified “person” (as that term is used in Section 13(d)(3) of the Exchange Act), as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.

The Company may “reopen” a previously issued tranche of Notes and issue additional Notes of such tranche or establish additional terms of such tranche or issue notes with the same terms as previously issued Notes (except for the Original Issue Date, Issue Price and, if applicable, the initial Interest Payment Date).

The Company may at any time purchase this Note at any price in the open market or otherwise. Notes so purchased by the Company may be held or resold or, at the discretion of the Company, may be surrendered to the Trustee for cancellation.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligations of the Company and the Guarantor, which are absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note, at the times, place and rate, and in the coin or currency, herein and in the Indenture prescribed.

This Note shall be governed by and construed in accordance with the laws of the State of New York.

By acceptance of this Note, the Holder hereof agrees to be bound by the provisions of the Indenture. Terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee under the Indenture.

IN WITNESS WHEREOF , the Company has caused this instrument to be duly executed, manually or by facsimile by an authorized signatory.

HARLEY-DAVIDSON FINANCIAL SERVICES, INC.

By:
Name:
Title:

Dated:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated herein and referred to in the within-mentioned Indenture.

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee

By:
Authorized Signatory

GUARANTEE

For value received, undersigned hereby fully, irrevocably and unconditionally guarantees, pursuant to the terms of the Guarantee contained in Article Fourteen of the Indenture, to the Holder of this Note and to the Trustee, on behalf of the Holder, the due and punctual payment of the principal of, and any premium, interest and any Additional Amounts on, this Note, when and as the same shall become due and payable, whether at the stated maturity, by declaration of acceleration, call for redemption or otherwise, in accordance with the terms of this Note and the Indenture. This Guarantee will not be valid or obligatory for any purpose until the Trustee duly executes the certificate of authentication on the Note upon which this Guarantee is endorsed.



Dated:
	HARLEY-DAVIDSON CREDIT CORP.,
	a Nevada corporation

	By: Name: Title:


Attest:

By: Name: Title:

ABBREVIATIONS

The following abbreviations, when used in the inscription on this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:



TEN COM - as tenants in common	UNIF GIFT MIN ACT - _______ Custodian ______ (Cust) (Minor)
TEN ENT - as tenants by the entireties	under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right of survivorship and not as tenant in common	(State)

Additional abbreviations may also be used though not in the above list.

ASSIGNMENT

FOR VALUE RECEIVED , the undersigned hereby sells, assigns and transfers unto:

(Please insert social security or other identifying number of assignee)

(Name and address of assignee, including zip code,
must be printed or typewritten)

the within Note, and all rights thereunder, hereby irrevocably constituting and appointing ___________________________________________ attorney to transfer said Note on the books of the within Company, with full power of substitution in the premises.



Dated:

	NOTICE: The signature to this assignment must correspond with the name as it appears upon the within Note in every particular, without alteration or enlargement or any change whatever and must be guaranteed.

SIGNATURE(S) GUARANTEED:

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO SEC RULE 17Ad-15.

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The following increases or decreases in this Global Note have been made



Date of Exchange	Amount of increase in Principal Amount of this Global Note	Amount of decrease in Principal Amount of this Global Note	Principal Amount of this Global Note following each decrease or increase	Signature of authorized signatory of Trustee

EXECUTION COPY

AMENDMENT NO. 2 TO 5-YEAR CREDIT AGREEMENT

Dated as of April 7, 2014

5-YEAR CREDIT AGREEMENT

Dated as of April 13, 2012

THIS AMENDMENT NO. 2 TO 5-YEAR CREDIT AGREEMENT (this “ Amendment ”) is made as of April 7, 2014 (the “ Effective Date ”) by and among Harley-Davidson, Inc., a Wisconsin corporation, Harley-Davidson Financial Services, Inc., a Delaware corporation and Harley-Davidson Financial Services Canada, Inc., a corporation organized under the laws of Canada (collectively, the “ Borrowers ”), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as Global Administrative Agent (the “ Administrative Agent ”), under that certain 5-Year Credit Agreement dated as of April 13, 2012 by and among the Borrowers, the Guarantors party thereto, the Lenders and the Administrative Agent (as amended prior to the date hereof, the “ Credit Agreement ”). Capitalized definitional terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrowers have requested that certain modifications be made to the Credit Agreement; and

WHEREAS, the Borrowers, the Lenders party hereto and the Administrative Agent have agreed to amend the Credit Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders party hereto and the Administrative Agent hereby agree to the following amendment to the Credit Agreement.

1. Amendments to Credit Agreement . Effective as of the Effective Date but subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows:

(a) The recitals to the Credit Agreement are amended to delete the reference to “Harley Davidson Funding Corp., a Nevada corporation,” appearing therein.

(b) Section 1.1 of the Credit Agreement is amended to (i) delete therefrom the definitions of “Consolidated EBITDA”, “Consolidated Interest Expense”, “HDFC”, “Interest Coverage Ratio” and “Mandatory Cost” appearing therein and (ii) add the following new definitions therein in the appropriate alphabetical order and, where applicable, replace the corresponding previously existing definitions:

“ Agent Party ” has the meaning assigned to such term in Section 14.1(c) .

“ Amendment No. 2 Effective Date ” means April 7, 2014.

“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to any Company or its Subsidiaries from time to time concerning or relating to bribery or corruption.

“ Board ” means the Board of Governors of the Federal Reserve System of the United States of America.

“ COF Rate ” has the meaning assigned to such term in Section 3.3(a) .

“ Communications ” has the meaning assigned to such term in Section 14.1(c) .

“ Consolidated Opco Debt ” is defined in Section 6.3(A) hereof.

“ Electronic Signature ” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

“ Electronic System ” means any electronic system, including e-mail, e-fax, Intralinks ^®, ClearPar ^® and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Global Administrative Agent and any of its Affiliates, and each of such Person’s respective officers, directors, employees, attorneys and agents, providing for access to data protected by passcodes or other security system.

“ FATCA ” means Sections 1471 through 1474 of the Code, as of the Amendment No. 2 Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

“ Finco ” means HDFS and HDCC.

“ Impacted Interest Period ” has the meaning assigned to such term in the definition of “LIBOR”.

“ Interpolated Rate ” means, at any time, the rate per annum determined by the Global Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBOR Screen Rate for the longest period (for which the LIBOR Screen Rate is available for the applicable currency) that is shorter than the Impacted Interest Period and (b) the LIBOR Screen Rate for the shortest period (for which the LIBOR Screen Rate is available for the applicable currency) that exceeds the Impacted Interest Period, in each case, at such time.

“ LIBOR ” means, for any Eurocurrency Rate Loan denominated in any Applicable Agreed Currency or U.K. Swing Line Currency and for any applicable Interest Period, the London interbank offered rate administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) appearing on the applicable LIBOR Reference Page for such Agreed Currency or U.K. Swing Line Currency as of the applicable LIBOR Fixing Time and, in each case, having a maturity approximately equal to the requested Interest Period (in each case the “ LIBOR Screen Rate ”); provided that, if the LIBOR Screen Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement. Notwithstanding the foregoing, (A) if a LIBOR Screen Rate shall not be available at such time for such Interest Period (the “ Impacted Interest

Period ”), then LIBOR for such currency and such Interest Period shall be the Interpolated Rate and (B) if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement. It is understood and agreed that all of the terms and conditions of this definition of “LIBOR” shall be subject to Section 3.3.

“ LIBOR Fixing Time ” means the relevant currency fixing date and/or time described in Schedule I and Schedule II ; provided that, with respect to any Eurocurrency Rate Loan denominated in any Applicable Agreed Currency or U.K. Swing Line Currency, in the event market practice differs in the relevant market where LIBOR for such currency is to be determined, the LIBOR Fixing Time will be determined by the Global Administrative Agent in accordance with market practice in such market (and if quotations would normally be given on more than one day, then the LIBOR Fixing Time will be the last of those days)).

“ LIBOR Reference Page ” means, with respect to any London interbank offered rate administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for any Applicable Agreed Currency or U.K. Swing Line Currency, pages LIBOR01 or LIBOR02 of the Reuters screen or, in the event such rate does not appear on either of such Reuters pages, any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate as shall be selected by the Global Administrative Agent from time to time in its reasonable discretion (and consistent with any such selection by the Global Administrative Agent generally under substantially similar credit facilities for which it acts as administrative agent) at approximately 11:00 a.m., London time, at the LIBOR Fixing Time for such currency and Interest Period.

“ LIBOR Screen Rate ” has the meaning assigned to such term in the definition of “LIBOR”.

“ OFAC ” means the Office of Foreign Assets Control of the U.S. Department of Treasury.

“ Permitted Liens ” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 6.1.2 hereof; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, landlords’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that are either (i) not overdue for a period of more than forty-five (45) days or (ii) being contested in good faith and by proper actions and as to which appropriate reserves are being maintained; (c) pledges or deposits to secure obligations under workers’ compensation laws, unemployment insurance or similar legislation or to secure public or statutory obligations and/or securing liability for reimbursement or indemnification obligations to insurance carriers providing property, casualty or liability insurance to one or more of the Companies and/or the Material Subsidiaries; (d)(i) easements, rights of way and other encumbrances on title to real Property, (ii) zoning, building, entitlement and other land use regulations and (iii) any zoning or similar law, rule, regulation or requirement or right reserved to, or vested in, any Governmental Authority to control or regulate the use of any real property, in each of the foregoing cases that does not render title to the Property encumbered thereby unmarketable or materially adversely affect the use of such Property for its present purposes; (e) Liens of attachment or judgment with respect to judgments, writs or warrants of attachment, or similar process against any of the Companies or any of their Subsidiaries which do not constitute a Default under Section 7.1(f) ; (f) Liens arising from leases, subleases, licenses or sublicenses granted to others which do not interfere in any material respect with the business of the Companies or any of their Subsidiaries; (g) any interest or title of the lessor

in the Property subject to any operating lease entered into by any of the Companies or any of their Subsidiaries in the ordinary course of business; (h) Liens in respect of an agreement to dispose of any asset, to the extent such disposal is permitted by this Agreement; (i) Liens arising under any retention of title arrangements entered into in the ordinary course of business or over goods or documents of title to goods arising in the ordinary course of documentary credit transactions; (j) Liens arising due to any cash pooling, netting or composite account arrangements between any one or more of the Borrowers and any of their Subsidiaries or between any one or more of such entities and one or more banks or other financial institutions where any such entity maintains deposits; (k) customary rights of set off, revocation, refund or chargeback or similar rights under deposit disbursement, concentration account agreements or under the UCC (or comparable foreign law) or arising by operation of law of banks or other financial institutions where any Borrower or any of its Subsidiaries maintains deposit, disbursement or concentration accounts in the ordinary course of business; (l) any Lien that may from time to time be created under any Loan Document; (m) any Lien on any landlord’s estate or interest in any property that is leased by any Company or Material Subsidiary; (n) Liens securing the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases and statutory obligations, Contingent Obligations in connection with surety bonds, appeal bonds and similar instruments and other non-delinquent obligations of a like nature, in each case incurred in the ordinary course of business; (o) Liens securing reimbursement obligations incurred in the ordinary course of business for letters of credit or banker’s acceptances, which Liens encumber only goods, or documents of title covering goods, which are purchased in transactions for which such letters of credit or banker’s acceptances are issued; and (p) contractual rights of set-off and similar rights securing Hedging Obligations.

“ Reference Bank Rate ” means the arithmetic mean of the rates (rounded upwards to four decimal places) supplied to the Global Administrative Agent at its request by the Reference Banks (as the case may be) as of the applicable time on the LIBOR Fixing Time for Loans in the applicable currency and the applicable Interest Period as the rate at which the relevant Reference Bank could borrow funds in the London (or other applicable) interbank market in the relevant currency and for the relevant period, were it to do so by asking for and then accepting interbank offers in reasonable market size in that currency and for that period.

“ Reference Banks ” means the principal London (or other applicable) offices of JPMorgan Chase Bank, N.A. and such other banks as may be appointed by the Global Administrative Agent in consultation with Harley and as agreed to by such bank, in a manner consistent with that applied by the Administrative Agent generally to substantially similar credit facilities for which it acts as administrative agent.

“ Reserve Requirement ” means, with respect to an Interest Period, the maximum aggregate reserve, liquid asset, fees or similar requirements (including any marginal, special, emergency or supplemental reserves or other requirements) established by any central bank, monetary authority, the Board, the Financial Conduct Authority, the Prudential Regulation Authority, the European Central Bank or other Governmental Authority for any category of deposits or liabilities customarily used to fund loans in such currency, expressed in the case of each such requirement as a decimal. Such reserve, liquid asset, fees or similar requirements shall include those imposed pursuant to Regulation D of the Board. Eurocurrency Rate Loans shall be deemed to be subject to such reserve, liquid asset, fee or similar requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under any applicable law, rule or regulation, including Regulation D of the Board. The Reserve Requirement shall be adjusted automatically on and as of the effective date of any change in any reserve, liquid asset or similar

requirement, and the Global Administrative Agent shall notify Harley promptly of any such adjustment.

“ Sanctioned Country ” means, at any time, a country or territory which is the subject of any Sanctions.

“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.

“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

“ TARGET Settlement Day ” means any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) payment system (or, if such payment system ceases to be operative, such other payment system (if any) reasonably determined by the Global Administrative Agent to be a suitable replacement) is open for the settlement of payments in euro.

“ Termination Date ” means the earlier of (a) April 13, 2017 (subject to extension (in the case of each Lender consenting thereto) as provided in Section 2.21 ) and (b) the date of termination of the Commitments pursuant to Section 2.4 or Section 8.1 .

(c) The definition of “Agreement Accounting Principles” appearing in Section 1.1 of the Credit Agreement is amended to delete the reference to “December 31, 2011” appearing therein and replace such reference with “December 31, 2013”.

(d) The definition of “Alternate Base Rate” appearing in Section 1.1 of the Credit Agreement is amended to (i) delete the parenthetical “(rounded upwards, if necessary, to the next 1/16 of 1%)” appearing therein and (ii) add the phrase “in Dollars” immediately after the phrase “the Eurocurrency Rate for a one month Interest Period” appearing in clause (c) thereof.

(e) The definition of “Capitalized Lease Obligations” appearing in Section 1.1 of the Credit Agreement is amended to delete the reference to “the date of this Agreement” appearing therein and replace such reference with “the Amendment No. 2 Effective Date”.

(f) The definition of “Change of Control” appearing in Section 1.1 of the Credit Agreement is amended to (i) delete the comma appearing immediately before clause (iii) thereof and replace such comma with the word “or”, (ii) delete clause (iii) thereof in its entirety and (iii) change clause (iv) thereof to new clause (iii) thereof.

(g) The definition of “Eurocurrency Rate” appearing in Section 1.1 of the Credit Agreement is amended to delete the phrase “, plus (iii) in the case of Loans and Advances by a Lender from its office or branch in England or any Participating Member State, the Mandatory Cost” appearing at the end thereof.

(h) The definition of “Existing Credit Agreement” appearing in Section 1.1 of the Credit Agreement is amended to delete the reference to “HDFC,” appearing therein.

(i) The definition of “Governmental Authority” appearing in Section 1.1 of the Credit Agreement is amended to add the words “(including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing)” at the end thereof.

(j) The definition of “Guarantor” appearing in Section 1.1 of the Credit Agreement is amended to delete the phrase “each of HDFC and” appearing therein.

(k) The definition of “Indebtedness” appearing in Section 1.1 of the Credit Agreement is amended to add the parenthetical “(other than obligations in respect of (x) trade letters of credit and (y) standby letters of credit (excluding any standby letter of credit (1) supporting Indebtedness of any Person or (2) obtained for any purpose not in the ordinary course of business))” immediately after the phrase “letters of credit” appearing in clause (i)(b) thereof.

(l) The definition of “Indebtedness” appearing in Section 1.1 of the Credit Agreement is further amended to add the phrase “in respect of Indebtedness” immediately after the phrase “Contingent Obligations” appearing in clause (ii)(d) thereof.

(m) The definition of “Indebtedness” appearing in Section 1.1 of the Credit Agreement is further amended to restate clause (i) of the second sentence thereof in its entirety as follows:

(i) the outstanding balance at such date of all uncontingent obligations as described above and the liability with respect to any such Contingent Obligations at such date as calculated in accordance with the definition of “Contingent Obligation” and

(n) The definition of “Indebtedness” appearing in Section 1.1 of the Credit Agreement is further amended to (1) delete the reference to “defeased” appearing in clause (v) of the penultimate sentence thereof and replace such reference with “defeased and/or discharged” and (ii) delete the reference to “defeasance” appearing in clause (v) of the penultimate sentence thereof and replace such reference with “defeasance and/or discharge”.

(o) The definition of “Material Adverse Effect” appearing in Section 1.1 of the Credit Agreement is amended to (i) add the phrase “against the Companies” (A) immediately after the phrase “the validity or enforceability” and (B) immediately after the phrase “the rights or remedies of the Global Administrative Agent and the Lenders”, in each case, appearing in clause (b) thereof and (ii) delete the reference to “Closing Date” appearing therein and replace such reference with “Amendment No. 2 Effective Date”.

(p) The definition of “Support Agreement” appearing in Section 1.1 of the Credit Agreement is amended to (i) delete the reference to “April 28, 2011” appearing therein and replace such reference with “April 13, 2012” and (ii) delete the reference to “April 13, 2012” appearing therein and replace such reference with “April 7, 2014”.

(q) The definitions of “U.S. Borrower” and “U.S. Borrowers” appearing in Section 1.1 of the Credit Agreement are amended to delete each reference to “, HDFC” appearing therein.

(r) Clause (A) of Section 2.3 of the Credit Agreement is amended to add the following sentence to the end thereof:

Any notice of optional prepayment of the Loans delivered by Harley pursuant to this Section may state that such notice is conditioned upon the effectiveness of other credit facilities or other transactions specified therein, in which case such notice may be revoked by Harley (by notice to the Global Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.

(s) Clause (a) of Section 2.4 of the Credit Agreement is amended to add the following sentence to the end thereof:

Any notice delivered by Harley pursuant to this Section 2.4(a) may state that such notice is conditioned upon the effectiveness of other credit facilities or other transactions specified therein, in which case such notice may be revoked by Harley (by notice to the Global Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.

(t) Clause (b)(i) of Section 2.6 of the Credit Agreement is amended to (i) delete therefrom the definition of “Relevant Loan” appearing therein and (ii) add the following new definition therein in the appropriate alphabetical order:

“ Split Rating ” has the meaning set forth in Section 2.6(b)(iii) .

(u) Clause (b)(i) of Section 2.6 of the Credit Agreement is further amended to delete the phrase “the following terms shall have the following meanings” appearing therein and replace such phrase with the phrase “the following terms shall have the following meanings, subject, in the case of a Split Rating, to Section 2.6(b)(iii) below”.

(v) Clause (b)(i) of Section 2.6 is further amended to (i) add the word “(“ Fitch ”)” immediately after the reference to “Fitch Ratings” appearing in the definition of “Fitch Rating” thereof and (ii) add the words “or, solely in the event such Applicable Finco does not maintain such rating, the rating issued by Fitch and then in effect with respect to such Applicable Finco’s issuer default rating” at the end of the definition of “Fitch Rating” thereof.

(w) Clause (b)(i) of Section 2.6 of the Credit Agreement is further amended to (i) add the word “(“ Moody’s ”)” immediately after the reference to “Moody’s Investors Service, Inc.” appearing in the definition of “Moody’s Rating” thereof and (ii) add the words “or, solely in the event such Applicable Finco does not maintain such rating, the rating issued by Moody’s and then in effect with respect to such Applicable Finco’s issuer rating” at the end of the definition of “Moody’s Rating” thereof.

(x) Clause (b)(i) of Section 2.6 of the Credit Agreement is further amended to (i) delete the reference to “Standard and Poor’s Rating Services, a division of The McGraw Hill Companies, Inc.” appearing in the definition of “S&P Rating” thereof and replace such reference with “Standard and Poor’s Ratings Group, a subsidiary of The McGraw Hill Companies, Inc. (“ S&P ”)” and (ii) add the words “or, solely in the event such Applicable Finco does not maintain such rating, the rating issued by S&P and then in effect with respect to such Applicable Finco’s implied corporate credit rating” at the end of the definition of “S&P Rating” thereof.

(y) Clause (b)(ii) of Section 2.6 of the Credit Agreement is amended and restated in its entirety to read as follows:

(ii) Determination of Applicable Margin and Applicable Commitment Fee Rate . The Applicable Commitment Fee Rate payable under Section 2.14(C) shall be determined by reference

to the table set forth in clause (i) above on the basis of the Status as determined from Harley’s then-current Moody’s Rating, S&P Rating and Fitch Rating. The Applicable Margin in respect of any Loan shall be determined by reference to the table set forth in clause (i) above on the basis of the Status as determined from (a) Harley’s then-current Moody’s Rating, S&P Rating and Fitch Rating, in the case of Loans made to Harley and (b) the Applicable Finco’s then-current Moody’s Rating, S&P Rating and Fitch Rating, in the case of Loans made to any Borrower other than Harley. The rating in effect on any date for the purposes of this Section is that in effect at the close of business on such date (it being understood and agreed that any change in such rating shall be effective as of the date on which such change is first announced publicly by the rating agency making such change). Except under the circumstances described in clause (iv) below, if at any time Harley has no Moody’s Rating, no S&P Rating and no Fitch Rating (a “ Harley Ratings Failure ”), Level V Status shall exist with respect to Loans to Harley and with respect to the Applicable Commitment Fee Rate. Except under the circumstances described in clause (iv) below, if at any time each Finco has no Moody’s Rating, no S&P Rating and no Fitch Rating, the Status then applicable to Harley shall apply with respect to Loans to any Borrower other than Harley; provided that if a Harley Ratings Failure shall then be in effect, Level V Status shall exist with respect to Loans to any Borrower other than Harley. If any rating agency shall change the basis on which ratings are established, each reference to Moody’s Rating, S&P Rating or Fitch Rating shall refer to the then equivalent rating by the applicable rating agency.

(z) (i) Clause (b)(iii) of Section 2.6 of the Credit Agreement is redesignated as clause (b)(iv) of Section 2.6 of the Credit Agreement and (ii) Section 2.6 of the Credit Agreement is amended to add the following as a new clause (b)(iii) thereof:

(iii) Notwithstanding the foregoing, (a) if Harley or the Applicable Finco, as applicable, is split-rated by all three rating agencies (i.e., the ratings issued by the rating agencies are at three different levels), then the intermediate level will apply, and (b) in the event that Harley or the Applicable Finco, as applicable, shall maintain ratings from only two rating agencies and they are split-rated and (x) the ratings differential is one level, then the higher level will apply and (y) the ratings differential is two levels or more, then the level next below that of the higher of the levels will apply (any of the foregoing circumstances described in this clause (iii), a “ Split Rating ”).

(aa) Article II of the Credit Agreement is amended to add the following as a new Section 2.21 thereof:

2.21 Extension of Termination Date .

(A) Requests for Extension . Harley may, by notice to the Global Administrative Agent (who shall promptly notify the Lenders) not earlier than 60 days and not later than 30 days prior to each anniversary of the date of this Agreement (each such date, an “ Extension Date ”), request that each Lender extend such Lender’s Termination Date to the date that is one year after the Termination Date then in effect for such Lender (the “ Existing Termination Date ”).

(B) Lender Elections to Extend . Each Lender, acting in its sole and individual discretion, shall, by notice to the Global Administrative Agent given not later than the date that is 15 days after the date on which the Global Administrative Agent received Harley’s extension request (the “ Lender Notice Date ”), advise the Global Administrative Agent whether or not such Lender agrees to such extension (each Lender that determines to so extend its Termination Date, an “ Extending Lender ”). Each Lender that determines not to so extend its Termination Date (a “ Non-Extending Lender ”)

shall notify the Global Administrative Agent of such fact promptly after such determination (but in any event no later than the Lender Notice Date), and any Lender that does not so advise the Global Administrative Agent on or before the Lender Notice Date shall be deemed to be a Non-Extending Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree, and it is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by Harley for extension of the Termination Date.

(C) Notification by Global Administrative Agent . The Global Administrative Agent shall notify Harley of each Lender’s determination under this Section no later than the third Business Day after the Lender Notice Date.

(D) Additional Commitment Lenders . Harley shall have the right, but shall not be obligated, on or before the applicable Termination Date for any Non-Extending Lender to replace such Non-Extending Lender with, and add as “Lenders” under this Agreement in place thereof, one or more financial institutions (which, for the avoidance of doubt, may be existing Lenders) (each, an “ Additional Commitment Lender ”) approved by the Global Administrative Agent in accordance with the procedures provided in Section 3.8 , each of which Additional Commitment Lenders shall have entered into an Assignment and Assumption (in accordance with and subject to the restrictions contained in Section 13.3 , with Harley or the replacement Lender obligated to pay any applicable processing or recordation fee) with such Non-Extending Lender, pursuant to which such Additional Commitment Lenders shall, effective on or before the applicable Termination Date for such Non-Extending Lender, assume a Commitment (and, if any such Additional Commitment Lender is already a Lender, its Commitment shall be in addition to such Lender’s Commitment hereunder on such date). The Global Administrative Agent may effect such amendments to this Agreement as are reasonably necessary to provide for any such extensions with the consent of Harley but without the consent of any other Lenders.

(E) Minimum Extension Requirement . If (and only if) the total of the Commitments of the Lenders (other than any Defaulting Lenders) that have agreed to extend their Termination Date and the new or increased Commitments of any Additional Commitment Lenders is more than 50% of the aggregate amount of the Commitments in effect immediately prior to the applicable Extension Date, then, effective as of the applicable Extension Date, the Termination Date of each Extending Lender and of each Additional Commitment Lender shall be extended to the date that is one year after the Existing Termination Date (except that, if such date is not a Business Day, such Termination Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall thereupon become a “Lender” for all purposes of this Agreement and shall be bound by the provisions of this Agreement as a Lender hereunder and shall have the obligations of a Lender hereunder.

(F) Conditions to Effectiveness of Extension . Notwithstanding the foregoing, (x) no more than two (2) extensions of the Termination Date shall be permitted hereunder and (y) any extension of any Termination Date pursuant to this Section 2.21 shall not be effective with respect to any Extending Lender unless:

(1) no Default or Unmatured Default shall have occurred and be continuing on the applicable Extension Date and immediately after giving effect thereto;

(2) the representations and warranties of Harley set forth in this Agreement are true and correct in all material respects (or in all respects if the applicable representation or warranty

is qualified by Material Adverse Effect or materiality) on and as of the applicable Extension Date and after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and

(3) the Global Administrative Agent shall have received a certificate from Harley signed by an Authorized Officer of Harley (A) certifying the accuracy of the foregoing clauses (1) and (2) and (B) certifying and attaching the resolutions adopted by each Borrower approving or consenting to such extension.

(G) Termination Date for Non-Extending Lenders . On the Termination Date of each Non-Extending Lender, (i) the Commitment of each Non-Extending Lender shall automatically terminate and (ii) Harley shall repay such Non-Extending Lender in accordance with Section 2.1 (and shall pay to such Non-Extending Lender all of the other Obligations owing to it under this Agreement) and after giving effect thereto shall prepay any Loans outstanding on such date (and pay any additional amounts required pursuant to Section 3.4 ) to the extent necessary to keep outstanding Loans ratable with any revised Pro Rata Shares of the respective Lenders effective as of such date, and the Global Administrative Agent shall administer any necessary reallocation of the Outstanding Credit Exposures (without regard to any minimum borrowing, pro rata borrowing and/or pro rata payment requirements contained elsewhere in this Agreement).

(H) Conflicting Provisions . This Section shall supersede any provisions in Section 8.3 or Section 11.2 to the contrary.

(bb) Section 3.1 of the Credit Agreement is amended to (i) add the phrase “, but excluding those that are merely proposed and not in effect” to the end of the first parenthetical therein, (ii) add the parenthetical “(or with respect to any Lender, if later, the date on which such Lender becomes a Lender)” (x) immediately after the phrase “adopted after the date of this Agreement” appearing therein and (y) immediately after the phrase “regulations or guidelines passed prior to the date of this Agreement” appearing therein, (iii) add the phrase “except to the extent they are merely proposed and not in effect,” immediately before clause (i) appearing in the first paragraph thereof and (iv) delete the reference to “15 days” appearing in the final paragraph thereof and replace such reference with “30 days”.

(cc) Section 3.1 of the Credit Agreement is further amended to is amended to delete the two references to “the date of this Agreement” appearing therein and replace each such reference with “the Amendment No. 2 Effective Date”.

(dd) Section 3.2 of the Credit Agreement is amended to (i) delete the reference to “15 days” appearing in clause (ii) thereof and replace such reference with “30 days”, (ii) add the phrase “, but excluding those that are merely proposed and not in effect” to the end of the first parenthetical appearing in the definition of “Change” set forth therein, (iii) add the parenthetical “(or with respect to any Lender, if later, the date on which such Lender becomes a Lender)” immediately after the phrase “after the date of this Agreement” appearing in the definition of “Change” set forth therein and (iv) add the phrase “except to the extent they are merely proposed and not in effect,” immediately before clause (i) appearing in the proviso thereto.

(ee) Section 3.2 of the Credit Agreement is further amended to is amended to delete the reference to “the date of this Agreement” appearing therein and replace such reference with “the Amendment No. 2 Effective Date”.

(ff) Section 3.3 of the Credit Agreement is amended and restated in its entirety to read as follows:

3.3 Availability of Types of Advances . (a) If at the time that the Global Administrative Agent shall seek to determine the LIBOR Screen Rate at the LIBOR Fixing Time for any Interest Period for a Eurocurrency Rate Advance, the LIBOR Screen Rate shall not be available for such Interest Period and/or for the applicable currency with respect to such Eurocurrency Rate Advance for any reason, and the Global Administrative Agent shall reasonably determine that it is not possible to determine the Interpolated Rate (which conclusion shall be conclusive and binding absent demonstrable error), then the Reference Bank Rate shall be LIBOR for such Interest Period for such Eurocurrency Rate Advance; provided that if the Reference Bank Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement; provided , further , however, that if less than two Reference Banks shall supply a rate to the Global Administrative Agent for purposes of determining LIBOR for such Eurocurrency Rate Advance, (i) if such Advance shall be requested in Dollars, then such Advance shall be made as a Base Rate Advance and (ii) if such Advance shall be requested in any currency other than Dollars, LIBOR shall be equal to the cost to each Lender to fund its pro rata share of such Eurocurrency Rate Advance (from whatever source and using whatever methodologies as such Lender may select in its reasonable discretion, such rate, the “ COF Rate ”).

(b) If (i) any Lender determines that maintenance of any of its Fixed Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation or directive, whether or not having the force of law, (ii) prior to the commencement of any Interest Period for a Fixed Rate Advance, the Global Administrative Agent determines (which determination shall be conclusive and binding absent demonstrable error) that adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate, CDOR, EURIBOR or LIBOR, as applicable, for a Loan in the applicable currency or for the applicable Interest Period or (iii) the Required Lenders with respect to Fixed Rate Advances or the Global Swing Line Lender with respect to Swing Line Loans determine that (x) deposits of a type, currency and maturity appropriate to match fund Fixed Rate Advances or Swing Line Loans, as applicable, are not available or (y) the interest rate, Eurocurrency Rate, CDOR, EURIBOR or LIBOR applicable to a Fixed Rate Advance or Swing Line Loan does not accurately reflect the cost of making or maintaining such a Fixed Rate Advance or Swing Line Loans, then the Global Administrative Agent shall give notice thereof to the Borrowers and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Global Administrative Agent notifies the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist (which notice shall be given by the Global Administrative Agent promptly after such circumstances cease to exist), (A) the availability of Fixed Rate Advances or such Swing Line Loans of the affected Type or in the affected currency shall be suspended (except as set forth in clause (C) below), (B) in the case of any occurrence set forth in clause (i) above, the Global Administrative Agent shall require any affected Fixed Rate Advances or Swing Line Loans to be repaid or, in the case of Eurocurrency Rate Loans in Dollars, at the option of the applicable U.S. Borrower, converted to Base Rate Advances or, in the case of any Loans to the Canadian Borrower, at the option of the Canadian Borrower, converted to Canadian Prime Rate Advances and (C) if any Borrowing Notice requests a Eurocurrency Rate Advance in a currency other than Dollars, then LIBOR for such Eurocurrency Rate Advance shall be the COF Rate; provided that if the circumstances giving rise to such notice affect only one Type of Advance, then the other Type of Advance shall be permitted.

(gg) Clause (vi) of Section 3.5 of the Credit Agreement is amended to delete the reference to “the date of this Agreement” appearing therein and replace such reference with “the Amendment No. 2 Effective Date”.

(hh) Section 3.6 of the Credit Agreement is amended to (i) delete the reference to “180 days” appearing therein and replace such reference with “120 days” and (ii) delete the reference to “180-day period” appearing therein and replace such reference with “120-day period”.

(ii) Section 3.8 of the Credit Agreement is amended to (i) add the letter “(a)” to the beginning thereof, (ii) add the parenthetical “(or any Participant holding interests in any Loan owing to such Lender or in any Commitment of such Lender or in any other interest of such Lender under the Loan Documents)” immediately after the phrase “If any Lender” at the beginning thereof, (iii) add the letter “(b)” immediately prior to the phrase “if any Borrower is required” appearing therein, (iv) add the letter “(c)” immediately prior to the phrase “if any Lender becomes a Defaulting Lender” appearing therein, (v) add the clause “or (d) if any Lender shall at any time have (or have a parent that has) a long-term credit rating of lower than BBB from S&P, lower than Baa2 from Moody’s or lower than the equivalent rating from any other nationally recognized statistical rating organization, or shall at any time not have a long-term credit rating from S&P, Moody’s or any other nationally recognized statistical rating organization (in each case under this clause (d) regardless of whether any such circumstances existed at the time such Lender became a Lender)” immediately following the phrase “if any Lender becomes a Defaulting Lender” appearing therein, (vi) delete the word “and” immediately following clause (ii) thereof and replace such word with a comma and (vi) add “and (iv) in the case of any such assignment arising under clause (d) above, the assignee shall have a rating greater than or equal to BBB from S&P and greater than or equal to Baa2 from Moody’s” as a new clause (iv) thereto.

(jj) Article III of the Credit Agreement is amended to add the following as a new Section 3.9 thereof:

3.9 Removal of Lenders . Notwithstanding any other provision of this Agreement to the contrary, if a Lender (or any Participant holding interests in any Loan owing to such Lender or in any Commitment of such Lender or in any other interest of such Lender under the Loan Documents) (each, a “ Demanding Lender ”) demands any payment of any amount pursuant to this Article III and the amount so demanded is disproportionately greater than the amount of compensation (if any) that the Borrowers generally are obligated to pay to other Lenders arising out of the same event or circumstance giving rise to such demand (a “ Trigger Event ”), then Harley may terminate such Lender’s Commitment hereunder, provided that (i) no Unmatured Default or Default shall have occurred and be continuing at the time of such Commitment termination, (ii) in the case of a Demanding Lender, Harley shall concurrently terminate the Commitment of each other Lender that has made a demand for payment under this Article III that arises out of such Trigger Event and that is similarly disproportionate to the amount the Borrowers are generally obligated to pay to other Lenders arising out of such Trigger Event, (iii) the Global Administrative Agent, the Global Swing Line Lender and the Required Lenders shall have consented to each such Commitment termination (such consents not to be unreasonably withheld or delayed, but may include consideration of the adequacy of the liquidity of Harley and its Subsidiaries) and (iv) such Lender shall have been paid all amounts then due to it under this Agreement and each other Loan Document (which, for the avoidance of doubt, the respective Borrowers may pay in connection with any such termination without making ratable payments to any other Lender (other than another Lender that has a Commitment that concurrently is being terminated under this Section 3.9 )). In no event shall the termination of a Lender’s Commitment in accordance with this paragraph impair or otherwise affect the obligation of the Borrowers to make any payment demanded by such Lender in accordance with this Article III .

(kk) Section 4.1 of the Credit Agreement is amended to delete the reference to “HDFC” appearing in clause (ii) thereof.

(ll) Clause (ii) of Section 5.1.2 of the Credit Agreement is amended to delete the amount “$25,000,000” appearing therein and replace such amount with “$50,000,000”.

(mm) Section 5.1.5 of the Credit Agreement is amended to delete the reference to “December 31, 2011” appearing therein and replace such reference with “December 31, 2013”.

(nn) Section 5.1.6 of the Credit Agreement is amended to delete the reference to “December 31, 2011” appearing therein and replace such reference with “December 31, 2013”.

(oo) Section 5.1.7 of the Credit Agreement is amended to (i) delete the words “pending or threatened” appearing therein and (ii) delete the word “affecting” appearing therein and replace such word with the phrase “pending or threatened in writing against”.

(pp) Article V of the Credit Agreement is amended to add the following as a new Section 5.1.12 thereto:

5.1.12 Anti-Corruption Laws and Sanctions . The Companies have implemented and maintain in effect policies and procedures designed to promote and achieve compliance by the Companies, their Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Companies, their Subsidiaries and their respective officers and employees and, to the knowledge of each Company, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions, in each case in all material respects. None of (a) any Company, any Subsidiary or to the knowledge of such Company or such Subsidiary any of their respective directors, officers or employees, or (b) to the knowledge of each Company, any agent of such Company or any of its Subsidiaries that, in the case of any such director, officer, employee or agent (with respect to this clause (b)), will act in any capacity in connection with or directly benefit from the credit facility established hereby, is a Sanctioned Person. No Loan or Advance, use of proceeds of any Loan or Advance or other Transactions by the Companies and their Subsidiaries will violate Anti-Corruption Laws or applicable Sanctions.

(qq) Section 6.1.1 of the Credit Agreement is amended to add the following sentence to the end thereof:

The Companies will maintain in effect and enforce policies and procedures designed to promote and achieve compliance by the Companies, their Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, in each case in all material respects.

(rr) Section 6.1.2 of the Credit Agreement is amended to (i) delete the word “material” appearing immediately before the word “taxes” therein, (ii) add the letter “(a)” immediately before the phrase “that is being contested” appearing in the proviso thereto, (iii) delete the reference to “proper proceedings” appearing therein and replace such reference with “proper actions” and (iv) delete the phrase “, unless and until any Lien resulting therefrom attaches to its Property and becomes enforceable against its other creditors” appearing in the proviso thereto and replace such phrase with the phrase “or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect”.

(ss) Section 6.1.3 of the Credit Agreement is amended to delete the phrase “responsible and reputable” appearing therein.

(tt) Section 6.1.4 of the Credit Agreement is amended to amend and restate the second proviso thereto to read as “and provided further that neither Harley nor any of its Material Subsidiaries shall be required to preserve any right or franchise if the failure to do so could not reasonably be expected to have a Material Adverse Effect”.

(uu) Section 6.1.9 of the Credit Agreement is amended delete the reference to “Furnish to the Global Administrative Agent:” appearing therein and replace such reference with “Furnish to the Global Administrative Agent for distribution to each Lender:”.

(vv) Clause (b) of Section 6.1.9 of the Credit Agreement is amended and restated in its entirety to read as follows:

(b) as soon as available and in any event no later than the date which is the earlier of (i) one hundred twenty (120) days after the end of each fiscal year of Harley and (ii) the date the Annual Report on Form 10-K for such fiscal year of Harley would have been required to have been filed under the rules and regulations of the Commission giving effect to any automatic extension available thereunder for filing of such form, a copy of the annual audit report for such year for Harley and its Subsidiaries, containing the Consolidated balance sheet of Harley and its Subsidiaries and the Consolidated balance sheet of HDFS and its Subsidiaries, in each case as of the end of such fiscal year and Consolidated statements of income and cash flows of Harley and its Subsidiaries and Consolidated statements of income and cash flows of HDFS and its Subsidiaries, in each case for such fiscal year, and in each case accompanied by an opinion ((1) without a “going concern” or like qualification or like exception and (2) other than a qualification permitted by the Commission regarding the internal controls of a company acquired during such period pursuant to a material acquisition by Harley or any Subsidiary, without any qualification or exception as to the scope of such audit; provided that such opinion may contain references (excluding formal qualifications) regarding audits performed by other auditors as contemplated by AU Section 543, Part of Audit Performed by Other Independent Auditors (or any successor or similar standard under Agreement Accounting Principles)) of Ernst & Young LLP or other independent public accountants of recognized national standing and certificates of the chief financial officer or treasurer of Harley (on behalf of Harley and HDFS) as to compliance with the terms of this Agreement and setting forth in reasonable detail the calculations necessary to demonstrate compliance with Section 6.3 ;

(ww) Section 6.1.10 of the Credit Agreement is amended and restated in its entirety to read as follows:

(a) Each Borrower shall use the proceeds of the Loans to provide funds for the general corporate purposes of such Borrower and its Subsidiaries.

(b) No Borrower will request any Loan or Advance, and no Borrower shall use, and each Borrower shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Loan or Advance (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding or financing any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, in each case in violation of Sanctions, or (iii) in any other manner that would result in liability to

the Global Administrative Agent or any Lender under any applicable Sanctions or a breach by the Global Administrative Agent or any Lender of Sanctions.

(xx) Clause (b) of Section 6.2.2 of the Credit Agreement is amended to (i) delete the phrase “purchase money liens upon” appearing at the beginning thereof and replace such phrase with the phrase “purchase money Liens (including Liens securing Capitalized Lease Obligations) upon”, (ii) delete the phrase “or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount” appearing therein and replace such phrase with the phrase “and extensions, renewals or replacements of any of the foregoing to the extent the principal amount secured is not increased” and (iii) delete the amount “$150,000,000” appearing therein and replace such amount with the phrase “the greater of (i) $150,000,000 and (ii) an amount equal to 1.5% of Consolidated Total Assets (determined by reference to the most recent financial statements of Harley delivered pursuant to Section 6.1.9(a) or 6.1.9(b) or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 6.1.9(a) or 6.1.9(b) , the most recent financial statements referred to in Section 5.1.5 ) as determined at the time of, and immediately after giving effect to, the incurrence of such Lien”.

(yy) Clause (e) of Section 6.2.2 of the Credit Agreement is amended to (i) delete the amount “$150,000,000” appearing therein and replace such amount with “$250,000,000” and (ii) delete the percentage “1.5%” appearing therein and replace such percentage with “2.5%”.

(zz) Clause (g) of Section 6.2.2 of the Credit Agreement is amended to delete the parenthetical “(without increase in the amount or change in any direct or contingent obligor)” appearing therein and replace such parenthetical with the parenthetical “(to the extent the principal amount secured is not increased)”.

([[) Clause (h) of Section 6.2.2 of the Credit Agreement is amended and restated in its entirety to read as follows:

(h) Liens incurred in connection with sale and leaseback transactions securing assets or other Property with a value of not in excess of the greater of (i) $150,000,000 and (ii) an amount equal to 1.5% of Consolidated Total Assets (determined by reference to the most recent financial statements of Harley delivered pursuant to Section 6.1.9(a) or 6.1.9(b) or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 6.1.9(a) or 6.1.9(b) , the most recent financial statements referred to in Section 5.1.5 ) as determined at the time of, and immediately after giving effect to, the incurrence of such Lien;

(aaa) Clause (j) of Section 6.2.2 of the Credit Agreement is amended to add the phrase “, and Liens on equity interests of joint ventures securing obligations of such joint ventures” at the end thereof.

(bbb) Section 6.2.2 of the Credit Agreement is amended to (i) delete the word “and” appearing immediately at the end of clause (i) thereof, (ii) delete the period appearing immediately at the end of clause (j) thereof and replace such period with “; and” and (iii) add the following as a new clause (k) thereof:

(k) Liens on assets in order to secure defeased and/or discharged indebtedness.

(ccc) Section 6.2.3 of the Credit Agreement is amended and restated in its entirety to read as follows:

6.2.3 Mergers, Etc . Merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (but excluding, for the avoidance of doubt, the following transactions: (w) any transfer of cash, cash equivalents or marketable securities in the ordinary course of business, (x) any issuance by a Person of its own equity interests, (y) any transfer for security purposes that is permitted by Section 6.2.2 and (z) any casualty loss, governmental taking or similar disposition) (whether in one transaction or in a series of related transactions) all or substantially all of the assets (whether now owned or hereafter acquired) of any Borrower or of any Borrower and its Subsidiaries (taken as a whole) to, any Person, or permit any of its Material Subsidiaries to do so, except that (i) any Subsidiary (other than any Company) may merge or consolidate with or into, or transfer, convey or dispose of assets to, any other Person so long as such transaction or series of related transactions does not result in the transfer, conveyance or other disposal of all or substantially all of the assets (whether now owned or hereafter acquired) of any Borrower or of any Borrower and its Subsidiaries (taken as a whole), (ii) any of the Companies and any Material Subsidiary may merge into or transfer, convey or dispose of assets to any Person in a transaction in which a Company or a Material Subsidiary is the surviving or transferee entity (provided that any such transaction involving a Company must result in a Company as the surviving or transferee entity), (iii) Harley may merge into a wholly-owned Subsidiary that has no material assets or liabilities for the sole purpose of changing the state of incorporation of Harley if the surviving corporation shall expressly assume the liabilities of Harley under this Agreement and the other Loan Documents and (iv) any Guarantor may merge or consolidate with a Person (other than a Borrower) in a transaction in which such Guarantor is the surviving entity; provided , in each case, that no Unmatured Default shall have occurred and be continuing at the time of such proposed transaction or would result after giving effect thereto and provided , further , that the foregoing shall not restrict any of the Companies or any Material Subsidiaries in respect of dispositions of inventory, cash or obsolete, used or surplus equipment or other Property in the ordinary course of business or in respect of any Permitted Finance Receivables Securitization and provided , further , that the foregoing shall not restrict any of the Companies or any Material Subsidiaries from selling or disposing of any Property the contemplated disposition of which Harley has disclosed in any Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K filed with or furnished to the Commission prior to the Amendment No. 2 Effective Date.

(ddd) Section 6.2.5 of the Credit Agreement is amended to delete the reference to “the date hereof” appearing therein and replace such reference with “the Amendment No. 2 Effective Date”.

(eee) Clause (A) of Section 6.3 of the Credit Agreement is amended to (i) delete therefrom the definitions of “Consolidated EBITDA”, “Consolidated Interest Expense” and “Interest Coverage Ratio” appearing therein, (ii) delete the phrase “all Indebtedness of HDFS” appearing in the definition of “Consolidated Finco Debt” appearing therein and replace such phrase with the phrase “all Indebtedness for borrowed money of HDFS” (iii) add the following new definitions therein in the appropriate alphabetical order:

“ Consolidated Opco Debt ” means, at any time, all Indebtedness for borrowed money of Harley and its Consolidated Subsidiaries as reflected in the most recent Consolidated balance sheet of Harley in accordance with Agreement Accounting Principles; provided , there shall be excluded from such amounts any Indebtedness of HDFS and its Consolidated Subsidiaries.

“ Consolidated Shareholders’ Equity ” means, as of the end of any fiscal quarter, the consolidated shareholders’ equity of Harley at the end of such fiscal quarter of Harley (determined by reference to the financial statements of Harley delivered with respect to such fiscal quarter pursuant to Section 6.1.9(a) or 6.1.9(b) ), determined on a Consolidated basis in accordance with Agreement Accounting Principles.

Opco Leverage Ratio ” means the ratio of (a) Consolidated Opco Debt to (b) the sum of (i) Consolidated Opco Debt plus (ii) Consolidated Shareholders’ Equity.

(fff) Clause (C) of Section 6.3 of the Credit Agreement is amended and restated in its entirety to read as follows:

(C) Maximum Opco Leverage Ratio . The Companies shall not permit the Opco Leverage Ratio, as of the end of any fiscal quarter, to exceed 0.65 to 1.00.

(ggg) Article VI of the Credit Agreement is amended to delete each of Section 6.1.8 and Section 6.2.1 thereof and replace each such Section with “[Reserved]”.

(hhh) Clause (c) of Section 7.1 of the Credit Agreement is amended to add a reference to “6.1.10(b)” immediately after the reference to “6.1.9” appearing therein.

(iii) Clause (d) of Section 7.1 of the Credit Agreement is amended to (i) delete the amount “$100,000,000” appearing therein and replace such amount with “$125,000,000” and (ii) add the following sentence to the end thereof:

Notwithstanding the foregoing, none of the following events shall constitute a Default under this clause (d) unless such event results in the acceleration of other Indebtedness of a Borrower or any Material Subsidiary in an aggregate principal amount of more than $125,000,000: (i) any secured Indebtedness becoming due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, (ii) any change of control offer made within 60 days after an acquisition with respect to, and effectuated pursuant to, Indebtedness of an acquired business, (iii) any default under Indebtedness of an acquired business if such default is cured, or such Indebtedness is repaid, within 60 days after the acquisition of such business so long as no other creditor accelerates or commences any kind of enforcement action in respect of such Indebtedness or (iv) mandatory prepayment requirements arising from the receipt of net cash proceeds from debt, dispositions (including casualty losses, governmental takings and other involuntary dispositions), equity issues or excess cash flow, in each case pursuant to Indebtedness of an acquired business.

(jjj) Clause (f) of Section 7.1 of the Credit Agreement is amended to delete the amount “$100,000,000” appearing therein and replace such amount with “$125,000,000”

(kkk) Clause (i) of Section 7.1 of the Credit Agreement is amended to (i) delete the phrase “Harley or any of its ERISA Affiliates shall incur, or shall be reasonably likely to incur, liability in excess of $100,000,000 in the aggregate as a result of one or more of the following:” appearing therein and (ii) add the phrase “, and in each such case under this Section 7.1(i) such event or circumstance has occurred or could reasonably be expected to result in a Material Adverse Effect” to the end thereof.

(lll) Section 8.3 of the Credit Agreement is amended to add the following parenthetical to the end of clause (ii) thereof:

(except with respect to a waiver of the application of the default rate of interest pursuant to Section 2.11 hereof)

(mmm) Section 8.3 of the Credit Agreement is further amended to add the following paragraph to the end thereof:

Notwithstanding anything herein to the contrary, as to any amendment or amendment and restatement otherwise approved in accordance with this Section, it shall not be necessary to obtain the consent or approval of any Lender that, upon giving effect to such amendment or amendment and restatement, would have no Commitment or outstanding Loans so long as such Lender receives payment in full of the principal of and interest accrued on each Loan made by, and all other amounts owing to, such Lender or accrued for the account of such Lender under this Agreement and the other Loan Documents at the time such amendment, amendment and restatement or other modification becomes effective.

(nnn) The second sentence of Section 9.8 of the Credit Agreement is amended to (i) delete the word “and” appearing immediately at the end of clause (i) thereof and replace such word with a comma, (ii) delete the period appearing immediately at the end of clause (ii) thereof and replace such period with the word “and” and (iii) add the following as a new clause (iii) to the end thereof:

(iii) for purposes of calculating shareholders’ equity, by excluding all accumulated other comprehensive income (or loss) as shown on the most recent Consolidated balance sheet of Harley or HDFS, as applicable, delivered pursuant to Section 6.1.9(a) or 6.1.9(b) or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 6.1.9(a) or 6.1.9(b) , the most recent financial statements referred to in Section 5.1.5 .

(ooo) The last sentence of Section 9.8 of the Credit Agreement is amended to delete the reference to “Closing Date” appearing therein and replace such reference with “Amendment No. 2 Effective Date”.

(ppp) Section 9.11 of the Credit Agreement is amended to (i) add the phrase “, BOROUGH OF MANHATTAN,” immediately following the phrase “NEW YORK COUNTY” appearing therein and (ii) delete the phrase “OF THE SOUTHERN DISTRICT” appearing therein and replace such phrase with “FOR THE SOUTHERN DISTRICT”.

(qqq) Section 11.1 of the Credit Agreement is amended to add the phrase “, but excluding deposits held in a trustee, fiduciary, agency or similar capacity or otherwise for the benefit of a third party” at the end of the parenthetical appearing therein.

(rrr) The penultimate paragraph of Article XII of the Credit Agreement is amended to delete the reference to “Closing Date” appearing therein and replace such reference with “Amendment No. 2 Effective Date”.

(sss) The last paragraph of Article XII of the Credit Agreement is amended and restated in its entirety to read as follows:

Notwithstanding anything contained in this Article XII to the contrary, (i) the obligations of HDFS under this Article XII shall be solely in respect of the Loans made to, and any other Obligations of, the Canadian Borrower, (ii) the obligations of the Finco Guarantors under this Article XII shall be solely in respect of the Loans made to, and any other Obligations of, HDFS and the

Canadian Borrower and (iii) no Guarantor shall have any obligations under this Article XII in respect of the Loans made to, or any other Obligations of, Harley.

(ttt) The fourth sentence in clause (A) of Section 13.3 of the Credit Agreement is amended and restated in its entirety to read as follows:

Notice to the Global Administrative Agent shall be required prior to any assignment becoming effective and the consent of the Global Administrative Agent (which consent will not be unreasonably withheld or delayed) shall be required prior to any assignment becoming effective with respect to a Purchaser which is not a Lender and the consent of Harley (which consent will not be unreasonably withheld or delayed; provided that Harley shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Global Administrative Agent within ten (10) Business Days after having received written notice thereof from the Global Administrative Agent) shall be required prior to an assignment becoming effective unless (A) a Default shall have occurred and be continuing at such time or (B) the Purchaser which is a Lender, an Affiliate thereof or an Approved Fund; provided that, notwithstanding the preceding clause (B), (1) the Purchaser with respect to any assignment that does not require Harley’s consent under the preceding clause (B) shall nevertheless provide written notice to Harley thereof prior to, or promptly after, such assignment and (2) the consent of Harley shall be required prior to any assignment resulting in the applicable Purchaser, collectively with its Affiliates and affiliated Approved Funds, holding Commitments in an aggregate amount greater than 15% of the Aggregate Commitment at such time (or, if the Commitments shall have been terminated, such Purchaser, collectively with its Affiliates and affiliated Approved Funds, would hold Loans aggregating to more than 15% in principal amount of all outstanding Loans at such time). It is understood and agreed that it shall be reasonable for Harley to consider a proposed Purchaser’s right to require reimbursement for incremental increased costs pursuant to Article III when determining whether to consent to any applicable assignment.

(uuu) The first sentence in clause (C) of Section 13.3 of the Credit Agreement is amended to add the parenthetical “(and stated interest)” immediately after the phrase “and the Commitment of and principal amount” appearing therein.

(vvv) Section 13.3 of the Credit Agreement is amended to insert the following as new clause (E) thereto:

(E) Purported Assignments in Violation of Section . Any assignment or purported assignment by a Lender in violation of the terms of this Section 13.3 shall be null and void .

(www) Section 14.1 of the Credit Agreement is amended and restated in its entirety to read as follows:

14.1 Giving Notice . (a) Except as otherwise permitted by Article II with respect to Borrowing Notices and Section 6.1.9 , all notices and other communications provided to any party hereto under this Agreement or any other Loan Documents shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes); or, if by courier, one (1) Business Day after deposit with a reputable overnight carrier service; with all charges paid.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by using Electronic Systems pursuant to procedures approved by the Global Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Global Administrative Agent and the applicable Lender. The Global Administrative Agent or the Companies may, in their respective discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

Unless the Global Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

(i) Each Borrower agrees that the Global Administrative Agent may, but shall not be obligated to, make Communications (as defined below) available to the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar Electronic System.

(ii) Any Electronic System used by the Global Administrative Agent is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or any Electronic System. In no event shall the Global Administrative Agent or any of its Affiliates, and each of such Person’s respective officers, directors, employees, attorneys and agents (collectively, the “ Agent Parties ”), have any liability to any Company, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Company’s or the Global Administrative Agent’s transmission of Communications through an Electronic System, except to the extent determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of the Global Administrative Agent or the Agent Parties. “ Communications ” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Company pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Global Administrative Agent or any Lender by means of electronic communications pursuant to this Section, including through an Electronic System.

(iii) For the avoidance of doubt, nothing in this Section 14.1(c) shall affect any obligations arising under Section 13.4 .

(xxx) Section 15.1 of the Credit Agreement is amended and restated in its entirety to read as follows:

15.1 Counterparts; Effectiveness; Electronic Execution . This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by the Global Administrative Agent and when the Global Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy, e-mailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

(yyy) Each of Schedule III and Schedule 6.2.1(b) to the Credit Agreement is deleted in its entirety.

(zzz) Schedule 6.2.2(c) of the Credit Agreement is amended and restated in the form of Schedule 6.2.2(c) attached hereto.

([[[) The Credit Agreement is amended to delete each reference to “Closing Date” appearing in the definitions of “Material Adverse Change” and “Material Adverse Effect” appearing in Section 1.1 of the Credit Agreement, in Sections 6.2.2(c) and 9.8 of the Credit Agreement and in the ninth paragraph of Article XII of the Credit Agreement and replace each such reference with “Amendment No. 2 Effective Date”.

2. Conditions of Effectiveness . The effectiveness of this Amendment is subject to the conditions precedent that the Administrative Agent shall have received (i) counterparts of this Amendment duly executed by each Borrower, the Lenders whose consent is required under Section 8.3 of the Credit Agreement and the Administrative Agent and counterparts of the Consent and Reaffirmation attached hereto duly executed by the Guarantors, (ii) such other instruments, documents and legal opinions as are reasonably requested by the Administrative Agent and (iii) payment and/or reimbursement of the reasonable fees and expenses of the Administrative Agent and its affiliates (including, to the extent invoiced, reasonable fees and expenses of one U.S. counsel for the Administrative Agent) in connection with this Amendment and the Loan Documents.

3. Representations and Warranties of each Borrower . Each Borrower hereby represents and warrants as follows:

(a) This Amendment and the Credit Agreement as amended hereby constitute the legal, valid and binding obligations of such Borrower enforceable against such Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and general principles of equity, regardless of whether the application of such principles is considered in a proceeding in equity or at law.

(b) As of the date hereof and giving effect to the terms of this Amendment, (i) no Default or Unmatured Default shall have occurred and be continuing and (ii) the representations and warranties of such Borrower contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects as of the Effective Date, except for representations and warranties made with reference solely to an earlier date, which representations and warranties shall be true and correct in all material respects as of such earlier date.

4. Reference to and Effect on the Credit Agreement .

(a) Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.

(b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

(c) Except as specifically provided above, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

5. Governing Law . This Amendment shall be construed in accordance with and governed by the internal laws of the State of New York, but giving effect to federal laws applicable to banks.

6. Headings . Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

7. Counterparts . This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature Pages Follow]

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

HARLEY-DAVIDSON, INC.,

as a U.S. Borrower

By:__ /s/ J. Darrell Thomas _______________
Name: J. Darrell Thomas

Title: Vice President and Treasurer

HARLEY-DAVIDSON FINANCIAL SERVICES, INC.,

as a U.S. Borrower

By:__ /s/ J. Darrell Thomas _______________
Name: J. Darrell Thomas

Title: Vice President and Treasurer

HARLEY-DAVIDSON FINANCIAL SERVICES CANADA, INC.,

as the Canadian Borrower

By:__ /s/ J. Darrell Thomas ________________
Name: J. Darrell Thomas

Title: Vice President and Treasurer

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

JPMORGAN CHASE BANK, N.A.,

individually as a Lender and as Administrative Agent and Global Swing Line Lender

By:__ /s/ Robert P. Kellas __________

Name: Robert P. Kellas

Title: Executive Director

JPMORGAN CHASE BANK, N.A., TORONTO BRANCH,

as a Lender

By:___ /s/ Robert P. Kellas __________

Name: Robert P. Kellas

Title: Executive Director

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

CITIBANK, N.A.,

as a Lender

By:_ /s/ Maureen Maroney ________________
Name: Maureen Maroney

Title: Vice President

CITIBANK, N.A., CANADIAN BRANCH,

as a Lender

By:____ /s/ Jawdat Sha’sha’a ______________

Name: Jawdat Sha’sha’a

Title: Authorized Signer

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

U.S. BANK NATIONAL ASSOCIATION,

as a Lender

By:___ /s/ Matthew J. Schulz __________________
Name: Matthew J. Schulz

Title: Senior Vice President

U.S. BANK NATIONAL ASSOCIATION, CANADA BRANCH,

as a Lender

By:____ /s/ Joseph Rauhala ___________________

Name: Joseph Rauhala

Title: Principal Officer

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

THE ROYAL BANK OF SCOTLAND PLC,

as a Lender

By:_ /s/ James Welch _____________________
Name: James Welch

Title: Director

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

BMO HARRIS BANK N.A.,

as a Lender

By:_ /s/ Ronald J. Carey ___________________
Name: Ronald J. Carey

Title: Sr. Vice President

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

MIZUHO CORPORATE BANK, LTD., NEW YORK BRANCH,

as a Lender

By:____ /s/ Tenya Mitsuboshi _______________
Name: Tenya Mitsuboshi

Title: Deputy General Manager

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

THE BANK OF NEW YORK MELLON,

as a Lender

By:__ /s/ Jeffrey Dears ______________________
Name: Jeffrey Dears

Title: Vice President

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

as a Lender

By:__ /s/ Thomas Danielson ___________________
Name: Thomas Danielson

Title: Authorized Signatory

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as a Lender

By:___ /s/ Thiplada Siddiqui __________________
Name: Thiplada Siddiqui

Title: Vice President

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

FIFTH THIRD BANK,

as a Lender

By:__ /s/ Gary Losey ______________________
Name: Gary Losey

Title: VP – Corporate Banking

FIFTH THIRD BANK, Operating through its Canada Branch,

as a Lender

By:__ /s/ Mauro Spagnolo ____________________
Name: Mauro Spagnolo

Title: Managing Director & Principal Officer

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

GOLDMAN SACHS BANK USA,

as a Lender

By:__ /s/ Mark Walton ____________________
Name: Mark Walton

Title: Authorized Signatory

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

TORONTO DOMINION BANK (NEW YORK) LLC,

as a Lender

By:__ /s/ Marie Fernandes ____________________
Name: Marie Fernandes

Title: Authorized Signatory

THE TORONTO-DOMINION BANK,

as a Lender

By:___ /s/ Marie Fernandes ____________________

Name: Marie Fernandes

Title: Authorized Signatory

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

BANCO BILBAO VIZCAYA ARGENTARIA S.A., NEW YORK BRANCH,

as a Lender

By:___ /s/ Luca Sacchi ______________________
Name: Luca Sacchi

Title: Managing Director

By:___ /s/ Luca Sacchi ______________________
Name: Mauricio Benitez

Title: Vice President

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

THE NORTHERN TRUST COMPANY,

as a Lender

By:_ /s/ Keith Burson ________________________
Name: Keith Burson

Title: Vice President

Signature Page to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

CONSENT AND REAFFIRMATION

Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 2 to the Credit Agreement dated as of April 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”) by and among Harley-Davidson, Inc., Harley-Davidson Financial Services, Inc. and Harley-Davidson Financial Services Canada, Inc. (collectively, the “ Borrowers ”), the Lenders and JPMorgan Chase Bank, N.A., as Global Administrative Agent (the “ Administrative Agent ”), which Amendment No. 2 is dated as of April 7, 2014 and is by and among the Borrowers, the financial institutions listed on the signature pages thereof and the Administrative Agent (the “ Amendment ”). Capitalized terms used in this Consent and Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement. Without in any way establishing a course of dealing by the Administrative Agent or any Lender, each of the undersigned consents to the Amendment and reaffirms the terms and conditions of the Support Agreement (in the case of Harley), the Guarantee (in the case of the Guarantors) and any other Loan Document executed by it and acknowledges and agrees that each and every Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above‑referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated.

Dated April 7, 2014

[Signature Page Follows]

IN WITNESS WHEREOF, this Consent and Reaffirmation has been duly executed as of the day and year above written.



	HARLEY-DAVIDSON FINANCIAL SERVICES, INC. By:____ /s/ J. Darrell Thomas _____________ Name: J. Darrell Thomas Title: Vice President and Treasurer HARLEY-DAVIDSON FINANCIAL SERVICES INTERNATIONAL, INC. By:____ /s/ J. Darrell Thomas _____________ Name: J. Darrell Thomas Title: Vice President and Treasurer HARLEY-DAVIDSON CREDIT CORP. By:___ /s/ J. Darrell Thomas _____________ Name: J. Darrell Thomas Title: Vice President and Treasurer

Signature Page to Consent and Reaffirmation to Amendment No. 2

5-Year Credit Agreement dated as of April 13, 2012

Harley-Davidson, Inc. et al

Schedule 6.2.2(c)

Liens

[See Attached]

Notice of Award of Performance Shares

and Performance Shares Agreement (Standard)

Harley-Davidson, Inc.

ID: 39-1805420

3700 West Juneau Avenue

Milwaukee, WI 53208

[Participant Name] [Grant Type]

[Signed Electronically] Plan: 2014 Incentive Stock Plan

Acceptance Date: [Acceptance Date] I D: [Participant ID]

Effective [Grant Date] (the “Grant Date”), you have been granted [Number of Performance Shares Granted] Performance Shares with respect to shares of Common Stock of Harley-Davidson, Inc. (the “Company”) under the Company's 2014 Incentive Stock Plan (the “Plan”).

Net Income. The performance measure that will determine the number of Shares you earn in respect of 42.5% of your Performance Shares (“Net Income Performance Shares”) will be the Company’s aggregate Net Income for the year in which the Grant Date occurs and the following two years. “Net Income” shall mean consolidated net income from continuing operations. “Target Aggregate Net Income” shall mean the aggregate Net Income for such period as reflected in the Company’s strategic plan approved by the Board of Directors of the Company as of the Grant Date.

The number of Net Income Performance Shares earned will be as follows:

Aggregate Net Income at 70% of Target Aggregate Net Income = 50% Net Income Performance Shares

Aggregate Net Income at 100% of Target Aggregate Net Income = 100% Net Income Performance Shares

Aggregate Net Income at 102.5% of Target Aggregate Net Income = 200% Net Income Performance Shares

Aggregate Net Income at 105% of Target Aggregate Net Income = 300% Net Income Performance Shares

No Net Income Performance Shares will be earned if aggregate Net Income is less than 70% of Target Aggregate Net Income. The number of Net Income Performance Shares earned will be interpolated between (i) 50% Net Income Performance Shares and 100% Net Income Performance Shares for aggregate Net Income between 70% and 100% of Target Aggregate Net Income, (ii) 100% Net Income Performance Shares and 200% Net Income Performance Shares for aggregate Net Income between 100% and 102.5% of Target Aggregate Net Income and (iii) 200% Net Income Performance Shares and 300% Net Income Performance Shares for aggregate Net Income between 102.5% and 105% of Target Aggregate Net Income.

year in the performance period, divided by the number of years in the performance period. “HDMC Net Operating Income After Tax” shall mean the amount of operating income of HDMC reduced for taxes for the relevant year in the performance period. “HDMC Invested Capital” shall mean the average amount of HDMC debt plus the average amount of HDMC shareholder’s equity, excluding accumulated other comprehensive income or loss for pension and post-retirement plans, for the relevant year in the performance period. “HDMC” shall mean Harley-Davidson Motor Company. “Target ROIC” shall mean the average HDMC ROIC for such period as reflected in the Company’s strategic plan approved by the Board of Directors of the Company as of the Grant Date.

The number of ROIC Performance Shares earned will be as follows:

Average HDMC ROIC at 70% of Target ROIC = 50% ROIC Performance Shares

Average HDMC ROIC at 100% of Target ROIC = 100% ROIC Performance Shares

Average HDMC ROIC at 102.5% of Target ROIC = 200% ROIC Performance Shares

Average HDMC ROIC at 105% of Target ROIC = 300% ROIC Performance Shares

No ROIC Performance Shares will be earned if average HDMC ROIC is less than 70% of Target ROIC. The number of ROIC Performance Shares earned will be interpolated between (i) 50% ROIC Performance Shares and 100% ROIC Performance Shares for average HDMC ROIC between 70% and 100% of Target ROIC, (ii) 100% ROIC Performance Shares and 200% ROIC Performance Shares for average HDMC ROIC between 100% and 102.5% of Target ROIC and (iii) 200% ROIC Performance Shares and 300% ROIC Performance Shares for average HDMC ROIC between 102.5% and 105% of Target ROIC.

New Riders. The performance measure that will determine the number of Shares you earn in respect of 15% of your Performance Shares (“New Rider Performance Shares”) will be the New Rider Percentage for the period beginning November 1 of the year following the year in which the Grant Date occurs and ending October 31 of the following year. “New Rider Percentage” shall mean the percentage of retail sales of new Harley-Davidson motorcycles in the U.S. purchased by new riders as reflected in the R. L. Polk & Co. Migration Database.

The number of New Rider Performance Shares earned will be determined based on a scale approved by the Human Resources Committee of the Board of Directors of the Company on the Grant Date as reflected in minutes of the Committee.

No New Rider Performance Shares will be earned if the New Rider Percentage is less than the threshold New Rider Percentage that the Committee approved as reflected in such minutes. The maximum number of New Rider Performance Shares earned will be 300% of the New Rider Performance Shares.

Any Performance Shares that are earned based on performance will be earned on the date that the Administrator certifies the achievement of the applicable level of performance. Any Performance Shares that are not earned on such date shall be forfeited.

You may not sell, transfer or otherwise convey an interest in or pledge any of your Performance Shares.

The Performance Shares are granted under and governed by the terms and conditions of the Plan and this Performance Shares Agreement including Exhibit A. Additional provisions regarding your Performance Shares and definitions of capitalized terms used and not defined in this Performance Shares Agreement can be found in the Plan.

HARLEY-DAVIDSON, INC.

Vice President and Controller

Exhibit A to Performance Shares Agreement

Termination of Employment: (1) If your employment with the Company and its Affiliates is terminated prior to the third December 31 following the Grant Date for any reason other than death, Disability or Retirement (based solely on clause (iii) of the definition of such term in the Plan), then you will forfeit any Performance Shares as of the date your employment is terminated. (2) If you cease to be employed by the Company and its Affiliates prior to the third December 31 following the Grant Date by reason of death, Disability or Retirement (based solely on clause (iii) of the definition of such term in the Plan), then you will receive a portion of the number of Performance Shares that you would have received had you not ceased to be employed by the Company and its Affiliates, which portion will be equal to such number of Performance Shares multiplied by a fraction the numerator of which is the number of Months (counting a partial Month as a full Month) from the Grant Date until the date your employment is terminated by reason of death, Disability or Retirement (based solely on clause (iii) of the definition of such term in the Plan), and the denominator of which is the number of Months from the Grant Date to the third December 31 following the Grant Date, and you will forfeit any remaining Performance Shares. For purposes of this Agreement, a “Month” shall mean the period that begins on the first calendar day after the Grant Date or the applicable anniversary of the Grant Date that occurs in each calendar month, and ends on the anniversary of the Grant Date that occurs in the following calendar month.

Voting Rights and Dividends: You are not entitled to exercise any voting rights with respect to the Shares underlying your Performance Shares. You will not receive cash payments relating to any dividends and other distributions paid with respect to the Shares underlying your Performance Shares at the time of the payment date of the dividend or other distribution. If, however, any dividends or distributions with respect to the Shares underlying your Performance Shares are paid in Shares rather than cash, you will be credited with additional Performance Shares equal to the number of shares that you would have received had your Performance Shares been actual Shares, and such Performance Shares will be subject to the same risk of forfeiture and other terms of this Performance Shares Agreement as are the Performance Shares with respect to which they were credited. Amounts credited to you in the form of additional Performance Shares will be settled (if vested) at the same time as the Performance Shares with respect to which they were credited. Further, at the time Performance Shares are settled, you will receive a dividend equivalent cash payment in respect of any dividends and other distributions paid in cash with respect to Shares for which the record date is on or after the Grant Date and before the settlement date which payment will be in an amount equal to the product of the number of Shares payable to you on settlement of your Performance Shares and the total amount of dividends and other distributions paid in cash with respect to a Share during such period.

Settlement: Your Performance Shares will be settled by delivery to you of Shares on a one-for-one basis, with one Share being delivered for each Performance Share that you earn. The Performance Shares will be settled (and any dividend equivalent cash payment will be paid to you) as soon as practicable following the third December 31 following the Grant Date and no later than March 15 of the third year after the year in which the Grant Date occurs. Cash will be paid in satisfaction of any fractional Performance Share settled pursuant to this paragraph.

Issuance of Share Certificates: In lieu of issuing in your name certificate(s) evidencing your Shares, the Company may cause its transfer agent or other agent to reflect on its records your ownership of such Shares.

Tax Withholding : To the extent that your receipt of Performance Shares, the vesting of Performance Shares, your receipt of payments in respect of Performance Shares or the delivery of Shares to you in respect of Performance Shares results in a withholding obligation to the Company with respect to federal, state or local taxes, the Company has the right and authority to deduct or withhold from any compensation it would pay to you (including payments in respect of Performance Shares) an amount, and/or to treat you as having surrendered vested Performance Shares having a value, sufficient to satisfy its withholding obligations. In its discretion, the Company may require you to deliver to the Company or to such other person as the Company may designate at the time the Company is obligated to withhold taxes that arise from such receipt or vesting, as the case may be, such amount as the Company requires to meet its withholding obligation under applicable tax laws or regulations.

When income results from the delivery of Shares to you in respect of Performance Shares, to the extent the Company permits you to do so, you may satisfy the withholding requirement, in whole or in part, by electing to have the Company accept that number of Shares having an aggregate Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax that the Company must withhold in connection with the delivery of such Shares. If you would be left with a fractional share after satisfying the withholding obligation, the fair market value of that fractional share will be applied to your general federal tax withholding. If the Company does not allow you to elect to have the Company accept Shares, or if you want to keep all of the Shares that will be delivered, you will have to deliver to the Company or to such other person as the Company may designate funds in an amount sufficient to cover the withholding tax obligation on a date advised by the Company. Where you may elect to deliver funds to satisfy the withholding tax obligation, your election to deliver funds must be irrevocable, in writing, and submitted to the Secretary or to such other person as the Company may designate on or before the date that the Company specifies, which will be before the date of delivery of the Shares, and if you fail to deliver such election then you will be deemed to have elected to have the Company accept Shares as described above.

Rejection/Acceptance : You have ninety (90) days following the Grant Date to accept this award through your Fidelity account. If you have not accepted this award within ninety (90) days following the Grant Date, the Performance Shares granted herein shall be automatically forfeited. If you choose to accept this Performance Shares Agreement, then you accept the terms of this Award, acknowledge these tax implications and agree and consent to all amendments to the Plan, the Harley-Davidson, Inc. 2004 Incentive Stock Plan and the Harley-Davidson, Inc. 2009 Incentive Stock Plan through the Grant Date as they apply to this Award and any prior awards to you of any kind under such plans.

Notice of Award of Performance Share

Units and Performance Share Unit

Agreement (Standard International)

Harley-Davidson, Inc.

or Subsidiaries

ID: 39-1805420

[Participant Name] [Grant Type]

[Signed Electronically] Plan: 2014 Incentive Stock Plan

Acceptance Date: [Acceptance Date] ID: [Participant ID]

Effective [Grant Date] (the “Grant Date”), you have been granted [Number of Performance Share Units Granted] Performance Share Units with respect to shares of Common Stock of Harley-Davidson, Inc. (“HDI” and, together with its Subsidiaries, the “Company”). This grant is made under HDI's 2014 Incentive Stock Plan (the “Plan”).

Net Income. The performance measure that will determine the number of Shares as to which you will receive a payment in respect of 42.5% of your Performance Share Units (“Net Income Performance Share Units”) will be the Company’s aggregate Net Income for the year in which the Grant Date occurs and the following two years. “Net Income” shall mean consolidated net income from continuing operations. “Target Aggregate Net Income” shall mean the aggregate Net Income for such period as reflected in the Company’s strategic plan approved by the Board of Directors of the Company as of the Grant Date.

The number of Net Income Performance Share Units earned will be as follows:

Aggregate Net Income at 70% of Target Aggregate Net Income = 50% Net Income Performance Share Units

Aggregate Net Income at 100% of Target Aggregate Net Income = 100% Net Income Performance Share Units

Aggregate Net Income at 102.5% of Target Aggregate Net Income = 200% Net Income Performance Share Units

Aggregate Net Income at 105% of Target Aggregate Net Income = 300% Net Income Performance Share Units

No Net Income Performance Share Units will be earned if aggregate Net Income is less than 70% of Target Aggregate Net Income. The number of Net Income Performance Share Units earned will be interpolated between (i) 50% Net Income Performance Share Units and 100% Net Income Performance Share Units for aggregate Net Income between 70% and 100% of Target Aggregate Net Income, (ii) 100% Net Income Performance Share Units and 200% Net Income Performance Share Units for aggregate Net Income between 100% and 102.5% of Target Aggregate Net Income and (iii) 200% Net Income Performance Share Units and 300% Net Income Performance Share Units for aggregate Net Income between 102.5% and 105% of Target Aggregate Net Income.

ROIC. The performance measure that will determine the number of Shares as to which you will receive a payment in respect of 42.5% of your Performance Share Units (“ROIC Performance Share Units”) will be the three year average HDMC ROIC for the year in which the Grant Date occurs and the following two years. “HDMC ROIC” shall mean the sum of the quotient obtained by dividing (i) HDMC Net Operating Income After Tax by (ii) HDMC Invested Capital for each year in the performance period, divided by the number of years in the performance period. “HDMC Net Operating Income After Tax” shall mean the amount of operating income of HDMC reduced for taxes for the relevant year in the performance period. “HDMC Invested Capital” shall mean the average amount of HDMC debt plus the average amount of HDMC shareholder’s equity, excluding accumulated other comprehensive income or loss for pension and post-retirement plans, for the relevant year in the performance period. “HDMC” shall mean Harley-Davidson Motor Company. “Target ROIC” shall mean the average HDMC ROIC for such period as reflected in the Company’s strategic plan approved by the Board of Directors of the Company as of the Grant Date.

The number of ROIC Performance Share Units earned will be as follows:

Average HDMC ROIC at 70% of Target ROIC = 50% ROIC Performance Share Units

Average HDMC ROIC at 100% of Target ROIC = 100% ROIC Performance Share Units

Average HDMC ROIC at 102.5% of Target ROIC = 200% ROIC Performance Share Units

Average HDMC ROIC at 105% of Target ROIC = 300% ROIC Performance Share Units

No ROIC Performance Share Units will be earned if average HDMC ROIC is less than 70% of Target ROIC. The number of ROIC Performance Share Units earned will be interpolated between (i) 50% ROIC Performance Share Units and 100% ROIC Performance Share Units for average HDMC ROIC between 70% and 100% of Target ROIC, (ii) 100% ROIC Performance Share Units and 200% ROIC Performance Share Units for average HDMC ROIC between 100% and 102.5% of Target ROIC and (iii) 200% ROIC Performance Share Units and 300% ROIC Performance Share Units for average HDMC ROIC between 102.5% and 105% of Target ROIC.

New Riders. The performance measure that will determine the number of Shares as to which you will receive a payment in respect of 15% of your Performance Share Units (“New Rider Performance Share Units”) will be the New Rider Percentage for the period beginning November 1 of the year following the year in which the Grant Date occurs and ending October 31 of the following year. “New Rider Percentage” shall mean the percentage of retail sales of new Harley-Davidson motorcycles in the U.S. purchased by new riders as reflected in the R. L. Polk & Co. Migration Database.

The number of New Rider Performance Share Units earned will be determined based on a scale approved by the Human Resources Committee of the Board of Directors of the Company on the Grant Date as reflected in minutes of the Committee.

No New Rider Performance Share Units will be earned if the New Rider Percentage is less than the threshold New Rider Percentage that the Committee approved as reflected in such minutes. The maximum number of New Rider Performance Share Units earned will be 300% of the New Rider Performance Share Units.

Any Performance Share Units that are earned based on performance will be earned on the date that the Administrator certifies the achievement of the applicable level of performance. Any Performance Share Units that are not earned on such date shall be forfeited.

You may not sell, transfer or otherwise convey an interest in or pledge any of your Performance Share Units.

The Performance Share Units are granted under and governed by the terms and conditions of the Plan and this Performance Share Unit Agreement including Exhibit A. Additional provisions regarding your Performance Share Units and definitions of capitalized terms used and not defined in this Performance Share Unit Agreement can be found in the Plan.

HARLEY-DAVIDSON, INC. and Subsidiaries

Vice President and Controller

Exhibit A to Performance Share Unit Agreement

Termination of Employment: (1) If your employment with the Company and its Affiliates is terminated prior to the third December 31 following the Grant Date for any reason other than death, Disability or Retirement (based solely on clause (iii) of the definition of such term in the Plan), then you will forfeit any Performance Share Units as of the date your employment is terminated. (2) If you cease to be employed by the Company and its Affiliates prior to the third December 31 following the Grant Date by reason of death, Disability or Retirement (based solely on clause (iii) of the definition of such term in the Plan), then you will receive a portion of the number of Performance Share Units that you would have received had you not ceased to be employed by the Company and its Affiliates, which portion will be equal to such number of Performance Share Units multiplied by a fraction the numerator of which is the number of Months (counting a partial Month as a full Month) from the Grant Date until the date your employment is terminated by reason of death, Disability or Retirement (based solely on clause (iii) of the definition of such term in the Plan), and the denominator of which is the number of Months from the Grant Date to the third December 31 following the Grant Date, and you will forfeit any remaining Performance Share Units. For purposes of this Agreement, a “Month” shall mean the period that begins on the first calendar day after the Grant Date or the applicable anniversary of the Grant Date that occurs in each calendar month, and ends on the anniversary of the Grant Date that occurs in the following calendar month.

Voting Rights and Dividends: You are not entitled to exercise any voting rights with respect to the Common Stock of HDI underlying your Performance Share Units. You will not receive cash payments relating to any dividends and other distributions paid with respect to the Shares underlying your Performance Share Units at the time of the payment date of the dividend or other distribution. If, however, any dividends or distributions with respect to the Common Stock of HDI underlying your Performance Share Units are paid in Shares rather than cash, you will be credited with additional Performance Share Units equal to the number of shares that you would have received had your Performance Share Units been actual Shares, and such Performance Share Units will be subject to the same risk of forfeiture and other terms of this Performance Share Unit Agreement as are the Performance Share Units that are granted contemporaneously with this Performance Share Unit Agreement. Amounts credited to you in the form of additional Performance Share Units will be settled (if vested) at the same time as the Performance Share Units with respect to which they were credited. Further, at the time Performance Share Units are settled, you will receive a dividend equivalent cash payment in respect of any dividends and other distributions paid in cash with respect to Shares for which the record date is on or after the Grant Date and before the settlement date which payment will be in an amount equal to the product of the number of Shares in respect of which payment will be made to you on settlement of your Performance Share Units and the total amount of dividends and other distributions paid in cash with respect to a Share during such period.

Settlement: Your Performance Share Units will be settled by delivery to you of a cash payment in respect of Shares on a one-for-one basis, with payment for one Share being made for each Performance Share Unit that you earn. As soon as practicable following the date on which the Performance Share Units are earned, the Company will make a cash payment to you equal to the product obtained by multiplying the Fair Market Value of a Share on the date your Performance Share Units are earned by the number of Performance Share Units that you have earned, plus any dividend equivalent amount due, which payment will be made in your local currency using the spot rate on the date your Performance Share Units are earned, less applicable withholding.

Tax Withholding : To the extent that your receipt of Performance Share Units, the vesting of Performance Share Units or your receipt of payments in respect of Performance Share Units results in income to you for federal or local taxes, the Company has the right and authority to deduct or withhold from any compensation it would pay to you (including payments in respect of Performance Share Units) an amount, and/or to treat you as having surrendered vested Performance Share Units having a value, sufficient to satisfy its withholding obligations. In its discretion, the Company may require you to deliver to the Company or to such other person as the Company may designate at the time the Company is obligated to withhold taxes that arise from such receipt or vesting, as the case may be, such amount as the Company requires to meet its withholding obligation under applicable tax laws or regulations.

Rejection/Acceptance : You have ninety (90) days following the Grant Date to accept this award through your Fidelity account. If you have not accepted this award within ninety (90) days following the Grant Date, the Performance Share Units granted herein shall be automatically forfeited. If you choose to accept this Performance Share Unit Agreement, then you accept the terms of this Award, acknowledge these tax implications and agree and consent to all amendments to the Plan, the Harley-Davidson, Inc. 2009 Incentive Stock Plan and the Harley-Davidson, Inc. 2004 Incentive Stock Plan through the Grant Date as they apply to this Award and any prior awards to you of any kind under such plans.

Notice of Award of Performance Shares

and Performance Shares Agreement (Transition Agreement)

Harley-Davidson, Inc.

ID: 39-1805420

3700 West Juneau Avenue

Milwaukee, WI 53208

[Participant Name] [Grant Type]

[Signed Electronically] Plan: 2014 Incentive Stock Plan

Acceptance Date: [Acceptance Date] ID: [Participant ID]

The number of Net Income Performance Shares earned will be as follows:

Aggregate Net Income at 70% of Target Aggregate Net Income = 50% Net Income Performance Shares

Aggregate Net Income at 100% of Target Aggregate Net Income = 100% Net Income Performance Shares

Aggregate Net Income at 102.5% of Target Aggregate Net Income = 200% Net Income Performance Shares

Aggregate Net Income at 105% of Target Aggregate Net Income = 300% Net Income Performance Shares

ROIC. The performance measure that will determine the number of Shares you earn in respect of 42.5% of your Performance Shares (“ROIC Performance Shares”) will be the three year average HDMC ROIC for the year in which the Grant Date occurs and the following two years. “HDMC ROIC” shall mean the sum of the quotient obtained by dividing (i) HDMC Net Operating Income After Tax by (ii) HDMC Invested Capital for each year in the performance period, divided by the number of years in the performance period. “HDMC Net Operating Income After Tax” shall mean the amount of operating income of HDMC reduced for taxes for the relevant year in the performance period. “HDMC Invested Capital” shall mean the average amount of HDMC

debt plus the average amount of HDMC shareholder’s equity, excluding accumulated other comprehensive income or loss for pension and post-retirement plans, for the relevant year in the performance period. “HDMC” shall mean Harley-Davidson Motor Company. “Target ROIC” shall mean the average HDMC ROIC for such period as reflected in the Company’s strategic plan approved by the Board of Directors of the Company as of the Grant Date.

The number of ROIC Performance Shares earned will be as follows:

Average HDMC ROIC at 70% of Target ROIC = 50% ROIC Performance Shares

Average HDMC ROIC at 100% of Target ROIC = 100% ROIC Performance Shares

Average HDMC ROIC at 102.5% of Target ROIC = 200% ROIC Performance Shares

Average HDMC ROIC at 105% of Target ROIC = 300% ROIC Performance Shares

You may not sell, transfer or otherwise convey an interest in or pledge any of your Performance Shares.

HARLEY-DAVIDSON, INC.

Vice President and Controller

Exhibit A to Performance Shares Agreement

Change of Control: The occurrence of a Change of Control (as defined in the Plan) shall not, in and of itself, cause otherwise unvested Performance Shares to become vested. Unless the Committee (as defined in the Plan) has exercised its discretion under Section 17(c) of the Plan to provide a result more favorable to you, whether or not the vesting of otherwise unvested Performance Shares is accelerated following such Change of Control shall be determined in accordance with the provisions of the Transition Agreement then in effect between you and Harley-Davidson, Inc. (or, if you had been but are not then a party to a Transition Agreement, the provisions of the Transition Agreement that would have applied if the last such Transition Agreement to which you were a party had continued).

taxes, the Company has the right and authority to deduct or withhold from any compensation it would pay to you (including payments in respect of Performance Shares) an amount, and/or to treat you as having surrendered vested Performance Shares having a value, sufficient to satisfy its withholding obligations. In its discretion, the Company may require you to deliver to the Company or to such other person as the Company may designate at the time the Company is obligated to withhold taxes that arise from such receipt or vesting, as the case may be, such amount as the Company requires to meet its withholding obligation under applicable tax laws or regulations.

Exhibit 21

HARLEY-DAVIDSON, INC.

SUBSIDIARIES



	State/Country
	Of
Name	Incorporation
H-D U.S.A., LLC	Wisconsin
Harley-Davidson Motor Company Group, LLC	Wisconsin
Harley-Davidson Motor Company Operations, Inc.	Wisconsin
H-D Franklin, LLC	Wisconsin
H-D Tomahawk Somo, LLC	Wisconsin
H-D Tomahawk Industrial Park, LLC	Wisconsin
H-D Tomahawk Kaphaem Road, LLC	Wisconsin
H-D Capitol Drive, LLC	Wisconsin
H-D Pilgrim Road, LLC	Wisconsin
Harley-Davidson Motor Company, Inc.	Wisconsin
Harley-Davidson Museum, LLC	Wisconsin
Buell Distribution Company, LLC	Wisconsin
H-D F&R, LLC	Wisconsin
Harley-Davidson Latin America, LLC	Wisconsin
Harley-Davidson Asia Pacific, LLC	Wisconsin
Buell Motorcycle Company, LLC	Wisconsin
HDWA, LLC	Wisconsin
Harley-Davidson Dealer Systems, Inc.	Ohio
H-D International Holding Co., Inc.	Wisconsin
Harley-Davidson Holding Co., Inc.	Delaware
Harley-Davidson Benelux B.V.	Netherlands
Harley-Davidson France SAS	France
Harley-Davidson Germany GmbH	Germany
Harley-Davidson Italia S.r.l.	Italy
Harley-Davidson Japan KK	Japan
Harley-Davidson Europe Limited	England
Harley-Davidson do Brazil Ltda.	Brazil
Harley-Davidson do Brazil Fabricacao De Componentes Ltda.	Brazil
Harley-Davidson Australia Pty. Limited	Australia
Harley-Davidson (Shanghai) Commercial and Trading Co., Ltd.	China
H-D Hong Kong Limited	Hong Kong
Harley-Davidson Espana S.L.	Spain
Harley-Davidson Switzerland GmbH	Switzerland
New Castalloy Pty. Limited	Australia
Harley-Davidson De Mexico, S. De R.L. De C.V.	Mexico
Harley-Davidson De Mexico Management, S. De R.L. De C.V.	Mexico
Harley-Davidson Africa (Pty) Limited	South Africa
Harley-Davidson Asia Pacific Pte. Ltd.	Singapore
Harley-Davidson Central and Eastern Europe s.r.o.	Czech Republic
H-D Motor Company India Private Limited	India
Harley-Davidson Austria GmbH	Austria



Harley-Davidson RUS LLC	Russia
Harley-Davidson MENA DMCC	Dubai
Harley-Davidson South East Europe Single Member E.P.E.	Greece
Harley-Davidson (Thailand) Company Limited	Thailand
Harley-Davidson Canada GP Inc.	Canada
Harley-Davidson Canada Holdings ULC	Canada
Renovation Realty Investment Services, Inc.	Wisconsin
HR, LLC	Indiana
HR Holding Corp.	Wisconsin
Harley-Davidson Financial Services, Inc.	Delaware
Harley-Davidson Insurance Services, Inc.	Nevada
Harley-Davidson Credit Corp.	Nevada
Harley-Davidson Insurance Services of Illinois, Inc.	Illinois
Harley-Davidson Customer Funding Corp	Nevada
Harley-Davidson Motorcycle Trust 2010-1	Delaware
Harley-Davidson Motorcycle Trust 2011-1	Delaware
Harley-Davidson Motorcycle Trust 2011-2	Delaware
Harley-Davidson Motorcycle Trust 2012-1	Delaware
Harley-Davidson Motorcycle Trust 2013-1	Delaware
Harley-Davidson Motorcycle Trust 2014-1	Delaware
Harley-Davidson Motorcycle Trust 2015-1	Delaware
Harley-Davidson Motorcycle Trust 2015-2	Delaware
Eaglemark Savings Bank	Nevada
Harley-Davidson Leasing, Inc.	Nevada
Harley-Davidson Warehouse Funding Corp.	Nevada
Harley-Davidson Financial Services International, Inc.	Delaware
Harley-Davidson Financial Services Europe Limited	England
Harley-Davidson Financial Services Canada, Inc.	Canada

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:


(1)	Registration Statement (Form S-8 No. 333-51741) pertaining to the Harley-Davidson, Inc. Director Stock Plan;


(2)	Registration Statement (Form S-8 No. 333-75347) pertaining to the Harley-Davidson, Inc. 1998 Non-Exempt Employee Stock Option Plan;


(3)	Registration Statement (Form S-8 No. 333-60840) pertaining to the Harley-Davidson, Inc. 2001 York Hourly-Paid Employees Stock Option Plan;


(4)	Registration Statement (Form S-8 No. 333-123405) pertaining to the Harley-Davidson, Inc. 2004 Incentive Stock Plan;


(5)	Registration Statement (Form S-8 No. 333-166549) pertaining to the Harley-Davidson, Inc. 2009 Incentive Stock Plan;


(6)	Registration Statement (Form S-8 No. 333-171813) pertaining to the Harley-Davidson, Inc. Stock Purchase Plan;

(7)

Registration Statement (Form S-8 Nos. 333-181761) of Harley-Davidson, Inc. pertaining to the Harley-Davidson Retirement Savings Plan for Salaried Employees, the Harley-Davidson Retirement Savings Plan for Milwaukee and Tomahawk Hourly Bargaining Unit Employees, the Harley-Davidson Retirement Savings Plan for Kansas City Hourly Bargaining Unit Employees, the Harley-Davidson Retirement Savings Plan for York Hourly Bargaining Unit Employees, and the Harley-Davidson Financial Services, Inc. 401(k) Profit Sharing Plan;


(8)	Registration Statement (Form S-8 No. 333-199972) pertaining to the Harley-Davidson, Inc. 2014 Incentive Stock Plan; and


(9)	Registration Statement (Form S-3 No. 333-202491) of Harley-Davidson, Inc. and the related Prospectus;

of our reports dated February 18, 2016, with respect to the consolidated financial statements and schedule of Harley-Davidson, Inc. and the effectiveness of internal control over financial reporting of Harley-Davidson, Inc., included in this Annual Report (Form 10-K) of Harley-Davidson for the year ended December 31, 2015.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

February 18, 2016

Exhibit 31.1

Chief Executive Officer Certification

Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

I, Matthew S. Levatich, certify that:


1.	I have reviewed this annual report on Form 10-K of Harley-Davidson, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: February 18, 2016	/S/ Matthew S. Levatich
	Matthew S. Levatich
	President and Chief Executive Officer

Exhibit 31.2

Chief Financial Officer Certification

Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

I, John A. Olin, certify that:


1.	I have reviewed this annual report on Form 10-K of Harley-Davidson, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: February 18, 2016	/S/ John A. Olin
	John A. Olin
	Senior Vice President and
	Chief Financial Officer

Exhibit 32

Written Statement of the Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. sec. 1350

Solely for the purpose of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer of Harley-Davidson, Inc. (the “Company”), hereby certify, based on our knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: February 18, 2016
	/S/ Matthew S. Levatich
	Matthew S. Levatich
	President and Chief Executive Officer

	/S/ John A. Olin
	John A. Olin
	Senior Vice President and
	Chief Financial Officer