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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 2022
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to           
Commission file number 1-9183
Harley-Davidson, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1382325
(State of organization) (I.R.S. Employer Identification No.)
3700 West Juneau AvenueMilwaukeeWisconsin53208
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (414) 342-4680
None
(Former name, former address and former fiscal year, if changed since last report)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock Par Value $.01 PER SHAREHOGNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒   No   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒Accelerated filer
☐
Non-accelerated filer☐Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No  ☒
The registrant had outstanding 146,184,014 shares of common stock as of October 28, 2022.


HARLEY-DAVIDSON, INC.
Form 10-Q
For The Quarter Ended September 25, 2022
Part I
Item 1.
Item 2.
Item 3.
Item 4.
Part II
Item 1.
Item 1A.
Item 2.
Item 6.


Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Revenue:
Motorcycles and Related Products$1,436,962 $1,160,618 $4,006,604 $3,724,225 
Financial Services211,613 204,692 606,244 595,650 
1,648,575 1,365,310 4,612,848 4,319,875 
Costs and expenses:
Motorcycles and Related Products cost of goods sold946,656 850,193 2,721,913 2,586,264 
Financial Services interest expense60,740 44,770 150,488 149,098 
Financial Services provision for credit losses36,617 11,208 94,572 4,935 
Selling, administrative and engineering expense265,841 254,312 740,699 747,665 
Restructuring expense (benefit)3 615 (389)1,167 
1,309,857 1,161,098 3,707,283 3,489,129 
Operating income338,718 204,212 905,565 830,746 
Other income, net 9,358 858 30,443 1,825 
Investment income (loss)1,723 198 (3,786)4,331 
Interest expense8,124 7,779 23,555 23,209 
Income before provision for income taxes341,675 197,489 908,667 813,693 
Provision for income taxes80,489 34,516 209,130 185,236 
Net income$261,186 $162,973 $699,537 $628,457 
Earnings per share:
Basic$1.79 $1.06 $4.71 $4.09 
Diluted$1.78 $1.05 $4.68 $4.06 
Cash dividends per share$0.1575 $0.1500 $0.4725 $0.4500 
The accompanying notes are integral to the consolidated financial statements.

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Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Net income$261,186 $162,973 $699,537 $628,457 
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments(46,245)(17,836)(81,387)(33,759)
Derivative financial instruments9,031 4,270 31,811 21,298 
Pension and postretirement benefit plans5,503 13,588 16,508 40,763 
(31,711)22 (33,068)28,302 
Comprehensive income$229,475 $162,995 $666,469 $656,759 
The accompanying notes are integral to the consolidated financial statements.


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Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)(Unaudited)
September 25,
2022		December 31,
2021		September 26,
2021
ASSETS
Current assets:
Cash and cash equivalents$1,730,250 $1,874,745 $2,061,303 
Accounts receivable, net300,454 182,148 282,627 
Finance receivables, net of allowance of $61,671, $60,734, and $62,406
1,807,718 1,465,544 1,540,822 
Inventories, net680,762 712,942 475,314 
Restricted cash287,264 128,935 153,873 
Other current assets205,734 185,777 194,481 
5,012,182 4,550,091 4,708,420 
Finance receivables, net of allowance of $298,425, $278,645, and $293,428
5,534,730 5,106,377 5,322,436 
Property, plant and equipment, net641,651 683,984 671,836 
Pension and postretirement assets424,784 386,152 132,958 
Goodwill60,440 63,177 63,841 
Deferred income taxes69,734 82,922 128,059 
Lease assets40,543 49,625 47,507 
Other long-term assets143,547 128,727 124,747 
$11,927,611 $11,051,055 $11,199,804 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$438,534 $374,978 $382,216 
Accrued liabilities710,544 601,981 599,852 
Short-term deposits, net97,856 72,146 92,626 
Short-term debt692,551 751,286 749,620 
Current portion of long-term debt, net1,740,422 1,542,496 1,605,798 
3,679,907 3,342,887 3,430,112 
Long-term deposits, net246,879 218,180 197,644 
Long-term debt, net4,738,234 4,595,617 4,876,292 
Lease liabilities23,836 29,904 26,017 
Pension and postretirement liabilities92,953 95,299 103,144 
Deferred income taxes8,312 9,261 8,585 
Other long-term liabilities297,280 206,663 224,116 
Commitments and contingencies (Note 16)
Shareholders’ equity:
Common stock1,704 1,694 1,694 
Additional paid-in-capital1,575,632 1,547,011 1,540,235 
Retained earnings2,471,795 1,842,421 1,843,964 
Accumulated other comprehensive loss(273,987)(240,919)(455,115)
Treasury stock, at cost(934,934)(596,963)(596,884)
2,840,210 2,553,244 2,333,894 
$11,927,611 $11,051,055 $11,199,804 
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Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands)
(Unaudited)(Unaudited)
September 25,
2022		December 31,
2021		September 26,
2021
Balances held by consolidated variable interest entities (Note 12):
Finance receivables, net - current$635,628 $493,543 $531,942 
Other assets$9,582 $2,982 $2,754 
Finance receivables, net - non-current$2,730,915 $1,734,428 $1,961,367 
Restricted cash - current and non-current$205,878 $144,284 $167,865 
Current portion of long-term debt, net $736,332 $569,145 $629,600 
Long-term debt, net$2,158,148 $1,330,586 $1,565,022 
The accompanying notes are integral to the consolidated financial statements.
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Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine months ended
September 25,
2022		September 26,
2021
Net cash provided by operating activities (Note 7)$574,704 $925,551 
Cash flows from investing activities:
Capital expenditures(84,947)(61,476)
Origination of finance receivables(3,773,830)(3,444,953)
Collections on finance receivables3,110,881 2,968,397 
Other investing activities2,160 2,485 
Net cash used by investing activities(745,736)(535,547)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes495,785 — 
Repayments of medium-term notes(950,000)(1,400,000)
Proceeds from securitization debt1,826,891 1,169,910 
Repayments of securitization debt(1,054,939)(1,013,820)
Borrowings of asset-backed commercial paper448,255 27,406 
Repayments of asset-backed commercial paper(228,431)(206,671)
Net decrease in unsecured commercial paper(60,281)(261,978)
Net increase in deposits54,080 210,144 
Deposit in advance of business combination100,000 — 
Dividends paid(70,163)(69,316)
Repurchase of common stock(338,496)(11,545)
Other financing activities(1,237)4,324 
Net cash provided (used) by financing activities221,464 (1,551,546)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(33,361)(11,050)
Net increase (decrease) in cash, cash equivalents and restricted cash$17,071 $(1,172,592)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$2,025,219 $3,409,168 
Net increase (decrease) in cash, cash equivalents and restricted cash17,071 (1,172,592)
Cash, cash equivalents and restricted cash, end of period$2,042,290 $2,236,576 
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents$1,730,250 $2,061,303 
Restricted cash 287,264 153,873 
Restricted cash included in Other long-term assets24,776 21,400 
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows$2,042,290 $2,236,576 
The accompanying notes are integral to the consolidated financial statements.


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Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share amounts)
(Unaudited)
 Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
 Issued
Shares		Balance
Balance, December 31, 2021169,364,686 $1,694 $1,547,011 $1,842,421 $(240,919)$(596,963)$2,553,244 
Net income— — — 222,502 — — 222,502 
Other comprehensive income, net of tax (Note 17)— — — — 11,309 — 11,309 
Dividends ($0.1575 per share)
— — — (24,056)— — (24,056)
Repurchase of common stock— — — — — (261,737)(261,737)
Share-based compensation976,062 10 7,829 — — — 7,839 
Balance, March 27, 2022170,340,748 1,704 1,554,840 2,040,867 (229,610)(858,700)2,509,101 
Net income— — — 215,849 — — 215,849 
Other comprehensive loss, net of tax (Note 17)— — — — (12,666)— (12,666)
Dividends ($0.1575 per share)
— — — (23,090)— — (23,090)
Repurchase of common stock— — — — — (64,091)(64,091)
Share-based compensation23,479 — 9,524 — — 525 10,049 
Balance, June 26, 2022170,364,227 1,704 1,564,364 2,233,626 (242,276)(922,266)2,635,152 
Net income— — — 261,186 — — 261,186 
Other comprehensive loss, net of tax (Note 17)— — — — (31,711)— (31,711)
Dividends ($0.1575 per share)
— — — (23,017)— — (23,017)
Repurchase of common stock— — — — — (12,668)(12,668)
Share-based compensation26,625 — 11,268 — — — 11,268 
Balance, September 25, 2022170,390,852 $1,704 $1,575,632 $2,471,795 $(273,987)$(934,934)$2,840,210 
 Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Issued
Shares		Balance
Balance, December 31, 2020168,503,526 $1,685 $1,507,706 $1,284,823 $(483,417)$(588,012)$1,722,785 
Net income— — — 259,144 — — 259,144 
Other comprehensive income, net of tax (Note 17)— — — — 13,780 — 13,780 
Dividends ($0.1500 per share)
— — — (23,105)— — (23,105)
Repurchase of common stock— — — — — (5,646)(5,646)
Share-based compensation483,326 5 9,423 — — — 9,428 
Balance, March 28, 2021168,986,852 1,690 1,517,129 1,520,862 (469,637)(593,658)1,976,386 
Net income— — — 206,340 — — 206,340 
Other comprehensive income, net of tax (Note 17)— — — — 14,500 — 14,500 
Dividends ($0.1500 per share)
— — — (23,104)— — (23,104)
Repurchase of common stock— — — — — (5,265)(5,265)
Share-based compensation322,015 3 14,327 — — 1,085 15,415 
Balance, June 27, 2021169,308,867 1,693 1,531,456 1,704,098 (455,137)(597,838)2,184,272 
Net income— — — 162,973 — — 162,973 
Other comprehensive income, net of tax (Note 17)— — — — 22 — 22 
Dividends ($0.1500 per share)
— — — (23,107)— — (23,107)
Repurchase of common stock— — — — — (634)(634)
Share-based compensation49,831 1 8,779 — — 1,588 10,368 
Balance, September 26, 2021169,358,698 $1,694 $1,540,235 $1,843,964 $(455,115)$(596,884)$2,333,894 
The accompanying notes are integral to the consolidated financial statements.
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Table of Contents
HARLEY-DAVIDSON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation and Use of Estimates
Principles of Consolidation and Basis of Presentation – The consolidated financial statements include the accounts of Harley-Davidson, Inc. and its subsidiaries, all of which are wholly-owned (the Company), including the accounts of the groups of companies referred to as Harley-Davidson Motor Company and Harley-Davidson Financial Services. In addition, certain variable interest entities (VIEs) related to secured financing are consolidated as the Company is the primary beneficiary. All intercompany accounts and material intercompany transactions have been eliminated.
The Company operates in two reportable segments: Motorcycles and Related Products (Motorcycles) and Financial Services.
In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Consolidated balance sheets as of September 25, 2022 and September 26, 2021, the Consolidated statements of operations for the three and nine month periods then ended, the Consolidated statements of comprehensive income for the three and nine month periods then ended, the Consolidated statements of cash flows for the nine month periods then ended, and the Consolidated statements of shareholders' equity for the three month periods within the nine month periods ended September 25, 2022 and September 26, 2021.
Certain information and disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and U.S. generally accepted accounting principles (U.S. GAAP) for interim financial reporting. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires the Company's management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
2. New Accounting Standards
Accounting Standards Not Yet Adopted
In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (ASU 2022-02). ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of its previously issued credit losses standard (ASU 2016-13) that introduced the current expected credit losses (CECL) model. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhances disclosure requirements for certain loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, ASU 2022-02 requires a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. As the Company has already adopted ASU 2016-13, the new guidance is effective for the fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. Early adoption is permitted. The adoption of ASU 2022-02 is not expected to have a material impact on the Company's consolidated financial statements.
3. Revenue
The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue.
9
Disaggregated revenue by major source was as follows (in thousands):
Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Motorcycles and Related Products Revenue:
Motorcycles$1,133,558 $885,626 $3,132,717 $2,931,669 
Parts and accessories201,003 204,506 581,068 577,035 
Apparel69,834 49,424 198,568 155,378 
Licensing10,662 8,481 28,940 22,865 
Other21,905 12,581 65,311 37,278 
1,436,962 1,160,618 4,006,604 3,724,225 
Financial Services Revenue:
Interest income179,261 174,103 509,702 501,645 
Other32,352 30,589 96,542 94,005 
211,613 204,692 606,244 595,650 
$1,648,575 $1,365,310 $4,612,848 $4,319,875 
The Company maintains certain deferred revenue balances related to payments received at contract inception in advance of the Company’s performance under the contract and generally relates to the sale of Harley Owners Group® memberships and various financial services products. Deferred revenue is recognized as revenue as the Company performs under the contract. Deferred revenue, included in Accrued liabilities and Other long-term liabilities on the Consolidated balance sheets, was as follows (in thousands):
September 25,
2022		September 26,
2021
Balance, beginning of period$40,092 $36,614 
Balance, end of period$45,746 $38,682 
Previously deferred revenue recognized as revenue in the three months ended September 25, 2022 and September 26, 2021 was $7.0 million and $6.1 million, respectively, and $22.4 million and $17.9 million in the nine months ended September 25, 2022 and September 26, 2021, respectively. The Company expects to recognize approximately $18.2 million of the remaining unearned revenue over the next 12 months and $27.6 million thereafter.
4. Restructuring Activities
The Company's restructuring activities are included in Restructuring expense (benefit) on the Consolidated statements of operations.
In 2020, the Company initiated restructuring activities including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. The workforce reduction resulted in the termination of approximately 500 employees. In addition, the India action resulted in the termination of approximately 70 employees. These restructuring activities are essentially complete, and the Company does not expect restructuring expenses of any significance in 2022.
Since the inception of the restructuring activities in 2020 through the nine months ended September 25, 2022, the Company has incurred cumulative restructuring expenses of $133.0 million, including $121.5 million and $11.5 million in the Motorcycles and Financial Services segments, respectively. This includes restructuring expense (benefit) for the three and nine month periods ended September 25, 2022 and September 26, 2021 by segment as follows (in thousands):
Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Motorcycles and Related Products$3 $517 $(389)$731 
Financial Services— 98 — 436 
$3 $615 $(389)$1,167 
10
Changes in accrued restructuring expenses, which are included in Accrued liabilities on the Consolidated balance sheets, were as follows (in thousands):
Three months ended September 25, 2022
Employee Termination BenefitsContract Terminations
& Other		Non-Current Asset AdjustmentsTotal
Balance, beginning of period$79 $744 $— $823 
Restructuring expense— 3 — 3 
Utilized – cash
(19)(221)— (240)
Utilized – non cash
— — — — 
Foreign currency changes(4)(5)— (9)
Balance, end of period$56 $521 

$— $577 
Three months ended September 26, 2021
Employee Termination BenefitsContract Terminations
& Other		Non-Current Asset AdjustmentsTotal
Balance, beginning of period$1,246 $2,084 $— $3,330 
Restructuring (benefit) expense(165)807 (27)615 
Utilized – cash
(397)(1,197)— (1,594)
Utilized – non cash
— — 27 27 
Foreign currency changes(7)(21)— (28)
Balance, end of period$677 $1,673 

$— $2,350 
Nine months ended September 25, 2022
Employee Termination BenefitsContract Terminations
& Other		Non-Current Asset AdjustmentsTotal
Balance, beginning of period$121 $2,874 $— $2,995 
Restructuring benefit— (389)— (389)
Utilized – cash
(55)(1,949)— (2,004)
Utilized – non cash
— — — — 
Foreign currency changes(10)(15)— (25)
Balance, end of period$56 $521 

$— $577 
Nine months ended September 26, 2021
Employee Termination BenefitsContract Terminations
& Other		Non-Current Asset AdjustmentsTotal
Balance, beginning of period$7,724 $16,196 $— $23,920 
Restructuring (benefit) expense(1,131)2,576 (278)1,167 
Utilized – cash
(5,743)(16,987)— (22,730)
Utilized – non cash
— — 278 278 
Foreign currency changes(173)(112)— (285)
Balance, end of period$677 $1,673 

$— $2,350 
5. Income Taxes
The Company’s effective income tax rate for the nine months ended September 25, 2022 was 23.0% compared to 22.8% for the nine months ended September 26, 2021.
11
6. Earnings Per Share
The computation of basic and diluted earnings per share was as follows (in thousands, except per share amounts):
 Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Net income$261,186 $162,973 $699,537 $628,457 
Basic weighted-average shares outstanding146,217 153,863 148,673 153,700 
Effect of dilutive securities – employee stock compensation plan
856 1,254 862 1,203 
Diluted weighted-average shares outstanding147,073 155,117 149,535 154,903 
Net earnings per share:
Basic$1.79 $1.06 $4.71 $4.09 
Diluted$1.78 $1.05 $4.68 $4.06 
Shares of common stock related to share-based compensation that were not included in the effect of dilutive securities because the effect would have been anti-dilutive include 3.9 million and 0.5 million shares for the three months ended September 25, 2022 and September 26, 2021, respectively, and 2.3 million and 0.5 million shares for the nine months ended September 25, 2022 and September 26, 2021, respectively.
7. Additional Balance Sheet and Cash Flow Information
Investments in Marketable Securities – The Company’s investments in marketable securities consisted of the following (in thousands):
September 25,
2022		December 31,
2021		September 26,
2021
Mutual funds$33,631 $49,650 $48,766 
Mutual funds, included in Other long-term assets on the Consolidated balance sheets, are carried at fair value with gains and losses recorded in income. Mutual funds are held to support certain deferred compensation obligations.
Inventories, net – Substantially all inventories located in the U.S. are valued using the last-in, first-out (LIFO) method. Other inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Motorcycle finished goods inventories include motorcycles that are ready for sale and motorcycles that are substantially complete but awaiting installation of certain components affected by global supply chain constraints. Inventories, net consisted of the following (in thousands):
September 25,
2022		December 31,
2021		September 26,
2021
Raw materials and work in process$311,424 $347,915 $279,699 
Motorcycle finished goods304,195 345,956 178,315 
Parts and accessories and apparel160,724 103,191 86,977 
Inventory at lower of FIFO cost or net realizable value776,343 797,062 544,991 
Excess of FIFO over LIFO cost(95,581)(84,120)(69,677)
$680,762 $712,942 $475,314 
Restricted cash – During the quarter ended September 25, 2022, the Company received a $100 million cash deposit from an independent strategic investor, Kwang Yang Motor Co., Ltd. (KYMCO), in advance of the pending LiveWire transaction, discussed further in Note 20. Restricted cash recorded in connection with asset-backed financing is discussed further in Note 12.
12
Deposits – Harley-Davidson Financial Services offers brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. The Company had $344.7 million, $290.3 million and $290.3 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of September 25, 2022, December 31, 2021, and September 26, 2021, respectively. The liabilities for deposits are included in Short-term deposits, net or Long-term deposits, net on the Consolidated balance sheets based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.
Future maturities of the Company's certificates of deposit as of September 25, 2022 were as follows (in thousands):
2022$27,475 
202380,106 
202480,378 
202524,006 
202679,742 
Thereafter54,158 
Future maturities345,865 
Unamortized fees(1,130)
$344,735 
Operating Cash Flow – The reconciliation of Net income to Net cash provided by operating activities was as follows (in thousands):
 Nine months ended
September 25,
2022		September 26,
2021
Cash flows from operating activities:
Net income$699,537 $628,457 
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization114,867 122,483 
Amortization of deferred loan origination costs72,214 63,265 
Amortization of financing origination fees11,475 10,426 
Provision for long-term employee benefits(14,637)19,640 
Employee benefit plan contributions and payments(4,766)(14,677)
Stock compensation expense33,595 34,032 
Net change in wholesale finance receivables related to sales(294,698)(22,031)
Provision for credit losses94,572 4,935 
Deferred income taxes(2,980)10,626 
Other, net24,392 2,094 
Changes in current assets and liabilities:
Accounts receivable, net(150,726)(148,670)
Finance receivables – accrued interest and other
3,566 11,088 
Inventories, net(6,577)31,874 
Accounts payable and accrued liabilities37,745 168,306 
Other current assets(42,875)3,703 
(124,833)297,094 
Net cash provided by operating activities$574,704 $925,551 
13
8. Finance Receivables
The Company provides retail financial services to customers of its dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to dealer sales of motorcycles to retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.
The Company offers wholesale financing to its dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles and related parts and accessories to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.
Finance receivables, net were as follows (in thousands):
September 25,
2022		December 31,
2021		September 26,
2021
Retail finance receivables$6,945,649 $6,493,519 $6,727,956 
Wholesale finance receivables756,895 417,781 491,136 
7,702,544 6,911,300 7,219,092 
Allowance for credit losses(360,096)(339,379)(355,834)
$7,342,448 $6,571,921 $6,863,258 
The Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. The Company's allowance for credit losses reflects expected lifetime credit losses on its finance receivables. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for credit losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio.
The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.
The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past credit loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.
The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Each quarter, the Company’s outlook on economic conditions impacts the Company's retail and wholesale estimates for expected credit losses. During the third quarter of 2022, economic recovery slowed and the ongoing pace of economic recovery remained uncertain as the magnitude of inflation continued to challenge the U.S. and global economies, near-term recession concerns have not abated, muted consumer confidence persisted, the conflict in Ukraine was wide-reaching with resolution uncertain, and global supply chain issues continued, among other factors. As such, at the end of the third quarter of 2022, the Company’s outlook on economic
14
conditions and its probability weighting of its economic forecast scenarios included continued slow economic improvement in certain factors, such as unemployment, with a high probability of a near-term recession.
Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance for credit losses balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and changes in other portfolio-specific loan characteristics.
Due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and the Company’s expectations surrounding the economic forecasts. The Company will continue to monitor future economic trends and conditions. Expectations surrounding the Company's economic forecasts may change in future periods as additional information becomes available.
Changes in the Company's allowance for credit losses on its finance receivables by portfolio were as follows (in thousands):
 Three months ended September 25, 2022Nine months ended September 25, 2022
 RetailWholesaleTotalRetailWholesaleTotal
Balance, beginning of period$342,691 $9,446 $352,137 $326,320 $13,059 $339,379 
Provision for credit losses34,697 1,920 36,617 96,265 (1,693)94,572 
Charge-offs(40,283)— (40,283)(114,145)— (114,145)
Recoveries11,625 — 11,625 40,290 — 40,290 
Balance, end of period$348,730 $11,366 $360,096 $348,730 $11,366 $360,096 
 Three months ended September 26, 2021Nine months ended September 26, 2021
 RetailWholesaleTotalRetailWholesaleTotal
Balance, beginning of period$342,490 $16,321 $358,811 $371,738 $19,198 $390,936 
Provision for credit losses13,861 (2,653)11,208 10,465 (5,530)4,935 
Charge-offs(24,670)— (24,670)(76,366)— (76,366)
Recoveries10,335 150 10,485 36,179 150 36,329 
Balance, end of period$342,016 $13,818 $355,834 $342,016 $13,818 $355,834 
The Company manages retail credit risk through its credit approval process and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. For the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.
As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the two portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.
15
The amortized cost of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator was as follows (in thousands):
September 25, 2022
202220212020201920182017 & PriorTotal
U.S. Retail:
Super prime$1,002,057 $684,597 $312,641 $187,399 $87,508 $36,424 $2,310,626 
Prime1,281,483 982,085 476,677 297,481 160,552 102,887 3,301,165 
Sub-prime389,674 334,611 185,874 122,231 67,147 58,364 1,157,901 
2,673,214 2,001,293 975,192 607,111 315,207 197,675 6,769,692 
Canadian Retail:
Super prime46,930 33,149 19,727 14,500 6,365 2,085 122,756 
Prime15,043 11,537 8,149 5,738 3,562 2,345 46,374 
Sub-prime1,984 1,552 1,321 991 582 397 6,827 
63,957 46,238 29,197 21,229 10,509 4,827 175,957 
$2,737,171 $2,047,531 $1,004,389 $628,340 $325,716 $202,502 $6,945,649 
December 31, 2021
202120202019201820172016 & PriorTotal
U.S. Retail:
Super prime$1,010,636 $484,479 $316,390 $171,763 $65,753 $27,424 $2,076,445 
Prime1,391,385 712,858 470,177 277,206 142,288 82,169 3,076,083 
Sub-prime476,688 273,787 182,002 105,330 61,923 51,035 1,150,765 
2,878,709 1,471,124 968,569 554,299 269,964 160,628 6,303,293 
Canadian Retail:
Super prime51,779 32,724 27,073 13,984 4,619 1,614 131,793 
Prime16,882 12,675 9,244 6,230 3,628 1,779 50,438 
Sub-prime2,356 2,134 1,571 947 606 381 7,995 
71,017 47,533 37,888 21,161 8,853 3,774 190,226 
$2,949,726 $1,518,657 $1,006,457 $575,460 $278,817 $164,402 $6,493,519 
September 26, 2021
202120202019201820172016 & PriorTotal
U.S. Retail:
Super prime$896,163 $551,078 $367,490 $206,333 $83,674 $38,494 $2,143,232 
Prime1,228,335 805,349 538,440 323,554 171,308 107,715 3,174,701 
Sub-prime428,238 312,163 207,139 119,730 72,026 64,890 1,204,186 
2,552,736 1,668,590 1,113,069 649,617 327,008 211,099 6,522,119 
Canadian Retail:
Super prime50,110 36,596 31,173 16,701 6,265 2,239 143,084 
Prime16,166 13,904 10,336 7,026 4,228 2,350 54,010 
Sub-prime2,345 2,436 1,694 1,090 704 474 8,743 
68,621 52,936 43,203 24,817 11,197 5,063 205,837 
$2,621,357 $1,721,526 $1,156,272 $674,434 $338,205 $216,162 $6,727,956 
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The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated by the Company on a quarterly basis.
The amortized cost of the Company's wholesale financial receivables, by vintage and credit quality indicator, was as follows (in thousands):
September 25, 2022
202220212020201920182017 & PriorTotal
Non-Performing$— $— $— $— $— $— $— 
Doubtful— — — — — — — 
Substandard— — — — — — — 
Special Mention— — — — — — — 
Medium Risk— — — — — — — 
Low Risk714,122 22,850 7,169 3,749 8,607 398 756,895 
$714,122 $22,850 $7,169 $3,749 $8,607 $398 $756,895 
December 31, 2021
202120202019201820172016 & PriorTotal
Non-Performing$— $— $— $— $— $— $— 
Doubtful— — — — — — — 
Substandard— — — — — — — 
Special Mention— — — — — — — 
Medium Risk— — — — — — — 
Low Risk380,211 11,379 11,047 10,565 3,662 917 417,781 
$380,211 $11,379 $11,047 $10,565 $3,662 $917 $417,781 
September 26, 2021
202120202019201820172016 & PriorTotal
Non-Performing$— $— $— $— $— $— $— 
Doubtful— — — — — — — 
Substandard— — — — — — — 
Special Mention— — — — — — — 
Medium Risk— — — — — — — 
Low Risk432,088 19,082 22,821 11,218 4,222 1,705 491,136 
$432,088 $19,082 $22,821 $11,218 $4,222 $1,705 $491,136 
Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. The Company reverses accrued interest related to charged-off accounts against Financial Services interest income when the account is charged-off. The Company reversed $3.9 million and $3.1 million of accrued interest against Financial Services interest income during the three months ended September 25, 2022 and September 26, 2021, respectively, and $13.0 million and $11.6 million during the nine months ended September 25, 2022 and September 26, 2021, respectively. All retail finance
17
receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses to exclude accrued interest from its allowance for credit losses. Accordingly, as of September 25, 2022, December 31, 2021 and September 26, 2021, all retail finance receivables were 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 the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against interest income. As the Company follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio. There were no charged-off accounts during the three and nine months ended September 25, 2022 and September 26, 2021. As such, the Company did not reverse any accrued interest in those periods. There were no dealers on non-accrual status at September 25, 2022, December 31, 2021, and September 26, 2021.
The aging analysis of the Company's finance receivables was as follows (in thousands):
 September 25, 2022
Current31-60 Days
Past Due		61-90 Days
Past Due		Greater than
90 Days
Past Due		Total
Past Due		Total
Retail finance receivables$6,714,095 $136,957 $49,260 $45,337 $231,554 $6,945,649 
Wholesale finance receivables756,609 271 15 — 286 756,895 
$7,470,704 $137,228 $49,275 $45,337 $231,840 $7,702,544 
 December 31, 2021
Current31-60 Days
Past Due		61-90 Days
Past Due		Greater than
90 Days
Past Due		Total
Past Due		Total
Retail finance receivables$6,298,485 $115,942 $44,326 $34,766 $195,034 $6,493,519 
Wholesale finance receivables417,720 9 1 51 61 417,781 
$6,716,205 $115,951 $44,327 $34,817 $195,095 $6,911,300 
 September 26, 2021
Current31-60 Days
Past Due		61-90 Days
Past Due		Greater than
90 Days
Past Due		Total
Past Due		Total
Retail finance receivables$6,561,412 $101,157 $35,273 $30,114 $166,544 $6,727,956 
Wholesale finance receivables490,974 46 92 24 162 491,136 
$7,052,386 $101,203 $35,365 $30,138 $166,706 $7,219,092 
Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize economic loss, the Company may modify certain finance receivables in troubled debt restructurings. Total finance receivables in troubled debt restructurings were not significant as of September 25, 2022, December 31, 2021 and September 26, 2021. Additionally, in certain situations, the Company may offer short-term adjustments to customer payment due dates without affecting the associated interest rate or loan term. From the second quarter of 2020 through the end of the second quarter of 2021, in response to the impact of the COVID-19 pandemic, the Company granted an increased amount of short-term payment due date extensions on eligible retail loans to help retail customers get through financial difficulties associated with the COVID-19 pandemic. The Company continues to grant standard payment extensions to customers in accordance with its policies.
9. Derivative Financial Instruments and Hedging Activities
The Company is exposed to risks from fluctuations in foreign currency exchange rates, interest rates and commodity prices. To reduce its exposure to such risks, the Company selectively uses derivative financial instruments. All derivative transactions are authorized and executed pursuant to regularly reviewed policies and procedures which prohibit the use of financial instruments for speculative trading purposes.
18
The Company sells products in foreign currencies and utilizes foreign currency exchange contracts to mitigate the effects of foreign currency exchange rate fluctuations related to the Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Chinese yuan, Singapore dollar, Thai baht, and Pound sterling. The Company's foreign currency exchange contracts generally have maturities of less than one year.
The Company utilizes commodity contracts to mitigate the effects of commodity price fluctuations related to metals and fuel consumed in its motorcycle operations. The Company's commodity contracts generally have maturities of less than one year.
The Company periodically utilizes treasury rate lock contracts to fix the interest rate on a portion of the principal related to an anticipated issuance of long-term debt and cross-currency swaps to mitigate the effect of foreign currency exchange rate fluctuations on its foreign currency-denominated debt. The Company also utilizes interest rate caps to facilitate certain asset-backed securitization transactions.
All derivative financial instruments are recognized on the Consolidated balance sheets at fair value. In accordance with ASC Topic 815, Derivatives and Hedging (ASC Topic 815), the accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship.
Changes in the fair value of derivative financial instruments that are designated as cash flow hedges are initially recorded in Other comprehensive (loss) income (OCI) and subsequently reclassified into income when the hedged item affects income. The Company assesses, both at the inception of each hedge and on an ongoing basis, whether the derivative financial instruments that are designated as cash flow hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. No component of a designated hedging derivative financial instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative financial instruments not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign currency, commodity risks, and interest rate risks. Changes in the fair value of derivative financial instruments not designated as hedging instruments are recorded directly in income. Cash flow activity associated with the Company's derivative financial instruments is recorded in Cash flows from operating activities on the Consolidated statement of cash flow.
The notional and fair values of the Company's derivative financial instruments under ASC Topic 815 were as follows (in thousands):
Derivative Financial Instruments
Designated as Cash Flow Hedging Instruments
 September 25, 2022December 31, 2021September 26, 2021
Notional
Value
Assets(a)
Liabilities(b)
Notional
Value
Assets(a)
Liabilities(b)
Notional
Value
Assets(a)
Liabilities(b)
Foreign currency contracts$459,252 $29,975 $331 $562,262 $14,644 $1,388 $406,220 $10,174 $502 
Commodity contracts1,724 169 — 996 19 39 1,000 458 — 
Cross-currency swaps1,367,460 — 149,479 1,367,460 35,071 — 1,367,460 47,989 — 
$1,828,436 $30,144 $149,810 $1,930,718 $49,734 $1,427 $1,774,680 $58,621 $502 
Derivative Financial Instruments
Not Designated as Hedging Instruments
September 25, 2022December 31, 2021September 26, 2021
Notional
Value
Assets(a)
Liabilities(b)
Notional
Value
Assets(a)
Liabilities(b)
Notional
Value
Assets(a)
Liabilities(b)
Foreign currency contracts$— $— $— $241,935 $1,299 $916 $135,381 $375 $162 
Commodity contracts8,197 27 919 10,631 641 18 9,920 739 30 
Interest rate caps1,183,178 3,857 — 504,526 360 — 608,222 112 — 
$1,191,375 $3,884 $919 $757,092 $2,300 $934 $753,523 $1,226 $192 
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(a)Includes $3.9 million of interest rate caps recorded in Other long-term assets as of September 25, 2022 with all remaining amounts recorded in Other current assets.
(b)Includes $82.7 million of cross-currency swaps recorded in Other long-term liabilities as of September 25, 2022 with all remaining amounts recorded in Accrued liabilities.
The amounts of gains and losses related to the Company's derivative financial instruments designated as cash flow hedges were as follows (in thousands):
 Gain/(Loss)
Recognized in OCI		Gain/(Loss)
Reclassified from AOCL into Income
 Three months endedNine months endedThree months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Foreign currency contracts$26,657 $8,653 $54,429 $20,829 $15,202 $(3,504)$30,484 $(16,051)
Commodity contracts88 390 816 546 147 65 627 36 
Cross-currency swaps(94,912)(40,741)(184,551)(90,633)(95,111)(33,600)(201,377)(77,775)
Treasury rate lock contracts— — — — (90)(127)(335)(375)
Interest rate swaps— — — 397 — — — (2,689)
$(68,167)$(31,698)$(129,306)$(68,861)$(79,852)$(37,166)$(170,601)$(96,854)
The location and amount of gains and losses recognized in income related to the Company's derivative financial instruments designated as cash flow hedges were as follows (in thousands):
 Motorcycles
cost of goods sold		Selling, administrative &
engineering expense		Interest expenseFinancial Services interest expense
Three months ended September 25, 2022
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$946,656 $265,841 $8,124 $60,740 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$15,202 $— $— $— 
Commodity contracts$147 $— $— $— 
Cross-currency swaps$— $(95,111)$— $— 
Treasury rate lock contracts$— $— $(90)$— 
Three months ended September 26, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$850,193 $254,312 $7,779 $44,770 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$(3,504)$— $— $— 
Commodity contracts$65 $— $— $— 
Cross-currency swaps$— $(33,600)$— $— 
Treasury rate lock contracts$— $— $(91)$(36)
20
 Motorcycles
cost of goods sold		Selling, administrative &
engineering expense		Interest expenseFinancial Services interest expense
Nine months ended September 25, 2022
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$2,721,913 $740,699 $23,555 $150,488 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$30,484 $— $— $— 
Commodity contracts$627 $— $— $— 
Cross-currency swaps$— $(201,377)$— $— 
Treasury rate lock contracts$— $— $(272)$(63)
Nine months ended September 26, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$2,586,264 $747,665 $23,209 $149,098 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$(16,051)$— $— $— 
Commodity contracts$36 $— $— $— 
Cross-currency swaps$— $(77,775)$— $— 
Treasury rate lock contracts$— $— $(272)$(103)
Interest rate swaps$— $— $— $(2,689)
The amount of net gain included in Accumulated other comprehensive loss (AOCL) at September 25, 2022, estimated to be reclassified into income over the next 12 months was $1.8 million.
The amount of gains and losses recognized in income related to derivative financial instruments not designated as hedging instruments were as follows (in thousands). Gains and losses on foreign currency contracts and commodity contracts were recorded in Motorcycles cost of goods sold. Gains and losses on interest rate caps were recorded in Selling, administrative & engineering expense.
 Amount of Gain/(Loss)
Recognized in Income
 Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Foreign currency contracts$3,061 $2,152 $9,348 $(3,396)
Commodity contracts(760)102 472 1,528 
Interest rate caps1,997 (39)2,015 65 
$4,298 $2,215 $11,835 $(1,803)
The Company is exposed to credit loss risk in the event of non-performance by counterparties to its derivative financial instruments. Although no assurances can be given, the Company does not expect any of the counterparties to its derivative financial instruments to fail to meet their obligations. To manage credit loss risk, the Company evaluates counterparties based on credit ratings and, on a quarterly basis, evaluates each hedge’s net position relative to the counterparty’s ability to cover their position.
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10. Leases
The Company determines if an arrangement is or contains a lease at contract inception. Right-of-use (ROU) assets related to the Company's leases are recorded in Lease assets and lease liabilities are recorded in Accrued liabilities and Lease liabilities on the Consolidated balance sheets. 
ROU assets represent the Company’s right to use an underlying asset over the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The ROU asset also includes prepaid lease payments and initial direct costs and is reduced for lease incentives paid by the lessor. The discount rate used to determine the present value is generally the Company's incremental borrowing rate because the implicit rate in the lease is not readily determinable. The lease term used to calculate the ROU asset and lease liabilities includes periods covered by options to extend or terminate when the Company is reasonably certain the lease term will include these optional periods.
In accordance with ASC Topic 842, Leases (ASC Topic 842), the Company elected the short-term lease practical expedient that allows entities to recognize lease payments on a straight-line basis over the lease term for leases with a term of 12 months or less. The Company has also elected the practical expedient under ASC Topic 842 allowing entities to not separate non-lease components from lease components, but instead account for such components as a single lease component for all leases except leases involving assets used in manufacturing and distribution processes.
The Company has operating lease arrangements for sales and administrative offices, manufacturing and distribution facilities, product testing facilities, equipment and vehicles. The Company’s leases have remaining lease terms ranging from 1 to 6 years, some of which include options to extend the lease term for periods generally not greater than 5 years and some of which include options to terminate the leases within 1 year. Certain leases also include options to purchase the leased asset. The Company's leases do not contain any material residual value guarantees or material restrictive covenants.
Operating lease expense for the three months ended September 25, 2022 and September 26, 2021 was $6.2 million and $6.1 million, respectively, and $19.3 million and $18.7 million for the nine months ended September 25, 2022 and September 26, 2021, respectively. This includes variable lease costs related to assets used in manufacturing and distribution processes of approximately $0.8 million and $0.9 million for the three months ended September 25, 2022 and September 26, 2021, respectively, and $2.7 million and $3.4 million for the nine months ended September 25, 2022 and September 26, 2021, respectively. Other variable and short-term lease costs were not material.
Balance sheet information related to the Company's leases was as follows (in thousands):
September 25,
2022		December 31,
2021		September 26,
2021
Lease assets$40,543 $49,625 $47,507 
Accrued liabilities$15,366 $17,369 $18,468 
Lease liabilities23,836 29,904 26,017 
$39,202 $47,273 $44,485 
Future maturities of the Company's operating lease liabilities as of September 25, 2022 were as follows (in thousands):
2022$4,502 
202314,351 
20248,437 
20256,121 
20264,927 
Thereafter2,130 
Future lease payments40,468 
Present value discount(1,266)
Lease liabilities$39,202 
22
Other lease information surrounding the Company's operating leases was as follows (dollars in thousands):
Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Cash outflows for amounts included in the measurement of lease liabilities$5,391 $4,756 $14,985 $20,479 
ROU assets obtained in exchange for lease obligations, net of modifications
$1,980 $11,189 $8,333 $17,390 
September 25,
2022		December 31,
2021		September 26,
2021
Weighted-average remaining lease term (in years)3.433.863.36
Weighted-average discount rate2.1 %1.9 %2.4 %
11. Debt
Debt with a contractual term less than 12 months is generally classified as short-term and consisted of the following (in thousands):
September 25,
2022		December 31,
2021		September 26,
2021
Unsecured commercial paper$692,551 $751,286 $749,620 
Debt with a contractual term greater than 12 months is generally classified as long-term and consisted of the following (in thousands): 
September 25,
2022		December 31,
2021		September 26,
2021
Secured debt:
Asset-backed Canadian commercial paper conduit facility$82,154 $85,054 $98,310 
Asset-backed U.S. commercial paper conduit facility489,074 272,589 242,254 
Asset-backed securitization debt2,416,075 1,634,753 1,961,571 
Unamortized discounts and debt issuance costs(10,669)(7,611)(9,203)
2,976,634 1,984,785 2,292,932 
Unsecured notes (at par value):
Medium-term notes:
Due in 2022, issued February 20194.05 %— 550,000 550,000 
Due in 2022, issued June 20172.55 %— 400,000 400,000 
Due in 2023, issued February 20183.35 %350,000 350,000 350,000 
Due in 2023, issued May 2020(a)
4.94 %632,586 737,302 756,763 
Due in 2024, issued November 2019(b)
3.14 %583,926 680,586 698,550 
Due in 2025, issued June 20203.35 %700,000 700,000 700,000 
Due in 2027, issued February 20223.05 %500,000 — — 
Unamortized discounts and debt issuance costs(9,682)(9,228)(10,649)
2,756,830 3,408,660 3,444,664 
23
September 25,
2022		December 31,
2021		September 26,
2021
Senior notes:
Due in 2025, issued July 20153.50 %450,000 450,000 450,000 
Due in 2045, issued July 20154.625 %300,000 300,000 300,000 
Unamortized discounts and debt issuance costs(4,808)(5,332)(5,506)
745,192 744,668 744,494 
3,502,022 4,153,328 4,189,158 
Long-term debt6,478,656 6,138,113 6,482,090 
Current portion of long-term debt, net(1,740,422)(1,542,496)(1,605,798)
Long-term debt, net$4,738,234 $4,595,617 $4,876,292 
(a)€650.0 million par value remeasured to U.S. dollar at September 25, 2022, December 31, 2021, and September 26, 2021, respectively
(b)€600.0 million par value remeasured to U.S. dollar at September 25, 2022, December 31, 2021, and September 26, 2021, respectively

Future principal payments of the Company's debt obligations as of September 25, 2022 were as follows (in thousands):
2022$978,288 
20231,701,700 
20241,257,491 
20251,866,611 
2026521,545 
Thereafter870,731 
Future principal payments7,196,366 
Unamortized discounts and debt issuance costs(25,159)
$7,171,207 
12. Asset-Backed Financing
The Company participates in asset-backed financing both through asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. In the Company's asset-backed financing programs, the Company transfers retail motorcycle finance receivables to special purpose entities (SPEs), which are considered VIEs under U.S. GAAP. Each SPE then converts those assets into cash, through the issuance of debt. The Company retains servicing rights for all of the retail motorcycle finance receivables transferred to SPEs as part of an asset-backed financing. The accounting treatment for asset-backed financings depends on the terms of the related transaction and the Company’s continuing involvement with the VIE.
In transactions where the Company has power over the significant activities of the VIE and has an obligation to absorb losses or the right to receive benefits from the VIE that are potentially significant to the VIE, the Company is the primary beneficiary of the VIE and consolidates the VIE within its consolidated financial statements. On a consolidated basis, the asset-backed financing is treated as a secured borrowing in this type of transaction and is referred to as an on-balance sheet asset-backed financing.
In transactions where the Company is not the primary beneficiary of the VIE, the Company must determine whether it can achieve a sale for accounting purposes under ASC Topic 860, Transfers and Servicing. To achieve a sale for accounting purposes, the assets being transferred must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond the Company’s control. If the Company does not meet all of these criteria for sale accounting, then the transaction is accounted for as a secured borrowing and is referred to as an on-balance sheet asset-backed financing.
If the Company meets all three of the sale criteria above, the transaction is recorded as a sale for accounting purposes and is referred to as an off-balance sheet asset-backed financing. Upon sale, the retail motorcycle finance receivables are removed from the Company’s Consolidated balance sheets and a gain or loss is recognized for the difference between the cash proceeds received, the assets derecognized, and the liabilities recognized as part of the transaction. The gain or loss on sale is included in Financial Services revenue on the Consolidated statements of operations.
The Company is not required, and does not currently intend, to provide any additional financial support to the on- or off-balance sheet VIEs associated with these transactions. Investors and creditors in these transactions only have recourse to the assets held by the VIEs.
24
The assets and liabilities related to the on-balance sheet asset-backed financings included in the Consolidated balance sheets were as follows (in thousands):
September 25, 2022
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations$3,003,578 $(150,672)$170,297 $8,274 $3,031,477 $2,405,406 
Asset-backed U.S. commercial paper conduit facility540,751 (27,114)35,581 1,308 550,526 489,074 
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility93,781 (3,874)6,162 168 96,237 82,154 
$3,638,110 $(181,660)$212,040 $9,750 $3,678,240 $2,976,634 
December 31, 2021
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations$2,048,194 $(102,779)$123,717 $2,328 $2,071,460 $1,627,142 
Asset-backed U.S. commercial paper conduit facility297,454 (14,898)20,567 654 303,777 272,589 
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility97,180 (3,990)6,191 139 99,520 85,054 
$2,442,828 $(121,667)$150,475 $3,121 $2,474,757 $1,984,785 
September 26, 2021
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations$2,362,454 $(119,975)$148,177 $2,228 $2,392,884 $1,952,368 
Asset-backed U.S. commercial paper conduit facility264,226 (13,396)19,688 526 271,044 242,254 
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility112,374 (4,729)7,408 157 115,210 98,310 
$2,739,054 $(138,100)$175,273 $2,911 $2,779,138 $2,292,932 
On-Balance Sheet Asset-Backed Securitization VIEs – The Company transfers U.S. retail motorcycle finance receivables to SPEs which in turn issue secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. Each on-balance sheet asset-backed securitization SPE is a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the asset-backed securitization transactions and are not available to pay other obligations or claims of the Company’s creditors until the associated secured debt and other obligations are satisfied. Restricted cash balances held by the SPEs are used only to support the securitizations. There are no amortization schedules for the secured notes; however, the debt is reduced monthly as available collections on the related U.S. retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2024 to 2030.
25
The Company is the primary beneficiary of its on-balance sheet asset-backed securitization VIEs because it retains servicing rights and a residual interest in the VIEs in the form of a debt security. As the servicer, the Company is the variable interest holder with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a residual interest holder, the Company has the obligation to absorb losses and the right to receive benefits which could potentially be significant to the VIE.
Quarterly transfers of U.S. retail motorcycle finance receivables to SPEs, the respective proceeds, and the respective proceeds, net of discounts and issuance costs were as follows (in millions):
20222021
TransfersProceedsProceeds, netTransfersProceedsProceeds, net
First quarter$— $— $— $663.1 $600.0 $597.4 
Second quarter2,176.4 1,836.3 1,826.9 — — — 
Third quarter— — $— 635.5 575.0 572.5 
$2,176.4 $1,836.3 $1,826.9 $1,298.6 $1,175.0 $1,169.9 
On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facility VIE – On September 23, 2022, the Company amended its $900.0 million revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset-backed U.S. commercial paper conduits, increasing the aggregate commitment to $1.5 billion. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party banks and their asset-backed U.S. commercial paper conduits. In addition to the $1.5 billion aggregate commitment, the agreement allows for additional borrowings, at the lender’s discretion, of up to $300.0 million. Availability under the U.S. Conduit Facility is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.
Under the U.S. Conduit Facility, the assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. Subsequent to the amendment date, the interest rate on any borrowings, if not funded by a conduit lender through the issuance of commercial paper, along with the current outstanding debt as of the date of the borrowings, is based on the Secured Overnight Financing Rate (SOFR). Prior to the amendment date, if not funded by a conduit lender through the issuance of commercial paper, the terms of the interest were based on LIBOR, with provisions for a transition to other benchmark rates. In each of these cases, a program fee is assessed based on the outstanding debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 4 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of September 25, 2022, the U.S. Conduit Facility has an expiration date of November 18, 2022.
The Company is the primary beneficiary of its U.S. Conduit Facility VIE because it retains servicing rights and a residual interest in the VIE in the form of a debt security. As the servicer, the Company is the variable interest holder with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a residual interest holder, the Company has the obligation to absorb losses and the right to receive benefits which could potentially be significant to the VIE.
There were no finance receivable transfers under the U.S. Conduit Facility during the third quarter of 2022. During the second quarter of 2022, the Company transferred $420.8 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $362.8 million of debt under the U.S. Conduit Facility. During the first quarter of 2022, the Company transferred $47.1 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $41.3 million of debt under the U.S. Conduit Facility. There were no finance receivable transfers under the U.S. Conduit Facility during the nine months ended September 26, 2021.
On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – In June 2022, the Company renewed its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. The transferred assets are restricted as collateral for the
26
payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of September 25, 2022, the Canadian Conduit has an expiration date of June 30, 2023.
The Company is not the primary beneficiary of the Canadian bank-sponsored, multi-seller conduit VIE; therefore, the Company does not consolidate the VIE. However, the Company treats the conduit facility as a secured borrowing as it maintains effective control over the assets transferred to the VIE and, therefore, does not meet the requirements for sale accounting.
As the Company participates in and does not consolidate the Canadian bank-sponsored, multi-seller conduit VIE, the maximum exposure to loss associated with this VIE, which would only be incurred in the unlikely event that all the finance receivables and underlying collateral have no residual value, was $14.1 million at September 25, 2022. The maximum exposure is not an indication of the Company's expected loss exposure.
Quarterly transfers of Canadian retail motorcycle finance receivables to the Canadian Conduit and the respective proceeds were as follows (in millions):
20222021
TransfersProceedsTransfersProceeds
First quarter$25.3 $21.2 $— $— 
Second quarter— — — — 
Third quarter27.8 23.0 32.8 27.4 
$53.1 $44.2 $32.8 $27.4 
13. Fair Value
The Company assesses the inputs used to measure fair value using a three-tier hierarchy.
Level 1 inputs include quoted prices for identical instruments and are the most observable.
Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity prices, and yield curves. The Company uses the market approach to derive the fair value for its Level 2 fair value measurements. Foreign currency contracts, commodity contracts, and cross-currency swaps are valued using quoted forward rates and prices; interest rate caps are valued using quoted interest rates and yield curves.
Level 3 inputs are not observable in the market and include the Company's judgments about the assumptions market participants would use in pricing the asset or liability.
Recurring Fair Value Measurements – The Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
 September 25, 2022
BalanceLevel 1Level 2
Assets:
Cash equivalents$1,324,705 $1,057,000 $267,705 
Marketable securities33,631 33,631 — 
Derivative financial instruments34,028 — 34,028 
$1,392,364 $1,090,631 $301,733 
Liabilities:
Derivative financial instruments$150,729 $— $150,729 
27
 December 31, 2021
Balance Level 1Level 2
Assets:
Cash equivalents$1,617,887 $1,337,900 $279,987 
Marketable securities49,650 49,650 — 
Derivative financial instruments52,034 — 52,034 
$1,719,571 $1,387,550 $332,021 
Liabilities:
Derivative financial instruments$2,361 $— $2,361 
 September 26, 2021
Balance Level 1Level 2
Assets:
Cash equivalents$1,753,398 $1,503,400 $249,998 
Marketable securities48,766 48,766 — 
Derivative financial instruments59,847 — 59,847 
$1,862,011 $1,552,166 $309,845 
Liabilities:
Derivative financial instruments$694 $— $694 
Nonrecurring Fair Value Measurements – Repossessed inventory is recorded at the lower of cost or net realizable value through a nonrecurring fair value measurement. Repossessed inventory was $20.3 million at September 25, 2022 and $18.3 million at December 31, 2021 and September 26, 2021, for which the fair value adjustment was a decrease of $2.5 million, $2.9 million and $1.4 million, respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.
28
Fair Value of Financial Instruments Measured at Cost – The carrying value of the Company's Cash and cash equivalents and Restricted cash approximates their fair values. The fair value and carrying value of the Company’s remaining financial instruments that are measured at cost or amortized cost were as follows (in thousands):
 September 25, 2022December 31, 2021September 26, 2021
 Fair ValueCarrying ValueFair ValueCarrying ValueFair ValueCarrying Value
Assets:
Finance receivables, net$7,555,135 $7,342,448 $6,794,499 $6,571,921 $7,117,828 $6,863,258 
Liabilities:
Deposits, net$369,429 $344,735 $293,602 $290,326 $292,284 $290,270 
Debt:
Unsecured commercial paper$692,551 $692,551 $751,286 $751,286 $749,620 $749,620 
Asset-backed U.S. commercial paper conduit facility$489,074 $489,074 $272,589 $272,589 $242,254 $242,254 
Asset-backed Canadian commercial paper conduit facility$82,154 $82,154 $85,054 $85,054 $98,310 $98,310 
Asset-backed securitization debt$2,385,056 $2,405,406 $1,633,749 $1,627,142 $1,967,893 $1,952,368 
Medium-term notes$2,612,372 $2,756,830 $3,513,815 $3,408,660 $3,583,411 $3,444,664 
Senior notes$637,494 $745,192 $790,373 $744,668 $798,518 $744,494 
Finance Receivables, net – The carrying value of retail and wholesale finance receivables is amortized cost less an allowance for credit losses. The fair value of retail finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects current credit, interest rate and prepayment risks associated with similar types of instruments. Fair value is determined based on Level 3 inputs. The amortized cost basis of wholesale finance receivables approximates fair value because they are generally either short-term or have interest rates that adjust with changes in market interest rates.
Deposits, net – The carrying value of deposits is amortized cost, net of fees. The fair value of deposits is estimated based upon rates currently available for deposits with similar terms and maturities. Fair value is calculated using Level 3 inputs.
Debt – The carrying value of debt is generally cost, net of unamortized discounts and debt issuance costs. The fair value of unsecured commercial paper is calculated using Level 2 inputs and approximates carrying value due to its short maturity. The fair value of debt provided under the U.S. Conduit Facility and the Canadian Conduit Facility is calculated using Level 2 inputs and approximates carrying value since the interest rates charged under the facilities are tied directly to market rates and fluctuate as market rates change. The fair values of the medium-term notes and senior notes are estimated based upon rates currently available for debt with similar terms and remaining maturities (Level 2 inputs). The fair value of the fixed-rate debt related to on-balance sheet asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities (Level 2 inputs). The fair value of the floating-rate debt related to on-balance sheet asset-backed securitization transactions is calculated using Level 2 inputs and approximates carrying value since the interest rates charged are tied directly to market rates and fluctuate as market rates change.
14. Product Warranty and Recall Campaigns
The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except in certain markets, where the Company currently provides a standard three-year limited warranty. The Company also provides a five-year limited warranty on the battery for electric motorcycles. In addition, the Company provides a one-year warranty for parts and accessories. The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company accrues for future warranty claims at the time of shipment using an estimated cost based primarily on historical Company claim information.
29
Additionally, the Company has from time to time initiated certain voluntary recall campaigns. The Company records estimated recall costs when the liability is both probable and estimable. This generally occurs when the Company's management approves and commits to a recall. The warranty and recall liability is included in Accrued liabilities and Other long-term liabilities on the Consolidated balance sheets. Changes in the Company’s warranty and recall liabilities were as follows (in thousands):
 Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Balance, beginning of period$61,727 $73,626 $61,621 $69,208 
Warranties issued during the period11,094 9,516 31,522 34,006 
Settlements made during the period(12,099)(10,860)(29,228)(29,823)
Recalls and changes to pre-existing warranty liabilities17,181 (569)13,988 (1,678)
Balance, end of period$77,903 $71,713 $77,903 $71,713 
The liability for recall campaigns, included in the balance above, was $31.2 million, $16.9 million and $21.9 million at September 25, 2022, December 31, 2021 and September 26, 2021, respectively.
15. Employee Benefit Plans
The Company has a qualified pension plan and postretirement healthcare benefit plans. The plans cover certain eligible employees and retirees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees. Service cost is allocated among Selling, administrative and engineering expense, Motorcycles cost of goods sold and Inventories, net. Amounts capitalized in inventory are not significant. Non-service cost components of net periodic benefit (income) cost are presented in Other income, net. Components of net periodic benefit (income) cost for the Company's defined benefit plans were as follows (in thousands):
 Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Pension and SERPA Benefits:
Service cost$4,763 $6,348 $14,289 $19,044 
Interest cost15,473 15,472 46,418 46,412 
Expected return on plan assets(31,476)(32,720)(94,428)(98,160)
Amortization of unrecognized:
Prior service credit(328)(312)(984)(936)
Net loss7,978 18,386 23,934 55,158 
Settlement (gain) loss— — (256)816 
Net periodic benefit (income) cost$(3,590)$7,174 $(11,027)$22,334 
Postretirement Healthcare Benefits:
Service cost$1,161 $1,288 $3,482 $3,864 
Interest cost1,904 1,626 5,712 4,878 
Expected return on plan assets(3,809)(3,495)(11,427)(10,485)
Amortization of unrecognized:
Prior service credit(581)(581)(1,743)(1,743)
Net loss122 264 366 792 
Net periodic benefit income$(1,203)$(898)$(3,610)$(2,694)
There are no required or planned voluntary qualified pension plan contributions for 2022. The Company expects it will continue to make ongoing benefit payments under the SERPA and postretirement healthcare plans.
30
16. Commitments and Contingencies
Litigation and Other Claims – The Company is subject to lawsuits and other claims related to product, product recall, commercial, employee, environmental and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and there are no material exposures to loss in excess of amounts accrued and insured for losses related to these matters.
Supply Matter – During the second quarter of 2022, the Company received information from a third-party supplier concerning a regulatory compliance matter relating to the supplier's component part. As a result, out of an abundance of caution, the Company suspended all vehicle assembly and shipments (excluding LiveWire models) for approximately two weeks during the second quarter of 2022. The Company continues to work through the regulatory compliance matter with its relevant suppliers and the regulatory agency. Given the uncertainties related to this matter, the Company is currently unable to reasonably estimate any potential additional costs or recall expenses it may incur. While at this time the Company does not expect that this matter will result in additional costs or recall expenses that are material, it is possible that the Company could incur additional costs or recall expenses that are material.
17. Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss were as follows (in thousands):
Three months ended September 25, 2022
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(79,543)$20,775 $(183,508)$(242,276)
Other comprehensive loss, before reclassifications(47,333)(68,167)— (115,500)
Income tax benefit1,088 14,803 — 15,891 
(46,245)(53,364)— (99,609)
Reclassifications:
Net loss on derivative financial instruments— 79,852 — 79,852 
Prior service credits(a)
— — (909)(909)
Actuarial losses(a)
— — 8,100 8,100 
Reclassifications before tax— 79,852 7,191 87,043 
Income tax expense— (17,457)(1,688)(19,145)
— 62,395 5,503 67,898 
Other comprehensive (loss) income(46,245)9,031 5,503 (31,711)
Balance, end of period$(125,788)$29,806 $(178,005)$(273,987)
31
Three months ended September 26, 2021
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(23,512)$(29,088)$(402,537)$(455,137)
Other comprehensive loss, before reclassifications(18,296)(31,698)— (49,994)
Income tax benefit460 6,928 — 7,388 
(17,836)(24,770)— (42,606)
Reclassifications:
Net loss on derivative financial instruments— 37,166 — 37,166 
Prior service credits(a)
— — (893)(893)
Actuarial losses(a)
— — 18,650 18,650 
Reclassifications before tax— 37,166 17,757 54,923 
Income tax expense— (8,126)(4,169)(12,295)
— 29,040 13,588 42,628 
Other comprehensive (loss) income(17,836)4,270 13,588 22 
Balance, end of period$(41,348)$(24,818)$(388,949)$(455,115)
Nine months ended September 25, 2022
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(44,401)$(2,005)$(194,513)$(240,919)
Other comprehensive loss, before reclassifications(82,737)(129,306)— (212,043)
Income tax benefit1,350 28,025 — 29,375 
(81,387)(101,281)— (182,668)
Reclassifications:
Net loss on derivative financial instruments— 170,601 — 170,601 
Prior service credits(a)
— — (2,727)(2,727)
Actuarial losses(a)
— — 24,300 24,300 
Reclassifications before tax— 170,601 21,573 192,174 
Income tax expense— (37,509)(5,065)(42,574)
— 133,092 16,508 149,600 
Other comprehensive (loss) income(81,387)31,811 16,508 (33,068)
Balance, end of period$(125,788)$29,806 $(178,005)$(273,987)
32
Nine months ended September 26, 2021
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(7,589)$(46,116)$(429,712)$(483,417)
Other comprehensive loss, before reclassifications(33,648)(68,861)— (102,509)
Income tax (expense) benefit(111)15,026 — 14,915 
(33,759)(53,835)— (87,594)
Reclassifications:
Net loss on derivative financial instruments— 96,854 — 96,854 
Prior service credits(a)
— — (2,679)(2,679)
Actuarial losses(a)
— — 55,950 55,950 
Reclassifications before tax— 96,854 53,271 150,125 
Income tax expense— (21,721)(12,508)(34,229)
— 75,133 40,763 115,896 
Other comprehensive (loss) income(33,759)21,298 40,763 28,302 
Balance, end of period$(41,348)$(24,818)$(388,949)$(455,115)
(a)Amounts reclassified are included in the computation of net periodic benefit (income) cost, discussed further in Note 15
18. Reportable Segments
Harley-Davidson, Inc. is the parent company for the groups of companies referred to as Harley-Davidson Motor Company and Harley-Davidson Financial Services. The Company operates in two business segments: Motorcycles and Related Products (Motorcycles) and Financial Services. The Company's reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.
The Motorcycles segment consists of the activities of Harley-Davidson Motor Company which designs, manufactures and sells motorcycles. The Motorcycles segment also sells motorcycle parts, accessories, and apparel as well as licenses its trademarks. The Company's products are sold to retail customers primarily through a network of dealers.
The Financial Services segment consists of Harley-Davidson Financial Services which is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans, primarily for the purchase of Harley-Davidson motorcycles. Harley-Davidson Financial Services also works with certain unaffiliated insurance companies to provide motorcycle insurance and protection products to motorcycle owners.
Selected segment information is set forth below (in thousands):
 Three months endedNine months ended
September 25,
2022		September 26,
2021		September 25,
2022		September 26,
2021
Motorcycles and Related Products:
Motorcycles revenue$1,436,962 $1,160,618 $4,006,604 $3,724,225 
Gross profit490,306 310,425 1,284,691 1,137,961 
Selling, administrative and engineering expense232,541 212,243 632,756 626,211 
Restructuring expense (benefit)3 517 (389)731 
Operating income257,762 97,665 652,324 511,019 
Financial Services:
Financial Services revenue211,613 204,692 606,244 595,650 
Financial Services expense130,657 98,047 353,003 275,487 
Restructuring expense— 98 — 436 
Operating income80,956 106,547 253,241 319,727 
Operating income$338,718 $204,212 $905,565 $830,746 
33
Total assets for the Motorcycles and Financial Services segments were $3.4 billion and $8.5 billion, respectively, as of September 25, 2022, $3.3 billion and $7.7 billion, respectively, as of December 31, 2021, and $3.0 billion and $8.2 billion, respectively, as of September 26, 2021.
19. Supplemental Consolidating Data
The supplemental consolidating legal entity data for Harley-Davidson Motor Company, Harley-Davidson Financial Services and related consolidating adjustments are presented for informational purposes. The legal entity income statement information presented below differs from reportable segment income statement information due to the allocation of legal entity consolidating adjustments to income for reportable segments. Supplemental consolidating data is as follows (in thousands):
 Three months ended September 25, 2022
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$1,439,894 $— $(2,932)$1,436,962 
Financial Services— 212,100 (487)211,613 
1,439,894 212,100 (3,419)1,648,575 
Costs and expenses:
Motorcycles and Related Products cost of goods sold946,656 — — 946,656 
Financial Services interest expense— 60,740 — 60,740 
Financial Services provision for credit losses— 36,617 — 36,617 
Selling, administrative and engineering expense233,151 36,231 (3,541)265,841 
Restructuring expense3 — — 3 
1,179,810 133,588 (3,541)1,309,857 
Operating income260,084 78,512 122 338,718 
Other income, net 9,358 — — 9,358 
Investment income201,723 — (200,000)1,723 
Interest expense8,124 — — 8,124 
Income before income taxes463,041 78,512 (199,878)341,675 
Provision for income taxes61,390 19,099 — 80,489 
Net income$401,651 $59,413 $(199,878)$261,186 
34
 Nine months ended September 25, 2022
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$4,015,779 $— $(9,175)$4,006,604 
Financial Services— 607,876 (1,632)606,244 
4,015,779 607,876 (10,807)4,612,848 
Costs and expenses:
Motorcycles and Related Products cost of goods sold2,721,913 — — 2,721,913 
Financial Services interest expense— 150,488 — 150,488 
Financial Services provision for credit losses— 94,572 — 94,572 
Selling, administrative and engineering expense634,506 117,117 (10,924)740,699 
Restructuring benefit(389)— — (389)
3,356,030 362,177 (10,924)3,707,283 
Operating income659,749 245,699 117 905,565 
Other income, net 30,443 — — 30,443 
Investment (income) loss196,214 — (200,000)(3,786)
Interest expense23,555 — — 23,555 
Income before income taxes862,851 245,699 (199,883)908,667 
Provision for income taxes150,231 58,899 — 209,130 
Net income$712,620 $186,800 $(199,883)$699,537 
Three months ended September 26, 2021
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$1,167,432 $— $(6,814)$1,160,618 
Financial Services— 202,080 2,612 204,692 
1,167,432 202,080 (4,202)1,365,310 
Costs and expenses:
Motorcycles and Related Products cost of goods sold850,193 — — 850,193 
Financial Services interest expense— 44,770 — 44,770 
Financial Services provision for credit losses— 11,208 — 11,208 
Selling, administrative and engineering expense216,030 42,686 (4,404)254,312 
Restructuring expense517 98 — 615 
1,066,740 98,762 (4,404)1,161,098 
Operating income100,692 103,318 202 204,212 
Other income, net858 — — 858 
Investment income120,198 — (120,000)198 
Interest expense7,779 — — 7,779 
Income before income taxes213,969 103,318 (119,798)197,489 
Provision for income taxes7,408 27,108 — 34,516 
Net income$206,561 $76,210 $(119,798)$162,973 
35
Nine months ended September 26, 2021
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$3,742,869 $— $(18,644)$3,724,225 
Financial Services— 590,468 5,182 595,650 
3,742,869 590,468 (13,462)4,319,875 
Costs and expenses:
Motorcycles and Related Products cost of goods sold2,586,264 — — 2,586,264 
Financial Services interest expense— 149,098 — 149,098 
Financial Services provision for credit losses— 4,935 — 4,935 
Selling, administrative and engineering expense635,902 125,053 (13,290)747,665 
Restructuring expense731 436 — 1,167 
3,222,897 279,522 (13,290)3,489,129 
Operating income519,972 310,946 (172)830,746 
Other income, net1,825 — — 1,825 
Investment income244,331 — (240,000)4,331 
Interest expense23,209 — — 23,209 
Income before income taxes742,919 310,946 (240,172)813,693 
Provision for income taxes112,974 72,262 — 185,236 
Net income$629,945 $238,684 $(240,172)$628,457 

36
 September 25, 2022
 Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
ASSETS
Current assets:
Cash and cash equivalents$926,389 $803,861 $— $1,730,250 
Accounts receivable, net695,899 — (395,445)300,454 
Finance receivables, net— 1,807,718 — 1,807,718 
Inventories, net680,762 — — 680,762 
Restricted cash100,000 187,264 — 287,264 
Other current assets167,999 54,251 (16,516)205,734 
2,571,049 2,853,094 (411,961)5,012,182 
Finance receivables, net— 5,534,730 — 5,534,730 
Property, plant and equipment, net616,382 25,269 — 641,651 
Pension and postretirement assets424,784 — — 424,784 
Goodwill60,440 — — 60,440 
Deferred income taxes15,806 79,162 (25,234)69,734 
Lease assets34,230 6,313 — 40,543 
Other long-term assets206,409 43,368 (106,230)143,547 
$3,929,100 $8,541,936 $(543,425)$11,927,611 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$414,448 $419,531 $(395,445)$438,534 
Accrued liabilities532,808 193,328 (15,592)710,544 
Short-term deposits, net— 97,856 — 97,856 
Short-term debt— 692,551 — 692,551 
Current portion of long-term debt, net— 1,740,422 — 1,740,422 
947,256 3,143,688 (411,037)3,679,907 
Long-term deposits, net— 246,879 — 246,879 
Long-term debt, net745,192 3,993,042 — 4,738,234 
Lease liabilities17,524 6,312 — 23,836 
Pension and postretirement liabilities92,953 — — 92,953 
Deferred income taxes32,199 582 (24,469)8,312 
Other long-term liabilities157,112 138,027 2,141 297,280 
Commitments and contingencies (Note 16)
Shareholders’ equity1,936,864 1,013,406 (110,060)2,840,210 
$3,929,100 $8,541,936 $(543,425)$11,927,611 

37
 September 26, 2021
 Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
ASSETS
Current assets:
Cash and cash equivalents$1,115,014 $946,289 $— $2,061,303 
Accounts receivable, net590,806 — (308,179)282,627 
Finance receivables, net— 1,540,822 — 1,540,822 
Inventories, net475,314 — — 475,314 
Restricted cash— 153,873 — 153,873 
Other current assets114,221 94,868 (14,608)194,481 
2,295,355 2,735,852 (322,787)4,708,420 
Finance receivables, net— 5,322,436 — 5,322,436 
Property, plant and equipment, net642,253 29,583 — 671,836 
Pension and postretirement assets132,958 — — 132,958 
Goodwill63,841 — — 63,841 
Deferred income taxes43,097 86,011 (1,049)128,059 
Lease assets40,163 7,344 — 47,507 
Other long-term assets191,126 37,370 (103,749)124,747 
$3,408,793 $8,218,596 $(427,585)$11,199,804 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$361,057 $329,338 $(308,179)$382,216 
Accrued liabilities489,988 123,642 (13,778)599,852 
Short-term deposits, net— 92,626 — 92,626 
Short-term debt— 749,620 — 749,620 
Current portion of long-term debt, net— 1,605,798 — 1,605,798 
851,045 2,901,024 (321,957)3,430,112 
Long-term deposits, net— 197,644 — 197,644 
Long-term debt, net744,494 4,131,798 — 4,876,292 
Lease liabilities19,457 6,560 — 26,017 
Pension and postretirement liabilities103,144 — — 103,144 
Deferred income taxes7,166 1,419 — 8,585 
Other long-term liabilities173,178 48,586 2,352 224,116 
Commitments and contingencies (Note 16)
Shareholders’ equity1,510,309 931,565 (107,980)2,333,894 
$3,408,793 $8,218,596 $(427,585)$11,199,804 
38
 Nine months ended September 25, 2022
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Cash flows from operating activities:
Net income$712,620 $186,800 $(199,883)$699,537 
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization108,485 6,382 — 114,867 
Amortization of deferred loan origination costs— 72,214 — 72,214 
Amortization of financing origination fees524 10,951 — 11,475 
Provision for long-term employee benefits(14,637)— — (14,637)
Employee benefit plan contributions and payments(4,766)— — (4,766)
Stock compensation expense31,418 2,177 — 33,595 
Net change in wholesale finance receivables related to sales— — (294,698)(294,698)
Provision for credit losses— 94,572 — 94,572 
Deferred income taxes1,981 (4,681)(280)(2,980)
Other, net20,190 4,318 (116)24,392 
Changes in current assets and liabilities:
Accounts receivable, net(443,645)— 292,919 (150,726)
Finance receivables – accrued interest and other
— 3,566 — 3,566 
Inventories, net(6,577)— — (6,577)
Accounts payable and accrued liabilities22,075 321,594 (305,924)37,745 
Other current assets(58,774)2,615 13,284 (42,875)
(343,726)513,708 (294,815)(124,833)
Net cash provided by operating activities 368,894 700,508 (494,698)574,704 
Cash flows from investing activities:
Capital expenditures(82,153)(2,794)— (84,947)
Origination of finance receivables— (6,642,296)2,868,466 (3,773,830)
Collections on finance receivables— 5,684,649 (2,573,768)3,110,881 
Other investing activities2,160 — — 2,160 
Net cash used by investing activities(79,993)(960,441)294,698 (745,736)
39
 Nine months ended September 25, 2022
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Cash flows from financing activities:
Proceeds from issuance of medium-term notes— 495,785 — 495,785 
Repayments of medium-term notes— (950,000)— (950,000)
Proceeds from securitization debt— 1,826,891 — 1,826,891 
Repayments of securitization debt— (1,054,939)— (1,054,939)
Borrowings of asset-backed commercial paper— 448,255 — 448,255 
Repayments of asset-backed commercial paper— (228,431)— (228,431)
Net decrease in unsecured commercial paper— (60,281)— (60,281)
Net increase in deposits— 54,080 — 54,080 
Deposit in advance of business combination100,000 — — 100,000 
Dividends paid(70,163)(200,000)200,000 (70,163)
Repurchase of common stock(338,496)— — (338,496)
Other financing activities(1,237)— — (1,237)
Net cash (used) provided by financing activities(309,896)331,360 200,000 221,464 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(30,821)(2,540)— (33,361)
Net (decrease) increase in cash, cash equivalents and restricted cash$(51,816)$68,887 $— $17,071 
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$1,078,205 $947,014 $— $2,025,219 
Net (decrease) increase in cash, cash equivalents and restricted cash(51,816)68,887 — 17,071 
Cash, cash equivalents and restricted cash, end of period$1,026,389 $1,015,901 $— $2,042,290 
40
 Nine months ended September 26, 2021
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Cash flows from operating activities:
Net income$629,945 $238,684 $(240,172)$628,457 
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization115,779 6,704 — 122,483 
Amortization of deferred loan origination costs— 63,265 — 63,265 
Amortization of financing origination fees517 9,909 — 10,426 
Provision for long-term employee benefits19,640 — — 19,640 
Employee benefit plan contributions and payments(14,677)— — (14,677)
Stock compensation expense31,089 2,943 — 34,032 
Net change in wholesale finance receivables related to sales— — (22,031)(22,031)
Provision for credit losses— 4,935 — 4,935 
Deferred income taxes4,710 6,028 (112)10,626 
Other, net3,320 (1,397)171 2,094 
Changes in current assets and liabilities:
Accounts receivable, net(379,821)— 231,151 (148,670)
Finance receivables – accrued interest and other
— 11,088 — 11,088 
Inventories, net31,874 — — 31,874 
Accounts payable and accrued liabilities162,088 247,740 (241,522)168,306 
Other current assets(11,127)3,952 10,878 3,703 
(36,608)355,167 (21,465)297,094 
Net cash provided by operating activities 593,337 593,851 (261,637)925,551 
Cash flows from investing activities:
Capital expenditures(59,128)(2,348)— (61,476)
Origination of finance receivables— (6,157,658)2,712,705 (3,444,953)
Collections on finance receivables— 5,659,465 (2,691,068)2,968,397 
Other investing activities2,485 — — 2,485 
Net cash used by investing activities(56,643)(500,541)21,637 (535,547)
41
 Nine months ended September 26, 2021
Harley-Davidson Motor CompanyHarley-Davidson Financial ServicesConsolidating AdjustmentsConsolidated
Cash flows from financing activities:
Repayments of medium-term notes— (1,400,000)— (1,400,000)
Proceeds from securitization debt— 1,169,910 — 1,169,910 
Repayments of securitization debt— (1,013,820)— (1,013,820)
Borrowings of asset-backed commercial paper— 27,406 — 27,406 
Repayments of asset-backed commercial paper— (206,671)— (206,671)
Net decrease in unsecured commercial paper— (261,978)— (261,978)
Net increase in deposits— 210,144 — 210,144 
Dividends paid(69,316)(240,000)240,000 (69,316)
Repurchase of common stock(11,545)— — (11,545)
Other financing activities4,324 — — 4,324 
Net cash used by financing activities(76,537)(1,715,009)240,000 (1,551,546)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,304)254 — (11,050)
Net increase (decrease) in cash, cash equivalents and restricted cash$448,853 $(1,621,445)$— $(1,172,592)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$666,161 $2,743,007 $— $3,409,168 
Net increase (decrease) in cash, cash equivalents and restricted cash448,853 (1,621,445)— (1,172,592)
Cash, cash equivalents and restricted cash, end of period$1,115,014 $1,121,562 $— $2,236,576 
20. Subsequent Event
LiveWire Transaction – On September 26, 2022, the Company's electric motorcycle subsidiary (LiveWire) completed its planned merger with AEA-Bridges Impact Corp. (ABIC), a special purpose acquisition company, to create a new publicly traded company. As described below, the transaction was financed with ABIC’s cash held in trust less redemptions, a cash investment from the Company and an investment from KYMCO, an independent strategic investor.
At the LiveWire transaction close, LiveWire received net proceeds of approximately $294 million, including a $180 million investment from the Company, net of transaction expenses, a $100 million investment from KYMCO and a $14 million investment from ABIC, net of redemptions and transaction expenses. Following the close, the Company has an equity interest in LiveWire of approximately 89.4%, ABIC’s shareholders and founders have an equity interest of approximately 5.7%, and KYMCO has an equity interest of approximately 4.9%. As the controlling shareholder, the Company will continue to consolidate LiveWire’s results, with additional adjustments to recognize non-controlling shareholder interests.
In connection with the LiveWire transaction, the Company received a $100 million cash deposit from KYMCO during the quarter ended September 25, 2022 in advance of the pending LiveWire transaction close. The $100 million cash deposit was included in Restricted cash on the Consolidated balance sheet as of September 25, 2022. In addition, the Company recorded a $100 million liability in Accrued liabilities on the Consolidated balance sheet as of September 25, 2022, representing the Company's obligation to return the funds to KYMCO in the event the transaction did not close.
42
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Harley-Davidson, Inc. is the parent company of the groups of companies referred to as Harley-Davidson Motor Company and Harley-Davidson Financial Services. Unless the context otherwise requires, all references to the “Company” include Harley-Davidson, Inc. and all its subsidiaries. The Company operates in two segments: Motorcycles and Related Products (Motorcycles) and Financial Services.
The “% Change” figures included in the Results of Operations sections were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented. Certain “% Change” deemed not meaningful (NM) have been excluded.
(1) Note Regarding Forward-Looking Statements
The Company intends that certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” “may,” “will,” “estimates,” “targets,” “intends,” “is on-track,” “forecasting,” or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including under the caption "Cautionary Statements" in this Item 2, as well as in Item 1A. Risk Factors, as well as in Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in the "Key Factors Impacting the Company" and the “Guidance” sections in this Item 2 are only made as of October 26, 2022 and the remaining forward-looking statements in this report are made as of the date of the filing of this report (November 3, 2022), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Overview(1)
During the third quarter of 2022, the Company's shipments were up 19% compared to the same quarter last year as it recovered a majority of the volume lost as a result of a suspension of production and shipments for approximately two weeks during the second quarter of 2022. Year to date, through the end of the third quarter, shipments were up 0.4% compared to the same period last year. The Company plans to make up the remaining volume lost as a result of the second quarter suspension during the fourth quarter of 2022. The Company's net income was $261.2 million, or $1.78 per diluted share, in the third quarter of 2022, compared to $163.0 million, or $1.05 per diluted share, in the third quarter of 2021. On a year to date basis, the Company's net income was $699.5 million, or $4.68 per diluted share, for the first three of quarters 2022, compared to $628.5 million, or $4.06 per diluted share, for the first three quarters of 2021.
In the third quarter of 2022, Motorcycles segment operating income was $257.8 million, up $160.1 million from the third quarter of 2021. The increase in operating income from the Motorcycles segment for the third quarter of 2022 was driven primarily by higher motorcycle shipments, price increases, favorable product mix and lower tariff costs partially offset by the impact of higher supply chain costs, unfavorable foreign currency exchange rates and increased operating expenses compared to the same quarter last year. Operating income from the Financial Services segment in the third quarter of 2022 was $81.0 million, down $25.6 million compared to the prior year quarter due primarily to an increase in the provision for credit losses and higher interest expense.
Retail sales of new Harley-Davidson motorcycles in the third quarter of 2022 were down 2.3% compared to the third quarter of 2021, including a decline of 5.4% in the U.S., partially offset by an increase of 2.8% in international markets. The Company believes retail sales during the third quarter of 2022 were impacted by low dealer inventory levels following the Company's suspension of production and shipments during the second quarter of 2022. Refer to the Motorcycles Retail Sales and Registration Data section for further discussion of retail sales results.
43
Table of Contents
Key Factors Impacting the Company(1)
Supply Chain Challenges – During the third quarter of 2022, the Company continued to experience disruption and increased costs related to global supply chain challenges including the continued global semiconductor chip shortages. As a result of these challenges, the Company experienced higher costs in the third quarter of 2022, although the rate of year over year inflation moderated during the quarter relative to inflation rates experienced in the first two quarters of 2022. The moderation in inflation experienced during the third quarter resulted primarily from the normalization of logistics inflation which started to decline during the quarter and to a lesser extent raw materials inflation which slowed as metal markets improved. In addition, the Company continued to reduce its reliance on expedited shipping during the third quarter of 2022. The Company expects inflation rates for supply chain costs during the fourth quarter of 2022 to be similar to the third quarter of 2022 with continued improvement in logistics and material costs through the balance of the year.
Supply Matter – During the second quarter of 2022, the Company received information from a third-party supplier concerning a regulatory compliance matter relating to the supplier's component part. As a result, out of an abundance of caution, the Company suspended all vehicle assembly and shipments (excluding LiveWire models) for approximately two weeks during the second quarter of 2022. The Company continues to work through the regulatory compliance matter with its relevant suppliers and the regulatory agency. Given the uncertainties related to this matter, the Company is currently unable to reasonably estimate any potential additional costs or recall expenses it may incur. While at this time the Company does not expect that this matter will result in additional costs or recall expenses that are material, it is possible that the Company could incur additional costs or recall expenses that are material.
Suspension of Additional European Union Tariffs – In April 2021, the Company received notification from the Economic Ministry of Belgium that, following a request from the European Union (EU), the Company would be subject to revocation of the Binding Origin Information (BOI) rulings that allowed it to supply its EU markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. As a result of the revocation, all non-electric motorcycles that Harley-Davidson imported into the EU, regardless of origin, were subject to a total tariff rate of 31% from April 19, 2021 through the end of 2021. On October 30, 2021, the U.S. and EU announced an agreement related to the Section 232 tariffs on steel and aluminum that were implemented in 2018 by the U.S. and the subsequent rebalancing tariff measures taken by the EU. This agreement suspended the additional tariffs initially imposed by the EU on the Company's motorcycles, reducing the total EU tariff rate on the Company’s motorcycles from 31% to 6%, effective January 1, 2022. The lower 6% tariff rate applies to all motorcycles imported by the Company into the EU, regardless of origin. Under the agreement between the U.S. and the EU, the lower tariff rate will remain in effect until December 31, 2023. During such time, the U.S. and EU will monitor and review the operation of the agreement, seeking to conclude the negotiations on steel and aluminum tariffs by December 31, 2023. These negotiations are ongoing, and there are no assurances the U.S. and EU will reach a resolution that concludes the trade conflict on steel and aluminum tariffs beyond December 31, 2023.
To date, the Company continues to pursue its appeals of the revocation of the BOIs and the denial of its application for temporary extended reliance on the 6% tariff rate (for motorcycles produced in Thailand and ordered prior to April 19, 2021), although there is no assurance that these appeals will continue or be successful.
COVID-19 Pandemic – The Company continues to manage through the impacts of the COVID-19 pandemic and its associated variants by keeping safety and community well-being a priority. The Company continues to proactively follow protocols to keep workers safe in its manufacturing facilities. The full impact of the COVID-19 pandemic on future results depends on future developments, such as the ultimate duration and scope of the pandemic including associated variants, the success of vaccination programs, the consequences of vaccine requirements, and its impact on the Company's employees, customers, dealers, distributors, and suppliers. Future impacts and disruptions could have an adverse effect on production, supply chains, distribution, and demand for the Company's products.
LiveWire Transaction – On September 26, 2022, the Company's electric motorcycle subsidiary (LiveWire) completed its planned merger with AEA-Bridges Impact Corp. (ABIC), a special purpose acquisition company, to create a new publicly traded company. As described below, the transaction was financed with ABIC’s cash held in trust less redemptions, a cash investment from the Company and an investment from Kwang Yang Motor Co., Ltd. (KYMCO), an independent strategic investor.
At the LiveWire transaction close, LiveWire received net proceeds of approximately $294 million, including a $180 million investment from the Company, net of transaction expenses, a $100 million investment from KYMCO and a $14 million investment from ABIC, net of redemptions and transaction expenses. Following the close, the Company has an equity interest in LiveWire of approximately 89.4%, ABIC’s shareholders and founders have an equity interest of approximately 5.7%, and KYMCO has an equity interest of approximately 4.9%. As the controlling shareholder, the Company will continue to consolidate LiveWire’s results, with additional adjustments to recognize non-controlling shareholder interests.
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Guidance(1)
On October 26, 2022, the Company provided the following guidance for 2022, which reflects its current outlook for the supply chain challenges discussed above.
The Company continues to expect Motorcycles segment revenue growth in 2022, compared to 2021, between 5% and 10%. This forecast incorporates the expectation that the Company will make up the remaining production and wholesale shipments lost as a result of the temporary suspension of production and shipments during the second quarter. The Company continues to expect revenue in 2022 to be positively impacted by global pricing as the Company works to offset cost headwinds across its supply chain.
The Company continues to expect Motorcycles segment operating margin as a percent of revenue of 11% to 12%. The Company believes the anticipated positive impacts from pricing will more than offset the expected cost inflation across the supply chain. Also, the Company expects the suspension of the additional EU tariffs to contribute over a percentage point of margin growth.
Given the model year 2023 planned production cut-over in the fourth quarter, the Company expects 2022 fourth quarter Motorcycles segment operating margin to be impacted by lower wholesale shipments and higher operating expenses relative to the first three quarters of 2022. The Company expects operating and capital expense to be higher in the fourth quarter, as compared to the first three quarters of 2022, related to product development, marketing and other model year launch support activities.
The Company continues to expect Financial Services operating income to decline 20% to 25% in 2022 compared to 2021. This decline is largely a result of the favorable credit loss allowance reductions and lower actual credit losses in 2021.
The Company expects capital investments between $170 and $190 million in 2022, down from the previous estimate of between $190 and $220 million. The Company plans to continue to invest behind product development and capability enhancement in support of The Hardwire strategy.
The Company's capital allocation priorities remain to fund growth through The Hardwire initiatives, including funding of the LiveWire transaction, pay dividends and execute discretionary share repurchases.
Results of Operations for the Three Months Ended September 25, 2022
Compared to the Three Months Ended September 26, 2021
Consolidated Results
 Three months ended  
(in thousands, except earnings per share)September 25,
2022		September 26,
2021		Increase
(Decrease)		% Change
Operating income from Motorcycles and Related Products$257,762 $97,665 $160,097 163.9 %
Operating income from Financial Services80,956 106,547 (25,591)(24.0)
Operating income338,718 204,212 134,506 65.9 
Other income, net9,358 858 8,500 NM
Investment income1,723 198 1,525 NM
Interest expense8,124 7,779 345 4.4 
Income before income taxes341,675 197,489 144,186 73.0 
Provision for income taxes80,489 34,516 45,973 133.2 
Net income$261,186 $162,973 $98,213 60.3 %
Diluted earnings per share$1.78 $1.05 $0.73 69.5 %
The Company reported operating income of $338.7 million in the third quarter of 2022 compared to $204.2 million in the same period last year. Motorcycles segment operating income was $257.8 million in the third quarter of 2022, an increase of $160.1 million compared to the third quarter of 2021. Operating income from the Financial Services segment decreased $25.6 million compared to the third quarter of 2021. Refer to the Motorcycles and Related Products Segment and Financial Services Segment sections for a more detailed discussion of the factors affecting operating income.
Other income in the third quarter of 2022 was higher than in the third quarter of 2021, impacted by higher non-operating income related to the Company's defined benefit plans.
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The Company's effective income tax rate for the third quarter of 2022 was 23.6% compared to 17.5% for the third quarter of 2021. The increase in the effective tax rate is primarily attributable to a higher overall tax rate in 2022 and higher discrete tax benefits in 2021.
Diluted earnings per share was $1.78 in the third quarter of 2022, up 69.5% from the same period last year. Diluted weighted average shares outstanding decreased from 155.1 million in the third quarter of 2021 to 147.1 million in the third quarter of 2022, driven by the Company's discretionary repurchases of common stock. Refer to Liquidity and Capital Resources for additional information concerning the Company's share repurchase activity.
Motorcycle Retail Sales(a)
Retail unit sales of new Harley-Davidson and LiveWire motorcycles were as follows:
 Three months ended  
September 30,
2022		September 30,
2021		(Decrease)
Increase		%
Change
United States30,000 31,699 (1,699)(5.4)%
Canada2,154 2,158 (4)(0.2)
North America
32,154 33,857 (1,703)(5.0)
Europe/Middle East/Africa (EMEA)9,054 9,389 (335)(3.6)
Asia Pacific7,631 6,484 1,147 17.7 
Latin America765 1,048 (283)(27.0)
49,604 50,778 (1,174)(2.3)%
(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning new retail sales, and the Company does not regularly verify the information that its dealers supply. This information is subject to revision.
Worldwide retail sales of new Harley-Davidson motorcycles were down 2.3% during the third quarter of 2022 compared to the same period last year. Retail sales during the third quarter of 2022 were adversely impacted by low dealer inventory levels through the first half of the third quarter related to the suspension of production and shipments for approximately two weeks during the second quarter. As the third quarter progressed, dealer inventory levels improved and retail sales comparisons to the prior year began to turn positive. Retail sales in the month of September 2022 were up approximately 5% in the U.S. and up approximately 7% worldwide compared to the prior year.
Worldwide average retail inventory of new motorcycles was up during the third quarter compared to the prior year as the Company increased wholesale shipments to make up volume lost as a result of the suspension of production and shipments during the second quarter of 2022, but remained at historically low levels. During the third quarter of 2022, worldwide average retail inventory was up 22% compared to the third quarter of 2021, but down 30% compared to the third quarter of 2020. Average retail inventory is calculated based on the average of monthly inventory levels within the quarter.
The Company continued to observe strong retail pricing for both new and used motorcycles within the U.S. during the third quarter of 2022. In the U.S., new motorcycle transaction prices on average as a percent of Manufacturer's Suggested Retail Prices were within the Company's targeted range of plus or minus 2% during the third quarter of 2022. In addition, prices for used Harley-Davidson motorcycles in the U.S. continued to trend above historical levels, and the gap between new and used motorcycle pricing continued to narrow.
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Motorcycles and Related Products Segment
Motorcycle Unit Shipments
Motorcycle unit shipments were as follows:
 Three months ended  
September 25, 2022September 26, 2021UnitUnit
UnitsMix %UnitsMix %Increase
(Decrease)		% Change
U.S. motorcycle shipments37,199 65.2 %27,919 58.2 %9,280 33.2 %
Worldwide motorcycle shipments:
Grand American Touring(a)
27,521 48.2 %21,988 45.9 %5,533 25.2 %
Cruiser(b)
17,403 30.5 %16,531 34.5 %872 5.3 
Sportster® / Street
8,361 14.7 %4,915 10.2 %3,446 70.1 
Adventure Touring3,776 6.6 %4,507 9.4 %(731)(16.2)
57,061 100.0 %47,941 100.0 %9,120 19.0 %
(a)Includes Grand American Touring, CVOTM and Trike
(b)Includes Softail® and LiveWireTM
The Company shipped 57,061 motorcycles worldwide during the third quarter of 2022, which was 19.0% higher than the third quarter of 2021. The Company's shipments were up compared to the same quarter last year as it increased volume to recover volume lost as a result of the suspension of production and shipments for approximately two weeks during the second quarter of 2022.
During the third quarter of 2022, the Company shipped a higher mix of Grand American Touring and Sportster/Street motorcycles as a percent of total shipments and a lower mix of Cruiser and Adventure Touring motorcycles.
Segment Results
Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):
 Three months ended  
September 25, 2022September 26, 2021Increase
(Decrease)		%
Change
Revenue:
Motorcycles
$1,133,558 $885,626 $247,932 28.0 %
Parts and accessories
201,003 204,506 (3,503)(1.7)
Apparel
69,834 49,424 20,410 41.3 
Licensing
10,662 8,481 2,181 25.7 
Other
21,905 12,581 9,324 74.1 
1,436,962 1,160,618 276,344 23.8 
Cost of goods sold946,656 850,193 96,463 11.3 
Gross profit490,306 310,425 179,881 57.9 
Operating expenses:
Selling & administrative expense
194,413 172,411 22,002 12.8 
Engineering expense
38,128 39,832 (1,704)(4.3)
Restructuring expense
3 517 (514)(99.4)
232,544 212,760 19,784 9.3 
Operating income$257,762 $97,665 $160,097 163.9 %
Operating margin17.9 %8.4 %9.5 pts.
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The estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the third quarter of 2021 to the third quarter of 2022 were as follows (in millions):
Net
Revenue		Cost of
Goods Sold		Gross
Profit
Three months ended September 26, 2021$1,160.6 $850.2 $310.4 
Volume193.9 126.3 67.6 
Price and sales incentives87.8 — 87.8 
Foreign currency exchange rates and hedging(48.4)(25.6)(22.8)
Shipment mix43.1 22.2 20.9 
Raw material prices— (0.3)0.3 
Manufacturing and other costs— (26.1)26.1 
276.4 96.5 179.9 
Three months ended September 25, 2022$1,437.0 $946.7 $490.3 
Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the third quarter of 2021 to the third quarter of 2022 were as follows:
•The increase in volume was due to higher motorcycle shipments and higher apparel and licensing sales, partially offset by lower parts and accessories sales.
•During the third quarter of 2022, revenue benefited from higher prices on new model year 2022 motorcycles coupled with pricing surcharges in select markets.
•Revenue and gross profit were negatively impacted by weaker foreign currency exchange rates relative to the U.S. dollar, partially offset by favorable net foreign currency gains associated with hedging recorded in cost of goods sold.
•Changes in the shipment mix had a favorable impact on gross profit during the third quarter of 2022.
•Raw material costs benefited from a moderation in the rate of inflation related to supply chain challenges.
•Manufacturing and other costs decreased due primarily to lower costs associated with a lower fixed cost per unit on higher volumes and lower EU tariff costs which more than offset the impact of higher supply chain costs compared to the third quarter of 2021.
Operating expenses were higher in the third quarter of 2022 compared to the same period last year related to Hardwire initiatives, including LiveWire, and increased recall expenses. These cost increases were partially offset by lower employee-related costs.
Financial Services Segment
Segment Results
Condensed statements of operations for the Financial Services segment were as follows (in thousands):
 Three months ended  
 September 25, 2022September 26, 2021Increase
(Decrease)		%
Change
Revenue:
Interest income$179,261 $174,103 $5,158 3.0 %
Other income32,352 30,589 1,763 5.8 
211,613 204,692 6,921 3.4 
Expenses:
Interest expense60,740 44,770 15,970 35.7 
Provision for credit losses36,617 11,208 25,409 226.7 
Operating expense33,300 42,069 (8,769)(20.8)
Restructuring expense— 98 (98)(100.0)
130,657 98,145 32,512 33.1 
Operating income$80,956 $106,547 $(25,591)(24.0)%
Interest income was higher for the third quarter of 2022, compared to the same period last year, primarily due to higher average outstanding finance receivables, partially offset by a lower average yield. Other income increased in the third quarter
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of 2022 driven by higher investment income and licensing revenue. Interest expense increased due to higher average outstanding debt at a higher average interest rate.
The provision for credit losses increased $25.4 million compared to the third quarter of 2021, driven by higher retail credit losses and an unfavorable change in the allowance. The increase in retail credit losses was driven by higher delinquencies as charge-offs moved towards more normalized levels during the third quarter of 2022. The unfavorable change in the allowance was due to an increase in finance receivables and a slight increase in the retail allowance rate during the third quarter of 2022 as credit performance normalizes to levels experienced prior to the COVID-19 pandemic. This compares to a decrease in the allowance rate in the third quarter of 2021 driven by improvement in economic conditions and the Company’s outlook on future economic conditions at that time.
The overall allowance for loan loss considers current economic conditions and the Company’s outlook on future conditions. During the third quarter of 2022, economic improvement slowed and the ongoing pace of economic recovery remained uncertain as the magnitude of inflation continued to challenge the U.S. and global economies, near-term recession concerns have not abated, muted consumer confidence persisted, the conflict in Ukraine was wide-reaching with resolution uncertain, and global supply chain issues continued, among other factors. As such, at the end of the third quarter of 2022, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios included continued slow economic improvement in certain economic factors, such as unemployment, with a high probability of a near-term recession. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available. Refer to the Results of Operations for the Nine Months Ended September 25, 2022 Compared to the Nine Months Ended September 26, 2021 for a discussion of 2022 annualized credit losses.
Operating expenses decreased $8.8 million compared to the third quarter of 2021 due in part to lower employee related expenses and technology costs as well as a net valuation gain on securitization interest rate caps.
Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
 Three months ended
September 25,
2022		September 26,
2021
Balance, beginning of period$352,137 $358,811 
Provision for credit losses36,617 11,208 
Charge-offs, net of recoveries(28,658)(14,185)
Balance, end of period$360,096 $355,834 
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Results of Operations for the Nine Months Ended September 25, 2022
Compared to the Nine Months Ended September 26, 2021
Consolidated Results
 Nine months ended  
(in thousands, except earnings per share)September 25,
2022		September 26,
2021		(Decrease)
Increase		%
 Change
Operating income from Motorcycles and Related Products$652,324 $511,019 $141,305 27.7 %
Operating income from Financial Services253,241 319,727 (66,486)(20.8)
Operating income905,565 830,746 74,819 9.0 
Other income, net30,443 1,825 28,618 NM
Investment (loss) income(3,786)4,331 (8,117)NM
Interest expense23,555 23,209 346 1.5 
Income before income taxes908,667 813,693 94,974 11.7 
Provision for income taxes209,130 185,236 23,894 12.9 
Net income$699,537 $628,457 $71,080 11.3 %
Diluted earnings per share$4.68 $4.06 $0.62 15.3 %
The Company reported operating income of $905.6 million in the first nine months of 2022 compared to $830.7 million in the same period last year. Motorcycles segment operating income was $652.3 million in the first nine months of 2022, up $141.3 million compared to the same period last year. Operating income from the Financial Services segment decreased $66.5 million compared to the first nine months of 2021. Refer to the Motorcycles and Related Products Segment and Financial Services Segment discussions for a more detailed analysis of the factors affecting operating income.
Other income in the first nine months of 2022 was higher than the same period last year, impacted by higher non-operating income related to the Company's defined benefit plans.
The Company's effective income tax rate for the first quarter of 2022 was 23.0% compared to 22.8% for the same period in 2021.
Diluted earnings per share was $4.68 in the first nine months of 2022, up from diluted earnings per share of $4.06 for the same period last year on higher net income and from the impact of lower diluted weighted average shares outstanding. Diluted weighted average shares outstanding decreased from 154.9 million in the first nine months of 2021 to 149.5 million in the first nine months of 2022, driven by the Company's discretionary repurchases of common stock. Please refer to Liquidity and Capital Resources for additional information concerning the Company's share repurchase activity.
Motorcycles Retail Sales and Registration Data
Motorcycle Retail Sales(a)
Retail unit sales of new Harley-Davidson and LiveWire motorcycles were as follows:
 Nine months ended  
September 30,
2022		September 30,
2021		(Decrease)
Increase		% Change
United States91,228 107,421 (16,193)(15.1)%
Canada7,116 7,403 (287)(3.9)
North America98,344 114,824 (16,480)(14.4)
Europe/Middle East/Africa (EMEA)24,095 24,580 (485)(2.0)
Asia Pacific20,404 18,263 2,141 11.7 
Latin America2,365 2,620 (255)(9.7)
145,208 160,287 (15,079)(9.4)%
(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning new retail sales, and the Company does not regularly verify the information that its dealers supply. This information is subject to revision.
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Worldwide retail sales of new Harley-Davidson motorcycles were down 9.4% during the first nine months of 2022 compared to the same period last year. Retail sales during the first nine months of 2022 were adversely impacted by low dealer inventory levels which were impacted by supply constraints and a suspension of production and shipments for approximately two weeks during the second quarter.
In North America, retail sales in the first nine months of 2022 were down compared to the same period last year led by a 15.1% decline in the U.S. where results were most heavily impacted by lower production and retail inventory levels. Retail sales were down in EMEA and Latin America, but increased in Asia Pacific during the first nine months of 2022 compared to the same period last year.
Motorcycle Registration Data and Market Share – 601+cc(a)
The Company's U.S. market share of new 601+cc motorcycles decreased during the first nine months of 2022 compared to the first nine months of last year on lower retail sales relative to the industry. Despite the lower retail sales relative to the industry, the Company's market share within the touring and large cruiser segments of the U.S. market increased compared to the first nine months of last year. The Company's European market share of new 601+cc motorcycles for first nine months of 2022 was up slightly compared to the first nine months of 2021. Industry retail registration data for new motorcycles and the Company's market share was as follows:
 Nine months ended  
September 30,
2022		September 30,
2021		(Decrease)
Increase		% Change
Industry new motorcycle registrations:
United States(b)
220,432 238,705 (18,273)(7.7)%
Europe(c)
344,393 375,122 (30,729)(8.2)%
Harley-Davidson market share data:
United States(b)
41.3 %44.7 %(3.4)pts.
Europe(c)
6.1 %5.6 %0.5 pts.
(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt (kW) peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.
(b)United States industry data is derived from information provided by Motorcycle Industry Council. This third-party data is subject to revision and update.
(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Industry data is derived from information provided by Management Services Helwig Schmitt GmbH. This third-party data is subject to revision and update.
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Motorcycles and Related Products Segment
Motorcycle Unit Shipments
Motorcycle unit shipments were as follows:
 Nine months ended  
September 25, 2022September 26, 2021UnitUnit
UnitsMix %UnitsMix %(Decrease)
Increase		% Change
U.S. motorcycle shipments101,475 63.4 %104,190 65.4 %(2,715)(2.6)%
Worldwide motorcycle shipments:
Grand American Touring(a)
75,291 47.0 %79,485 49.9 %(4,194)(5.3)%
Cruiser(b)
47,853 29.9 %52,117 32.7 %(4,264)(8.2)
Sportster® / Street
24,573 15.4 %19,262 12.0 %5,311 27.6 
Adventure Touring12,355 7.7 %8,555 5.4 %3,800 44.4 
160,072 100.0 %159,419 100.0 %653 0.4 %
(a)Includes Grand American Touring, CVOTM and Trike
(b)Includes Softail® and LiveWireTM
The Company shipped 160,072 motorcycles worldwide during the first nine months of 2022, which was 0.4% higher than the same period in 2021. The Company's shipments in the U.S. during the first nine months of 2022 were impacted by the suspension of production and shipments for approximately two weeks during the second quarter. The majority of the lost volume was made up during the third quarter; the Company plans to make up the remaining portion during the fourth quarter of 2022.(1)
The motorcycles shipped during the first nine months of 2022 compared to the same period last year included a lower mix of Grand American Touring and Cruiser motorcycles shipped as a percent of total shipments and a higher mix of Sportster/Street and Adventure Touring motorcycles. The Company's Pan America™ Adventure Touring motorcycles were launched in the second quarter of 2021.
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Segment Results
Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):
 Nine months ended  
September 25, 2022September 26, 2021Increase
(Decrease)		%
Change
Revenue:
Motorcycles
$3,132,717 $2,931,669 $201,048 6.9 %
Parts and accessories
581,068 577,035 4,033 0.7 
Apparel
198,568 155,378 43,190 27.8 
Licensing
28,940 22,865 6,075 26.6 
Other
65,311 37,278 28,033 75.2 
4,006,604 3,724,225 282,379 7.6 
Cost of goods sold2,721,913 2,586,264 135,649 5.2 
Gross profit1,284,691 1,137,961 146,730 12.9 
Operating expenses:
Selling & administrative expense
524,602 506,245 18,357 3.6 
Engineering expense
108,154 119,966 (11,812)(9.8)
Restructuring (benefit) expense
(389)731 (1,120)NM
632,367 626,942 5,425 0.9 %
Operating income$652,324 $511,019 $141,305 27.7 %
Operating margin16.3 %13.7 %2.6 pts.
The estimated impacts of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first nine months of 2021 to the first nine months of 2022 were as follows (in millions):
Net
Revenue		Cost of
Goods Sold		Gross
Profit
Nine months ended September 26, 2021$3,724.2 $2,586.3 $1,137.9 
Volume85.4 38.7 46.7 
Price and sales incentives258.5 — 258.5 
Foreign currency exchange rates and hedging(106.5)(63.3)(43.2)
Shipment mix45.0 40.5 4.5 
Raw material prices— 24.9 (24.9)
Manufacturing and other costs— 94.8 (94.8)
282.4 135.6 146.8 
Nine months ended September 25, 2022$4,006.6 $2,721.9 $1,284.7 
Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first nine months of 2021 to the first nine months of 2022 were as follows:
•The increase in volume was due to higher apparel sales as well as a slight increase in motorcycle shipments.
•During the first nine months of 2022, revenue benefited from higher prices on new model year 2022 motorcycles coupled with pricing surcharges in select markets.
•Revenue and gross profit were negatively impacted by weaker foreign currency exchange rates relative to the U.S. dollar, partially offset by favorable net foreign currency gains associated with hedging recorded in cost of goods sold.
•Changes in the shipment mix had a favorable impact on gross profit during the first nine months of 2022 due primarily to a change in the mix of models within motorcycle families.
•Raw material cost increases were driven by cost inflation primarily due to supply chain challenges.
•Manufacturing and other costs increased due primarily to higher costs associated with supply chain challenges. These higher costs were partially offset by lower EU tariff costs compared to the first nine months of 2021.
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Operating expenses were higher during the first nine months of 2022 compared to the same period last year related to Hardwire initiatives, including LiveWire, and higher recall expenses. These costs increases were partially offset by lower employee-related costs and the impact of the Company's ongoing effort to prudently manage spending.
Financial Services Segment
Segment Results
Condensed statements of operations for the Financial Services segment were as follows (in thousands):
 Nine months ended  
September 25,
2022		September 26,
2021		Increase
(Decrease)		%
Change
Revenue:
Interest income$509,702 $501,645 $8,057 1.6 %
Other income 96,542 94,005 2,537 2.7 
606,244 595,650 10,594 1.8 
Expenses:
Interest expense150,488 149,098 1,390 0.9 
Provision for credit losses94,572 4,935 89,637 NM
Operating expense107,943 121,454 (13,511)(11.1)
Restructuring expense— 436 (436)(100.0)
353,003 275,923 77,080 27.9 
Operating income$253,241 $319,727 $(66,486)(20.8)%
Interest income was higher for the first nine months of 2022, primarily due to higher average outstanding finance receivables, partially offset by a lower average yield. Other income increased due in part to higher investment income and licensing revenue. Interest expense increased due to higher average deposits at a higher average interest rate.
The provision for credit losses was $89.6 million higher in the first nine months of 2022 as compared to the prior year primarily due to a reduction in the allowance for credit losses during the first nine months of 2021 and higher credit losses in the first nine months of 2022. The reduction in the allowance for credit losses in the first nine months of 2021 was largely driven by improvement in economic conditions and the Company’s outlook of future conditions at that time. Since the end of 2021, economic improvement slowed and the ongoing pace of economic recovery remained uncertain as the magnitude of inflation continued to challenge the U.S. and global economies, near-term recession concerns have not abated, muted consumer confidence persisted, the conflict in Ukraine was wide-reaching with resolution uncertain, and global supply chain issues continued, among other factors. As such, at the end of the third quarter of 2022, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios included continued slow economic improvement in certain economic factors, such as unemployment, with a high probability of a near-term recession. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.
Annualized credit losses on the Company's retail motorcycle loans were 1.48% at the end of the third quarter of 2022 compared to 0.84% at the end of third quarter of 2021. The unfavorable retail credit loss performance in the first nine months of 2022 was driven by higher delinquencies and credit performance normalizing to levels experienced prior to the COVID-19 pandemic. The 30-day delinquency rate for retail motorcycle loans at September 25, 2022 increased to 3.66% from 2.76% at September 26, 2021. The September 26, 2021 30-day delinquency rate remained below levels experienced prior to the COVID-19 pandemic due to benefits to individuals provided under U.S. federal stimulus packages as well as the effects of COVID-19 pandemic-related retail payment extensions. Starting in the second quarter of 2020 through the end of the second quarter of 2021, the Company granted COVID-19 pandemic-related extensions to help customers get through financial difficulties associated with the pandemic. The Company continues to grant standard payment extensions to customers in accordance with its policies. The Company expects the delinquency rate and losses to continue to normalize to pre-COVID-19 pandemic levels over time.(1)
Operating expenses decreased $13.5 million in the first nine months of 2022 compared to the first nine months of 2021 in part due to lower employee related expenses and technology costs as well as a net valuation gain on securitization interest rate caps.
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Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
 Nine months ended
September 25,
2022		September 26,
2021
Balance, beginning of period$339,379 $390,936 
Provision for credit losses94,572 4,935 
Charge-offs, net of recoveries(73,855)(40,037)
Balance, end of period$360,096 $355,834 
Other Matters
Commitments and Contingencies
The Company is subject to lawsuits and other claims related to product, product recall, commercial, employee, environmental and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.
Liquidity and Capital Resources(1)
Based on the Company's current outlook, for both the near and longer terms, it expects Motorcycles segment operations to continue to be funded primarily through cash flows generated by operations and Financial Services segment operations to continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and brokered certificates of deposit.(1)
The Company's capital allocation priorities are to fund growth through The Hardwire initiatives, to pay dividends, and to execute discretionary share repurchases.
The Company's strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to the COVID-19 pandemic, the Company increased its cash and cash equivalents during 2020. Since the end of 2020, the Company has reduced its cash and cash equivalents; however, the Company's balances remained higher than pre-COVID-19 pandemic levels at the end of September 2022.
The Company’s cash and cash equivalents and availability under its credit and conduit facilities at September 25, 2022 were as follows (in thousands):
Cash and cash equivalents$1,730,250 
 Availability under credit and conduit facilities:
Credit facilities727,449 
Asset-backed U.S. commercial paper conduit facility(a)
1,200,000 
Asset-backed Canadian commercial paper conduit facility(a)
9,150 
$3,666,849 
(a)Includes facilities expiring in the next 12 months which the Company expects to renew prior to expiration.(1)
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To access the debt capital markets, the Company relies on credit rating agencies to assign short- and long-term credit ratings. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or withdraw the Company's ratings based on its assessment of the Company's current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings, as of September 25, 2022 were as follows:
 Short-TermLong-TermOutlook
Moody’sP3Baa3Stable
Standard & Poor’sA3BBB-Stable
FitchF2BBB+Stable
The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The Financial Services operations could be negatively affected by higher costs of funding and increased difficulty of raising, or potential unsuccessful efforts to raise, funding in the short-term and long-term capital markets.(1) These negative consequences could in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital, reduced funds available through its Financial Services operations to provide loans to dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.
Cash Flow Activity
The Company's cash flow activities were as follows (in thousands):
 Nine months ended
September 25, 2022September 26, 2021
Net cash provided by operating activities$574,704 $925,551 
Net cash used by investing activities(745,736)(535,547)
Net cash provided (used) by financing activities221,464 (1,551,546)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(33,361)(11,050)
Net increase (decrease) in cash, cash equivalents and restricted cash$17,071 $(1,172,592)
Operating Activities
Operating cash flow in the first nine months of 2022 compared to the first nine months of 2021 was adversely impacted by changes in working capital as well as higher net cash outflows for wholesale financing. Working capital was negatively impacted by less favorable changes in accounts payable compared to the first nine months of 2021. Net cash outflows for wholesale financing activity were higher in the first nine months of 2022 driven by higher loan originations as compared to the first nine months of 2021.
The Company continues to expect that it will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments at September 25, 2022 relate to leases, retirement plan obligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in Note 10 of the Notes to Consolidated financial statements. There are no required qualified pension plan contributions in 2022. The Company’s expected future contributions and benefit payments related to its defined benefit retirement plans are discussed further in Note 15 of the Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. The Company has a liability for unrecognized tax benefits of $43.8 million and related accrued interest and penalties of $21.8 million as of September 25, 2022. The Company cannot reasonably estimate the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.
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Investing Activities
The Company’s most significant investing activities consist of capital expenditures and retail finance receivable originations and collections. Capital expenditures were $84.9 million in the first nine months of 2022 compared to $61.5 million in the same period last year. The Company's 2022 plan includes estimated capital investments between $170 million and $190 million, all of which the Company expects to fund with net cash flow generated by operations.(1)
Net cash outflows for finance receivables during the first nine months of 2022 were $186.4 million higher compared to the same period last year due to higher retail finance receivable originations. The Company funds its finance receivables net lending activity through the issuance of debt, discussed in "Financing Activities" below.
Financing Activities
The Company’s financing activities consist primarily of dividend payments, share repurchases, and debt activity. In addition, during the quarter ended September 25, 2022, the Company received a $100 million cash deposit from KYMCO in advance of the closing of the pending LiveWire transaction.
The Company paid dividends of $0.473 and $0.450 per share totaling $70.2 million and $69.3 million during the first nine months of 2022 and 2021, respectively.
Cash outflows for share repurchases were $338.5 million in the first nine months of 2022 compared to $11.5 million in the same period last year. Share repurchases during the first nine months of 2022 include $324.5 million or 8.4 million shares of common stock related to discretionary repurchases and $14.0 million or 0.4 million shares of common stock employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares. As of September 25, 2022, there were 9.9 million shares remaining on a board-approved share repurchase authorization.
Financing cash flows related to debt and brokered certificates of deposit activity resulted in net cash inflows of $0.5 billion in the first nine months of 2022 compared to a net cash outflow of $1.5 billion in the same period last year. The Company’s total outstanding debt and liability for brokered certificates of deposit consisted of the following (in thousands):
September 25,
2022		September 26,
2021
Outstanding debt:
Unsecured commercial paper$692,551 $749,620 
Asset-backed Canadian commercial paper conduit facility82,154 98,310 
Asset-backed U.S. commercial paper conduit facility489,074 242,254 
Asset-backed securitization debt, net2,405,406 1,952,368 
Medium-term notes, net2,756,830 3,444,664 
Senior notes, net745,192 744,494 
$7,171,207 $7,231,710 
Deposits, net$344,735 $290,270 
Refer to Note 11 of the Notes to Consolidated financial statements for a summary of future principal payments on the Company's debt obligations. Refer to Note 7 of the Notes to Consolidated financial statements for a summary of future maturities on the Company's certificates of deposit.
Deposits – Harley-Davidson Financial Services offers brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. The Company had $344.7 million and $290.3 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of September 25, 2022 and September 26, 2021, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.
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Credit Facilities – On April 7, 2022, the Company entered into a $710.0 million five-year credit facility to replace the $707.5 million five-year credit facility that was due to mature in April 2023. The new five-year credit facility matures in April 2027. The Company also amended its other $707.5 million five-year credit facility to $710.0 million with no change to the maturity date of April 2025. The five-year credit facilities (together, the Global Credit Facilities) bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.
Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.42 billion as of September 25, 2022 supported by the Global Credit Facilities, as discussed above. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured commercial paper or through other means, such as borrowing under the Global Credit Facilities, borrowing under its asset-backed U.S. commercial paper conduit facility or through the use of operating cash flow and cash on hand.(1)
Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at September 25, 2022 (in thousands):
Principal AmountRateIssue DateMaturity Date
$350,0003.35%February 2018February 2023
    $632,586(a)
4.94%May 2020May 2023
    $583,926(b)
3.14%November 2019November 2024
$700,0003.35%June 2020June 2025
$500,0003.05%February 2022February 2027
(a)€650.0 million par value remeasured to U.S. dollar at September 25, 2022
(b)€600.0 million par value remeasured to U.S. dollar at September 25, 2022
The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by $9.7 million and $10.6 million at September 25, 2022 and September 26, 2021, respectively. There were no medium-term note maturities during the third quarter of 2022 or 2021. During the second quarter of 2022, $400.0 million of 2.55% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2022, $550.0 million of 4.05% medium-term notes matured, and the principal and accrued interest were paid in full. During the second quarter of 2021, $350.0 million of 3.55% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2021, $600.0 million of 2.85% medium-term notes and $450.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full.
Senior Notes – In July 2015, the Company issued $750.0 million of unsecured senior notes in an underwritten offering. The senior notes provide for semi-annual interest payments and principal due at maturity. $450.0 million of the senior notes mature in July 2025 and have an interest rate of 3.50%, and $300.0 million of the senior notes mature in July 2045 and have an interest rate of 4.625%. The Company used the proceeds from the debt to repurchase shares of its common stock in 2015.
On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – In June 2022, the Company renewed its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of September 25, 2022, the Canadian Conduit has an expiration date of June 30, 2023.
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Quarterly transfers of Canadian retail motorcycle finance receivables to the Canadian Conduit and the respective proceeds were as follows (in millions):
20222021
TransfersProceedsTransfersProceeds
First quarter$25.3 $21.2 $— $— 
Second quarter— — — — 
Third quarter27.8 23.0 32.8 27.4 
$53.1 $44.2 $32.8 $27.4 
On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facility VIE – On September 23, 2022, the Company amended its $900.0 million revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset backed U.S. commercial paper conduits, increasing the aggregate commitment to $1.5 billion. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party banks and their asset-backed U.S. commercial paper conduits. In addition to the $1.5 billion aggregate commitment, the agreement allows for additional borrowings, at the lender’s discretion, of up to $300.0 million. Availability under the U.S. Conduit Facility is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.
There were no finance receivable transfers under the U.S. Conduit Facility during the third quarter of 2022. During the second quarter of 2022, the Company transferred $420.8 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $362.8 million of debt under the U.S. Conduit Facility. During the first quarter of 2022, the Company transferred $47.1 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $41.3 million of debt under the U.S. Conduit Facility. There were no finance receivable transfers under the U.S. Conduit Facility during the nine months ended September 26, 2021.
The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. Subsequent to the amendment, the interest rate on any borrowings, if not funded by a conduit lender through the issuance of commercial paper, along with the current outstanding debt as of the date of the borrowings, is based on the Secured Overnight Financing Rate (SOFR). Prior to the amendment date, if not funded by a conduit lender through the issuance of commercial paper, the terms of the interest were based on LIBOR, with provisions for a transition to other benchmark rates. In each of these cases, a program fee is assessed based on the outstanding debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 4 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of September 25, 2022, the U.S. Conduit Facility has an expiration date of November 18, 2022.
Asset-Backed Securitization VIEs – For all of its asset-backed securitization transactions, the Company transfers U.S. retail motorcycle finance receivables to separate VIEs, which in turn issue secured notes with various maturities and interest rates to investors. All of the notes held by the VIEs are secured by future collections of the purchased U.S. retail motorcycle finance receivables. The U.S. retail motorcycle finance receivables included in the asset-backed securitization transactions are not available to pay other obligations or claims of the Company's creditors until the associated debt and other obligations are satisfied. Restricted cash balances held by the VIEs are used only to support the securitizations.
The accounting treatment for asset-backed securitizations depends on the terms of the related transaction and the Company’s continuing involvement with the VIE. The Company's current outstanding asset-backed securitizations do not meet the criteria to be accounted for as a sale because, in addition to retaining servicing rights, the Company retains a financial interest in the VIE in the form of a debt security. These transactions are treated as secured borrowings, and as such, the retail motorcycle finance receivables remain on the balance sheet with a corresponding obligation reflected as debt. There is no amortization schedule for the secured notes; however, the debt is reduced monthly as available collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2024 to 2030.
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Quarterly transfers of U.S. retail motorcycle finance receivables to SPEs, the respective proceeds, and the respective proceeds, net of discounts and issuance costs were as follows (in millions):
20222021
TransfersProceedsProceeds, netTransfersProceedsProceeds, net
First quarter$— $— $— $663.1 $600.0 $597.4 
Second quarter2,176.4 1,836.3 1,826.9 — — — 
Third quarter— — $— 635.5 575.0 572.5 
$2,176.4 $1,836.3 $1,826.9 $1,298.6 $1,175.0 $1,169.9 
Support Agreement – The Company has a support agreement with Harley-Davidson Financial Services whereby, if required, the Company agrees to provide Harley-Davidson Financial Services with financial support to maintain Harley-Davidson Financial Services’ fixed-charge coverage at 1.25 and minimum net worth of $40.0 million. Support may be provided at the Company’s option as capital contributions or loans. No amount has ever been provided to Harley-Davidson Financial Services under the support agreement.
Operating and Financial Covenants – Harley-Davidson Financial Services and the Company are subject to various operating and financial covenants related to the credit facilities and various operating covenants under the medium-term and senior notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below.
The operating covenants limit the Company’s and Harley-Davidson Financial Services’ ability to:
•Assume or incur certain liens;
•Participate in certain mergers or consolidations; and
•Purchase or hold margin stock.
Under the current financial covenants of the Global Credit Facilities, the ratio of Harley-Davidson Financial Services’ consolidated debt, excluding secured debt, to Harley-Davidson Financial Services' consolidated allowance for credit losses on finance receivables plus Harley-Davidson Financial Services’ consolidated shareholders' equity, excluding accumulated other comprehensive loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of Harley-Davidson Financial Services and its subsidiaries, and the Company's consolidated shareholders’ equity excludes AOCL), cannot exceed 0.7 to 1.0 as of the end of any fiscal quarter. No financial covenants are required under the medium-term or senior notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.
As of September 25, 2022, Harley-Davidson Financial Services and the Company remained in compliance with all of the then existing covenants.
Cautionary Statements
Important factors that could affect future results and cause those results to differ materially from those expressed in the forward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and severity of the pandemic across the globe and the pace of recovery following the pandemic and (ii) the Company’s ability to: (A) execute its business plans and strategies, including The Hardwire, including each of the pillars and the evolution of LiveWire as a standalone brand, which includes the risks noted below; (B) manage supply chain and logistics issues, including quality issues, availability of semiconductor chip components and the ability to find alternative sources of those components in a timely manner, unexpected interruptions or price increases caused by supplier volatility, raw material shortages, inflation, war or other hostilities, including the conflict in Ukraine, or natural disasters, and longer shipping times and increased logistics costs, including by successfully implementing pricing surcharges; (C) realize the expected business benefits from the combination of LiveWire with AEA Bridges Impact Corp. (ABIC), which may be affected by, among other things: (i) the ability of LiveWire to: (1) execute its plans to develop, produce, market, and sell its electric vehicles; (2) achieve profitability, which is dependent on the successful development and commercial introduction and acceptance of its electric vehicles, and its services, which may not occur; (3) adequately control the costs of its operations as a new entrant into a new space; (4) develop, maintain, and strengthen its brand; (5) execute its plans to develop, produce, market, and sell its electric vehicles; and (6) effectively establish and maintain cooperation from its retail partners, largely drawn from the Company's traditional motorcycle dealer network, to be able to effectively establish or maintain relationships with customers for electric vehicles; (ii) competition; and (iii) other risks and uncertainties indicated in the final prospectus of ABIC, including those under "Risk Factors" in that prospectus, and other documents filed with the SEC by the Company, LiveWire Group, Inc. or ABIC; (D)
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accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests; (E) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (F) successfully carry out its global manufacturing and assembly operations; (G) develop and introduce products, services and experiences on a timely basis that the market accepts, that enable the Company to generate desired sales levels and that provide the desired financial returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Grand American Touring, large Cruiser and Trike, and grow its complementary businesses; (H) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (I) manage the regulatory compliance matter relating to a third-party supplier's component part in a manner that avoids additional costs or recall expenses that are material; (J) successfully appeal: (i) the revocation of the Binding Origin Information (BOI) decisions that allowed the Company to supply its European Union (EU) market with certain of its motorcycles produced at its Thailand operations at a reduced tariff rate and (ii) the denial of the Company's application for temporary relief from the effect of the revocation of the BOI decisions; (K) manage and predict the impact that new, reinstated or adjusted tariffs may have on the Company's ability to sell products internationally, and the cost of raw materials and components, including the temporary lifting of the Section 232 steel and aluminum tariffs and incremental tariffs on motorcycles imported into the EU from the U.S., between the U.S. and EU, which expires on December 31, 2023; (L) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing; (M) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (N) successfully manage and reduce costs throughout the business; (O) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing domestic and international political environments, including as a result of the conflict in Ukraine; (P) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; (Q) continue to develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (R) maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (S) successfully maintain a manner in which to sell motorcycles in China and the Company’s Association of Southeast Asian Nations (ASEAN) countries that does not subject its motorcycles to incremental tariffs; (T) manage its Thailand corporate and manufacturing operation in a manner that allows the Company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets; (U) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (V) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (W) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding data security; (X) manage the credit quality, the loan servicing and collection activities, and the recovery rates of Harley-Davidson Financial Services Inc.'s loan portfolio; (Y) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the Company's business; (Z) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; (AA) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (BB) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; (CC) manage its exposure to product liability claims and commercial or contractual disputes; (DD) continue to manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness; (EE) achieve anticipated results with respect to the Company's pre-owned motorcycle program, Harley-Davidson Certified, and the Company's H-D1 Marketplace; (FF) accurately predict the margins of its Motorcycles and Related Products segment in light of, among other things, tariffs, inflation, foreign currency exchange rates, the cost associated with product development initiatives and the Company's complex global supply chain; and (GG) optimize capital allocation in light of the Company's capital allocation priorities.
The Company’s ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company’s dealers to sell its motorcycles and related products and services to retail customers. The Company depends on the capability and financial capacity of its dealers to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company. In addition, the Company’s dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions, the impact of the COVID-19 pandemic, or other factors.
In recent years, Harley-Davidson Financial Services Inc. has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The Company believes that Harley-Davidson Financial Services Inc.'s retail credit losses will increase over time due among other things to factors that have contributed recently to low levels of losses, including the favorable impact of recent federal stimulus payments that will not recur and the conflict in Ukraine.
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The Company's operations, demand for its products, and its liquidity could be adversely impacted by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, war or other hostilities, including the conflict in Ukraine, or other factors. Refer to Item 1A. Risk Factors and risk factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in foreign currency exchange rates, commodity prices and interest rates. To reduce such risks, the Company selectively uses derivative financial instruments. All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes. Sensitivity analysis is used to manage and monitor foreign currency exchange rate and interest rate risks. Further disclosure relating to the fair value of the Company's derivative financial instruments is included in Note 9 of the Notes to Consolidated financial statements.
Motorcycles and Related Products Segment
The Company sells its motorcycles and related products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, the Motorcycles segment operating results are affected by fluctuations in the value of the U.S. dollar relative to foreign currencies. The Company’s most significant foreign currency exchange rate risk resulting from the sale of motorcycles and related products relates to the Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Chinese yuan, Singapore dollar, Thai baht and Pound sterling. The Company utilizes foreign currency contracts to mitigate the effect of certain currencies' fluctuations on Motorcycles segment operating results. The foreign currency contracts are entered into with banks and allow the Company to exchange currencies at a future date, based on a fixed exchange rate. There have been no material changes to the foreign currency exchange rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
The Company purchases commodities for the use in the production of motorcycles. As a result, Motorcycles segment operating income is affected by changes in commodity prices. The Company uses derivative financial instruments on a limited basis to hedge the prices of certain commodities. There have been no material changes to the commodity market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Financial Services Segment
The Company has interest rate sensitive financial instruments including financial receivables, debt and interest rate derivative financial instruments. As a result, Financial Services operating income is affected by changes in interest rates. The Company utilizes interest rate caps to reduce the impact of fluctuations in interest rates on its asset-backed securitization transactions. There have been no material changes to the interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Harley-Davidson Financial Services also has short-term commercial paper and debt issued through the commercial paper conduit facilities that is subject to changes in interest rates which it does not hedge. There have been no material changes to the interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
The Company has foreign denominated debt transactions, and as a result, Financial Services operating income is affected by fluctuations in the value of the U.S. dollar relative to foreign currencies and interest rates. At September 25, 2022, this exposure related to the Euro. The Company utilizes cross-currency swaps to mitigate the effect of the foreign currency exchange rate and interest rate fluctuations related to foreign denominated debt. There have been no material changes to the foreign currency exchange rate and interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for further information concerning the Company's market risk.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures – In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and the Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.
Changes in Internal Controls – There were no changes in the Company's internal control over financial reporting during the quarter ended September 25, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
The information required under this Item 1 of Part II is contained in Item 1 of Part I of this Quarterly Report on Form 10-Q in Note 16 of the Notes to Consolidated financial statements, and such information is incorporated herein by reference in this Item 1 of Part II.
Item 1A. Risk Factors
An investment in Harley-Davidson, Inc. involves risks, including the risk factors discussed in Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which have not materially changed except as set forth below.
•The ongoing conflict between Russia and Ukraine could adversely affect the Company's business, financial condition and operating results. On February 24, 2022, Russian military forces launched a military action in Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing military conflict in Ukraine are highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply and prices of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences as well as increase in cyberattacks and espionage. Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to an unprecedented expansion of sanction programs imposed by the United States, European Union, United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic, including, among others: (i) blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European Union; (ii) blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government connections or involved in Russian military activities; and (iii) blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets and bans on various Russian imports. The Company has suspended its business in Russia. While the Company has not experienced any material interruptions to its infrastructure, supplies, technology systems or networks needed to support its operations or significant costs due to the conflict, the Company cannot provide assurance that will remain the case. The Company has no way to predict the progress or outcome of the conflict in Ukraine or its impacts in Ukraine, Russia or Belarus as the conflict, and any resulting government reactions, are rapidly developing and beyond its control. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and the Company's business for an unknown period of time. Any of the factors mentioned above could affect the Company's business, financial condition and operating results. The conflict could also exacerbate
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other risks that the Company described in Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The Company disclaims any obligation to update these risk factors or any other forward-looking statements. The Company assumes no obligation, and specifically disclaims any such obligation, to update these risk factors or any other forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company's share repurchases, which consisted of discretionary shares and shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares, were as follows during the quarter ended September 25, 2022:
2022 Fiscal MonthTotal Number of
Shares Purchased		Average Price
Paid per Share		Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs		Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
June 27 to June 31385,443 $32 385,443 9,872,167 
August 1 to August 285,721 $38 5,721 9,872,167 
August 29 to September 251,379 $38 1,379 9,872,167 
392,543 $32 392,543 
In February 2018, the Company's Board of Directors authorized the Company to repurchase up to 15.0 million shares of its common stock on a discretionary basis with no dollar limit or expiration date. In February 2020, the Company's Board of Directors authorized the Company to repurchase up to 10.0 million additional shares of its common stock on a discretionary basis with no dollar limit or expiration date. The Company repurchased 0.4 million shares on a discretionary basis during the quarter ended September 25, 2022 under these authorizations. As of September 25, 2022, 9.9 million shares remained under the 2020 authorization, as the Company exhausted all remaining shares under the 2018 authorization during the quarter ended September 25, 2022.
Under the share repurchase authorizations, the Company’s common stock may be purchased through any one or more of a Rule 10b5-1 trading plan and discretionary purchases on the open market, block trades, accelerated share repurchases, or privately negotiated transactions. The number of shares repurchased, if any, and the timing of repurchases will depend on a number of factors, including share price, trading volume, and general market conditions, as well as on working capital requirements, general business conditions, and other factors. The repurchase authority has no expiration date but may be suspended, modified, or discontinued at any time.
The Harley-Davidson, Inc. 2020 Incentive Stock Plan and the 2022 Aspirational Incentive Stock Plan (Incentive Plans) and predecessor stock plans permit participants to satisfy all or a portion of the statutory federal, state, and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares otherwise issuable under the award, (b) tender back shares received in connection with such award, or (c) deliver other previously owned shares, in each case having a value equal to the amount to be withheld. During the third quarter of 2022, the Company acquired 8,064 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares. At the Company's 2022 Annual Meeting of Shareholders held May 12, 2022, the shareholders of the Company approved an amendment to the 2020 Incentive Stock Plan to increase the authorized number of shares under the Incentive Plan by 3.1 million shares. As amended, the 2020 Incentive Stock Plan provides that up to a total of 8.5 million shares of the Company's common stock may be issued thereunder.
Item 6. Exhibits
Refer to the exhibit index immediately following this page.
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Harley-Davidson, Inc.
Exhibit Index to Form 10-Q
Exhibit No.Description
Form of Notice of Award of Performance Shares and Performance Shares Agreement (Aspirational Incentive Stock Plan - Non-CEO Award), Form of Notice of Award of Performance Shares and Performance Shares Agreement (Aspirational Incentive Stock Plan - CEO Award)
Chief Executive Officer Certification pursuant to Rule 13a-14(a)
Chief Financial Officer Certification pursuant to Rule 13a-14(a)
Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101

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

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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 HARLEY-DAVIDSON, INC.
Date: November 3, 2022/s/ Gina Goetter
Gina Goetter
Chief Financial Officer
(Principal financial officer)
 
Date: November 3, 2022/s/ Mark R. Kornetzke
Mark R. Kornetzke
Chief Accounting Officer
(Principal accounting officer)

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Notice of Award of Performance Shares                    Harley-Davidson, Inc.
and Performance Shares Agreement                    ID: 39-1805420
(Aspirational Incentive Stock Plan)                        3700 West Juneau Avenue
Milwaukee, WI 53208


[Participant Name]                    [Grant Type]
[Signed Electronically]                     Plan: 2022 Aspirational Incentive Stock Plan
Acceptance Date: [Acceptance Date]            ID: [Participant ID]



Effective [Grant Date] (the “Grant Date”), you have been granted [Number of Performance Shares Granted] Performance Shares (the “Performance Shares”) with respect to shares of Common Stock of Harley-Davidson, Inc. (“HDI”) under HDI’s 2022 Aspirational Incentive Stock Plan (the “Plan”).

The number of Performance Shares you earn will be based on HDI’s achievement of stock price goals between the Grant Date and December 31, 2025 (the “Performance Period”) and your continued service as set forth in the Plan.

Any Performance Shares that have not been earned as of the end of the Performance Period 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 Exhibits A and B. 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.




image_1a.jpg

Chief Human Resources Officer        
    







Exhibit A to Performance Shares Agreement

Confidential Information: In consideration of your agreement to the terms of this Performance Shares Agreement (this “Agreement”) by your acceptance of this Agreement, the Company promises to disclose to you from time to time confidential and competitively sensitive information concerning, among other things, the Company and its strategies, objectives, performance and business prospects. You may use this information to perform your duties to the Company as well as in determining whether to accept an equity award. You shall not use this information for any purpose prohibited by the Company’s policies and guidelines concerning insider trading and unauthorized disclosure or use of information.

Certain Definitions: The following definitions apply in this Agreement:

(1) “Company” or “the Company” means HDI and all of its subsidiaries and affiliates engaged in the development, manufacture, procurement, marketing, financing, or selling of two- or three-wheeled motorcycles; motorcycle parts, accessories, and clothing; or other motorcycle-related or motorcycle brand-identified products or services including financial services.

(2) “Competitive Business” as used in this Agreement means any person, firm, corporation, or entity of any type other than the Company that: (a) is engaged in developing, making, marketing or selling: (i) two- or three-wheeled motorcycles; (ii) motorcycle parts, motorcycle accessories, and/or motorcycle clothing; or (iii) other motorcycle-related or motorcycle brand-identified products or services; and (b) markets or sells, or attempts, intends, or is reasonably expected to market or sell, directly or indirectly such as through a dealer or dealer network, any of these products or services in any Prohibited Territory. Examples of a Competitive Business provided for your convenience and subject to change in an evolving marketplace include, but are not limited to the following: KTM AG; Husqvarna Motorcycles GmbH; Royal Enfield; Erik Buell Racing LLC; MV AGUSTA Motor S.p.A.; Parts Unlimited; Tucker Rocky Distributing; Polaris Industries, Inc.; Victory Motorcycles; Indian Motorcycle Company; Triumph Motorcycles Ltd.; Honda Racing Corporation; Yamaha Motor Co., Ltd.; Suzuki Motor Corporation; Kawasaki Motorcycle & Engine Company; Zero Motorcycles, Inc.; Brammo, Inc.; BMW Motorrad; Bombardier Recreational Products Inc.; Bajaj Auto Limited; TVS Motor Company Ltd.; The Hero Group, Ltd.; and Ural Motorcycles. Tesla, Inc. would be another example of a Competitive Business if Tesla is engaged in developing, manufacturing, marketing or selling a two- or three-wheeled motorcycle and/or related products or services. This non-exhaustive list of examples of competitive businesses does not limit the scope of the definition of Competitive Business provided above.

(3) “Confidential Information” means any information that is not generally known outside the Company relating to any phase of business of the Company, whether existing or foreseeable, including information conceived, discovered or developed by you. Confidential Information includes, but is not limited to: project files, product designs, drawings, sketches and processes; production characteristics; testing procedures and results thereof; manufacturing methods, processes, techniques and test results; plant layouts, tooling, engineering evaluations and reports; business plans, financial statements and projections; operating forms (including contracts) and procedures; payroll and personnel records; non-public marketing materials, plans and proposals; customer lists and information, and target lists for new clients and information relating to potential clients; software codes and computer programs; training manuals; policy and procedure manuals; raw materials sources, price and cost information; administrative techniques and documents; and any information received by the Company under an obligation of confidentiality to a third party.

(4) “Prohibited Territory” shall mean any country in which the Company, at any time during the time period from the date of this Agreement through the last day of your employment with the Company, (a) directly or indirectly, such as through a dealer network, marketed or sold its motorcycles or motorcycle-related products or services, or (b) had documented plans to market or sell, directly or indirectly, its motorcycles or motorcycle-related products or services (unless such plans had been abandoned).

(5) “Trade Secrets” means any information, including any data, plan, drawing, specification, pattern, procedure, method, computer data, system, program or design, device, list, tool, or compilation, that relates to the present or planned business of the Company and which: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means to, other persons who can obtain economic value from their disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain their secrecy. To the extent that the foregoing definition is inconsistent with a definition of “trade secret” under applicable law, the latter definition shall control.

(6) Neither Confidential Information nor Trade Secrets include general skills or knowledge or skills that you obtained prior to your employment with the Company.




Confidentiality:

(1) During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether your termination of employment is voluntary or involuntary or the reason therefor, you shall not use or disclose any Confidential Information except for the benefit of the Company in the course of your employment by the Company and shall not use or disclose any Confidential Information in competition with or to the detriment of the Company, or for your benefit or the benefit of anyone else other than the Company.

(2) During the time period from the date of this Agreement and for so long thereafter as such information is not generally known to, and not readily ascertainable by proper means to, other persons who can obtain economic value from its disclosure or use, you will maintain all Trade Secrets to which you have received access while employed by the Company as confidential and as the property of the Company.

(3) Upon termination of your employment with the Company, you will turn over immediately to the Company all Confidential Information and Trade Secrets (including all paper and electronic copies), and you shall retain no copies thereof. You shall attend an exit interview at or around the time of termination and sign a written statement certifying your compliance with the terms of this Agreement.

Competitive Employment: During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether your termination of employment is voluntary or involuntary or the reason therefor, you shall not on behalf of or in connection with any Competitive Business accept or perform any employment or service or provide any assistance, whether as an employee, consultant, contractor, agent, officer, director, investor, member, or otherwise, in any position or capacity in which your knowledge of Confidential Information or Trade Secrets of the Company or personal association with the goodwill of the Company could reasonably be considered useful.

No Solicitation of Certain Employees: During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether the termination of your employment is voluntary or involuntary or the reason therefor, you shall not, directly or indirectly, solicit or induce, or assist in any manner in the solicitation or inducement of any employee of the Company who was subject to your direct supervision or about whom you received any Confidential Information, in either event during any part of the last two years of your employment with the Company, to accept any employment, consulting, contracting or other confidential relationship with a Competitive Business.

No Solicitation of Certain Customers: During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether your termination of employment is voluntary or involuntary or the reason therefor, you shall not on behalf of or in connection with any Competitive Business, directly or indirectly, solicit or induce, or assist in any manner in the solicitation or inducement of any customer, distributor or dealer of the Company’s products or services to terminate its relationship with the Company or to purchase or deal in products or services competitive with the Company’s products or services, if you had any material contact with or learned any Confidential Information about the customer, distributor or dealer, in either event through performance of your job duties and responsibilities or through otherwise performing services on behalf of the Company during any part of the last two years of your employment with the Company.

Termination of Employment: If your employment with the Company is terminated prior to the date on which all of the Performance Shares are vested, then you will forfeit any Performance Shares that you have not earned and you will forfeit any then-unvested Performance Shares that do not become vested as a result of the termination of your employment as of the date your employment is terminated.

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 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 and that becomes vested. The Performance Shares will be settled (and any dividend equivalent cash payment will be paid to you) as soon as practicable following the date on which the Performance Shares vest. 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, HDI 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 earning or 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, earning 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. Notwithstanding the foregoing, if you are subject to Section 16 of the Exchange Act, pursuant to Rule 16a-2 promulgated thereunder, any tax withholding obligations shall be satisfied by having HDI withhold Shares otherwise issuable under the Performance Shares.

Rejection/Acceptance: You have ninety (90) days following the Grant Date to accept the award of Performance Shares through your Fidelity account. If you have not accepted the Performance Shares award within ninety (90) days following the Grant Date, the Performance Shares granted herein shall be automatically forfeited. If you choose to accept this Agreement, then you accept the terms of the Performance Shares award, acknowledge these tax implications and agree and consent to all amendments to the Plan, the Harley-Davidson, Inc. 2009 Incentive Stock Plan, the Harley-Davidson, Inc., the 2014 Incentive Stock Plan and the Harley-Davidson, Inc. 2020 Incentive Stock Plan through the Grant Date as they apply to this Performance Shares award and any prior awards to you of any kind under such plans.

Appendix. Notwithstanding any provision of this Agreement or the Plan to the contrary, the Performance Shares shall be subject to such special terms and conditions for your country or jurisdiction of residence (and country or jurisdiction of employment, if different), as HDI may determine in its sole discretion and which shall be set forth in an appendix (Exhibit B) to this Agreement (“Appendix”). Further, if you transfer residence and/or employment to another country or jurisdiction reflected in the Appendix, any special terms and conditions for such country or jurisdiction will apply to you to the extent the Committee determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable to comply with local law, rules and/or regulations or to facilitate the operation and administration of the Performance Shares and the Agreement (or HDI may establish additional special terms and conditions as may be necessary or advisable to accommodate your transfer). In all circumstances, the Appendix shall constitute part of this Agreement and the Plan.






Exhibit B
APPENDIX TO PERFORMANCE SHARES AGREEMENT

APPLICABLE TO PARTICIPANTS OUTSIDE THE UNITED STATES
This Appendix includes additional notices, terms and conditions that govern the Performance Shares granted pursuant to the Agreement and the Plan if you reside and/or work outside of the United States. If you transfer to another jurisdiction reflected in this Appendix, the additional terms and conditions for such jurisdiction (if any) will apply to you to the extent HDI determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable for legal or administrative reasons (or HDI may establish alternative terms as may be necessary or advisable to accommodate your transfer). Capitalized terms not defined in this Appendix but defined the Agreement or the Plan shall have the same meaning as in the Agreement or the Plan.
ALL NON-U.S. COUNTRIES
1.Nature of Grant. By acknowledging and accepting the Performance Shares, you acknowledge, understand and agree that:
(a)the Plan is established voluntarily by HDI, it is discretionary in nature and it may be modified, amended, suspended or terminated by HDI at any time, to the extent permitted by the Plan;
(b)the grant of the Performance Shares is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Shares, or benefits in lieu of the Performance Shares, even if Performance Shares have been granted in the past;
(c)all decisions with respect to future grants of Performance Shares, if any, will be at the sole discretion of HDI;
(d)the Participant is voluntarily participating in the Plan;
(e)the Performance Shares and the Shares subject to the Performance Shares, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f)the Performance Shares and the Shares subject to the Performance Shares, and the income from and value of same, are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(g)unless otherwise agreed with HDI in writing, the Performance Shares and the Shares subject to the Performance Shares, and the income from and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of any Affiliate;
(h)the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
(i)no claim or entitlement to compensation or damages shall arise from forfeiture of the Performance Shares resulting from you ceasing to provide employment or other services to the Company (for any reason whatsoever and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any);
(j)unless otherwise provided in the Plan, in the Agreement or by HDI in its discretion, the Performance Shares and the benefits evidenced by this Agreement do not create any entitlement to have the Performance Shares transferred to, or assumed by, another company or be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares of HDI;
(k)subject to Section 13(b) of the Plan, for purposes of the Performance Shares, your employment will be considered terminated as of the date you are no longer actively providing services to the Company (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide services or the terms of your employment agreement, if any), and such date will not be extended by any notice period (e.g., your period of employment would not include any contractual notice period or any period of “garden leave” or similar period mandated



under employment laws in the jurisdiction where you provide services or the terms of your service agreement, if any); HDI shall have the exclusive discretion to determine when you are no longer actively providing service for purposes of Performance Shares (including whether you may still be considered to be providing service while on a leave of absence); and
(l)the Company shall not be liable for any foreign exchange rate fluctuation between your local currency and the U.S. Dollar that may affect the value of the Performance Shares or of any amounts due to you pursuant to the settlement of the Performance Shares or the subsequent sale of any Shares acquired upon settlement.
2.Taxes. This Section supplements the Tax Withholding provision of Exhibit A to the Agreement:
(a)Responsibility for Taxes. You acknowledge that, regardless of any action taken by the Company, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you or deemed by the Company in its discretion to be an appropriate charge to you even if legally applicable to the Company (“Tax-Related Items”), is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company. You further acknowledge that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Shares, including, but not limited to, the grant, vesting or settlement of the Performance Shares, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends, and (ii) does not commit to and is under no obligation to structure the terms of the grant or any aspect of the Performance Shares to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction between the date the Performance Shares is granted and the date of any relevant taxable or tax withholding event, as applicable, you acknowledge that the Company (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. HDI may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if you fail to comply with your obligations in connection with the Tax-Related Items.
(b)Withholding Generally. In connection with any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company to fulfill any and all liability for Tax-Related Items. In this regard, you authorize the Company, or its respective agents, at their discretion, to satisfy any applicable withholding obligations or rights with regard to Tax-Related Items by one or a combination of the following without the need for your consent: (i) withholding from your wages or other cash compensation payable to you by the Company, (ii) withholding from proceeds of the sale of Shares acquired upon settlement of the Performance Shares either through a voluntary sale or through a mandatory sale arranged by HDI (on your behalf pursuant to this authorization without further consent), (iii) withholding Shares otherwise issuable under the Performance Shares, (iv) requiring you to tender a cash payment to the Company, (v) requiring you to tender back Shares received in connection with such Performance Shares, (vi) requiring you to deliver other previously owned Shares, in each case having a Fair Market Value equal to the amount to be withheld and/or (vii) any other method of withholding determined by HDI to be permitted under applicable law and, to the extent required by the Plan or applicable law, approved by the Committee. Notwithstanding the foregoing, if you are subject to Section 16 of the Exchange Act, pursuant to Rule 16a-2 promulgated thereunder, any tax withholding obligations shall be satisfied by having HDI withhold Shares otherwise issuable under the Performance Shares.
(c)Withholding Rates. The Company may withhold for Tax-Related Items by considering statutory withholding rates (as determined by the Company in good faith and in its sole discretion) or other withholding rates, including up to the maximum applicable rates in your jurisdiction(s). In the event the application of such withholding rate leads to over-withholding, you may receive a refund of any over-withheld amount in cash from the Company (and, in no event, will you have any entitlement to the equivalent amount in Shares); alternatively, if not refunded by the Company, you may be able to seek a refund from the local tax authorities. In the event the application of such withholding rate leads to under-withholding, you may be required to pay any additional Tax-Related Items directly to the applicable tax authorities.
3.Language. If you are resident in a country where English is not an official language, you acknowledge and agree that it is your express intent that the Plan, the Agreement, and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Performance Shares be drawn up in English. Further, you acknowledge that you are sufficiently proficient in English to understand the terms and conditions of the Plan, this Agreement and any documents related to the Plan or have had the ability to consult with an advisor who is sufficiently proficient in the English language. If you have received this Agreement, the Plan or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.



4.Not a Public Offering. The grant of the Performance Shares is not intended to be a public offering of securities in your country of employment (or country of residence, if different). HDI has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law), and the grant of the Performance Shares is not subject to the supervision of the local securities authorities.
5.Compliance with Law. Notwithstanding any other provision of the Plan or Agreement, unless there is an exemption from any registration, qualification or other legal requirement applicable to the Shares, HDI shall not be required to deliver any of the Shares that are otherwise issuable upon settlement of the Performance Shares prior to the completion or approval of any registration or qualification of the Shares under any applicable law or under any rulings or regulations of any governmental regulatory body, which registration, qualification or approval HDI shall, in its absolute discretion, deem necessary or advisable. You understand that HDI is under no obligation to register or qualify the Shares with any securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that HDI shall have unilateral authority to amend this Agreement without your consent to the extent necessary to comply with securities, exchange control or other laws applicable to issuance of Shares.
6.Imposition of Other Requirements. HDI reserves the right to impose other requirements on your participation in the Plan, on the Performance Shares and on any Shares acquired under the Plan, to the extent HDI determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
7.No Advice Regarding Grant. HDI is not providing any tax, legal or financial advice, nor is HDI making any recommendations regarding your participation in the Plan or your acquisition or sale of the underlying Shares. You should consult with your own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
8.Insider Trading/Market Abuse Laws. You acknowledge that you may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including (but not limited to) the United States and your jurisdiction, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares or rights to Shares (e.g., Performance Shares) or rights linked to the value of shares during such times you are considered to have “inside information” regarding HDI as defined in the laws or regulations in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable insider trading policy of HDI. You are responsible for complying with any such restrictions and should speak to your personal legal advisor on this matter.
9.Foreign Asset/Account Reporting and Exchange Control Requirements. You acknowledge that there may be foreign asset and/or account reporting and/or exchange control requirements that may affect your ability to acquire or hold Shares or cash received from participating in the Plan in a brokerage or bank account outside your country. You may be required to report such accounts, balances, assets and/or the related transactions to the tax, exchange control or other authorities in your jurisdiction. You also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to your jurisdiction through a designated bank or broker and/or within a certain time after receipt. You are responsible for complying with such regulations and should speak to your personal legal advisor on this matter.
GERMANY
No country-specific provisions.
SINGAPORE
Securities Law Information. The Performance Shares under the Plan are being offered pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”) and are not made with a view to the Shares being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. You should note that the Performance Shares are subject to section 257 of the SFA and that you will not be able to make any subsequent sale of the Shares in Singapore or any offer of such subsequent sale of the Shares subject to the Performance Shares in Singapore, unless such sale or offer is made (a) after 6 months from the date of grant or (b) pursuant to the exemptions under Part XIII Division 1 Subdivision (4) (other than section 280) of the SFA.



UNITED KINGDOM
Taxes. The following provision supplements the Tax Withholding provision of Exhibit B to the Agreement and Section 2 under the “All Non-U.S. Countries” heading of this Appendix:
Without limitation to the Tax Withholding provision of Exhibit B to the Agreement and Section 2 under the “All Non-U.S. Countries” heading of this Appendix, you agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items, as and when requested by the Company or by HM Revenue and Customs (“HMRC”) (or any other tax or relevant authority). You also agree to indemnify and keep indemnified the Company against any Tax-Related Items that they are required to pay or withhold, or have paid or will pay, on your behalf to HMRC (or any other tax or relevant authority). For purposes of this Agreement, Tax-Related Items include (without limitation) employment income tax, employee National Insurance contributions (“NICs”) and the employee portion of the Health and Social Care levy.
Notwithstanding the foregoing, if you are a director or executive officer of HDI (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that you are a director or executive officer and income tax is not collected from or paid by you within 90 days of the end of the United Kingdom tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected tax may constitute a benefit to you on which additional income tax and NICs and Health and Social Care levy may be payable. You acknowledge that you ultimately will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company (as applicable) for the value of any employee NICs and employee Health and Social Care levy due on this additional benefit, which the Company may recover from you at any time thereafter by any of the means referred to in Section 2 under the “All Non-U.S. Countries” heading of this Appendix.




Notice of Award of Performance Shares                Harley-Davidson, Inc.
and Performance Shares Agreement                ID: 39-1805420
(Aspirational Incentive Stock Plan)                    3700 West Juneau Avenue
Milwaukee, WI 53208

[Participant Name]                    [Grant Type]
[Signed Electronically]                    Plan:    2022 Aspirational Incentive Stock Plan
Acceptance Date: [Acceptance Date]            ID: [Participant ID]



Effective [Grant Date] (the “Grant Date”), you have been granted [Number of Performance Shares Granted] Performance Shares (the “Performance Shares”) with respect to shares of Common Stock of Harley-Davidson, Inc. (“HDI”) under HDI’s 2022 Aspirational Incentive Stock Plan (the “Plan”).

The number of Performance Shares you earn will be based on HDI’s achievement of stock price goals between the Grant Date and December 31, 2025 (the “Performance Period”) and your continued service as set forth in the Plan.

Any Performance Shares that have not been earned as of the end of the Performance Period 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 Exhibits A and B. 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.





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Chief Human Resources Officer        
    







Exhibit A to Performance Shares Agreement

Confidential Information: In consideration of your agreement to the terms of this Performance Shares Agreement (this “Agreement”) by your acceptance of this Agreement, the Company promises to disclose to you from time to time confidential and competitively sensitive information concerning, among other things, the Company and its strategies, objectives, performance and business prospects. You may use this information to perform your duties to the Company as well as in determining whether to accept an equity award. You shall not use this information for any purpose prohibited by the Company’s policies and guidelines concerning insider trading and unauthorized disclosure or use of information.

Certain Definitions: The following definitions apply in this Agreement:

(1) “Company” or “the Company” means HDI and all of its subsidiaries and affiliates engaged in the development, manufacture, procurement, marketing, financing, or selling of two- or three-wheeled motorcycles; motorcycle parts, accessories, and clothing; or other motorcycle-related or motorcycle brand-identified products or services including financial services.

(2) “Competitive Business” as used in this Agreement means any person, firm, corporation, or entity of any type other than the Company that: (a) is engaged in developing, making, marketing or selling: (i) two- or three-wheeled motorcycles; (ii) motorcycle parts, motorcycle accessories, and/or motorcycle clothing; or (iii) other motorcycle-related or motorcycle brand-identified products or services; and (b) markets or sells, or attempts, intends, or is reasonably expected to market or sell, directly or indirectly such as through a dealer or dealer network, any of these products or services in any Prohibited Territory. Examples of a Competitive Business provided for your convenience and subject to change in an evolving marketplace include, but are not limited to the following: KTM AG; Husqvarna Motorcycles GmbH; Royal Enfield; Erik Buell Racing LLC; MV AGUSTA Motor S.p.A.; Parts Unlimited; Tucker Rocky Distributing; Polaris Industries, Inc.; Victory Motorcycles; Indian Motorcycle Company; Triumph Motorcycles Ltd.; Honda Racing Corporation; Yamaha Motor Co., Ltd.; Suzuki Motor Corporation; Kawasaki Motorcycle & Engine Company; Zero Motorcycles, Inc.; Brammo, Inc.; BMW Motorrad; Bombardier Recreational Products Inc.; Bajaj Auto Limited; TVS Motor Company Ltd.; The Hero Group, Ltd.; and Ural Motorcycles. Tesla, Inc. would be another example of a Competitive Business if Tesla is engaged in developing, manufacturing, marketing or selling a two- or three-wheeled motorcycle and/or related products or services. This non-exhaustive list of examples of competitive businesses does not limit the scope of the definition of Competitive Business provided above.

(3) “Confidential Information” means any information that is not generally known outside the Company relating to any phase of business of the Company, whether existing or foreseeable, including information conceived, discovered or developed by you. Confidential Information includes, but is not limited to: project files, product designs, drawings, sketches and processes; production characteristics; testing procedures and results thereof; manufacturing methods, processes, techniques and test results; plant layouts, tooling, engineering evaluations and reports; business plans, financial statements and projections; operating forms (including contracts) and procedures; payroll and personnel records; non-public marketing materials, plans and proposals; customer lists and information, and target lists for new clients and information relating to potential clients; software codes and computer programs; training manuals; policy and procedure manuals; raw materials sources, price and cost information; administrative techniques and documents; and any information received by the Company under an obligation of confidentiality to a third party.

(4) “Prohibited Territory” shall mean any country in which the Company, at any time during the time period from the date of this Agreement through the last day of your employment with the Company, (a) directly or indirectly, such as through a dealer network, marketed or sold its motorcycles or motorcycle-related products or services, or (b) had documented plans to market or sell, directly or indirectly, its motorcycles or motorcycle-related products or services (unless such plans had been abandoned).

(5) “Trade Secrets” means any information, including any data, plan, drawing, specification, pattern, procedure, method, computer data, system, program or design, device, list, tool, or compilation, that relates to the present or planned business of the Company and which: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means to, other persons who can obtain economic value from their disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain their secrecy. To the extent that the foregoing definition is inconsistent with a definition of “trade secret” under applicable law, the latter definition shall control.

(6) Neither Confidential Information nor Trade Secrets include general skills or knowledge or skills that you obtained prior to your employment with the Company.




Confidentiality:

(1) During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether your termination of employment is voluntary or involuntary or the reason therefor, you shall not use or disclose any Confidential Information except for the benefit of the Company in the course of your employment by the Company and shall not use or disclose any Confidential Information in competition with or to the detriment of the Company, or for your benefit or the benefit of anyone else other than the Company.

(2) During the time period from the date of this Agreement and for so long thereafter as such information is not generally known to, and not readily ascertainable by proper means to, other persons who can obtain economic value from its disclosure or use, you will maintain all Trade Secrets to which you have received access while employed by the Company as confidential and as the property of the Company.

(3) Upon termination of your employment with the Company, you will turn over immediately to the Company all Confidential Information and Trade Secrets (including all paper and electronic copies), and you shall retain no copies thereof. You shall attend an exit interview at or around the time of termination and sign a written statement certifying your compliance with the terms of this Agreement.

Competitive Employment: During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether your termination of employment is voluntary or involuntary or the reason therefor, you shall not on behalf of or in connection with any Competitive Business accept or perform any employment or service or provide any assistance, whether as an employee, consultant, contractor, agent, officer, director, investor, member, or otherwise, in any position or capacity in which your knowledge of Confidential Information or Trade Secrets of the Company or personal association with the goodwill of the Company could reasonably be considered useful.

No Solicitation of Certain Employees: During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether the termination of your employment is voluntary or involuntary or the reason therefor, you shall not, directly or indirectly, solicit or induce, or assist in any manner in the solicitation or inducement of any employee of the Company who was subject to your direct supervision or about whom you received any Confidential Information, in either event during any part of the last two years of your employment with the Company, to accept any employment, consulting, contracting or other confidential relationship with a Competitive Business.

No Solicitation of Certain Customers: During the time period from the date of this Agreement through the date that is two years after the last day of your employment with the Company, regardless of whether your termination of employment is voluntary or involuntary or the reason therefor, you shall not on behalf of or in connection with any Competitive Business, directly or indirectly, solicit or induce, or assist in any manner in the solicitation or inducement of any customer, distributor or dealer of the Company’s products or services to terminate its relationship with the Company or to purchase or deal in products or services competitive with the Company’s products or services, if you had any material contact with or learned any Confidential Information about the customer, distributor or dealer, in either event through performance of your job duties and responsibilities or through otherwise performing services on behalf of the Company during any part of the last two years of your employment with the Company.

Termination of Employment or Service: If your employment as Chief Executive Officer is terminated prior to the date on which all of the Performance Shares are earned, then you will forfeit any Performance Shares that you have not earned as of the date your employment as Chief Executive Officer is terminated. If your employment as Chief Executive Officer is terminated prior to the date on which all of the Performance Shares are vested, then you will forfeit any then-unvested Performance Shares that do not become vested as a result of the termination of your employment as of the date your employment as Chief Executive Officer is terminated unless you continue serving the Company in a Board-approved role. If you continue serving the Company in a Board-approved role but such service is terminated prior to the date on which all of the Performance Shares are vested, then you will forfeit any then-unvested Performance Shares that do not become vested as a result of the termination of your service in a Board-approved role as of the date your service in a Board-approved role is terminated.

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 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 and that becomes vested. The Performance Shares will be settled (and any dividend equivalent cash payment will be paid to you) as soon as practicable following the date on which the Performance Shares vest. 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, HDI 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 earning or 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, earning 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. Notwithstanding the foregoing, if you are subject to Section 16 of the Exchange Act, pursuant to Rule 16a-2 promulgated thereunder, any tax withholding obligations shall be satisfied by having HDI withhold Shares otherwise issuable under the Performance Shares.

Rejection/Acceptance: You have ninety (90) days following the Grant Date to accept the award of Performance Shares through your Fidelity account. If you have not accepted the Performance Shares award within ninety (90) days following the Grant Date, the Performance Shares granted herein shall be automatically forfeited. If you choose to accept this Agreement, then you accept the terms of the Performance Shares award, acknowledge these tax implications and agree and consent to all amendments to the Plan, the Harley-Davidson, Inc. 2009 Incentive Stock Plan, the Harley-Davidson, Inc., the 2014 Incentive Stock Plan and the Harley-Davidson, Inc. 2020 Incentive Stock Plan through the Grant Date as they apply to this Performance Shares award and any prior awards to you of any kind under such plans.

Appendix. Notwithstanding any provision of this Agreement or the Plan to the contrary, the Performance Shares shall be subject to such special terms and conditions for your country or jurisdiction of residence (and country or jurisdiction of employment, if different), as HDI may determine in its sole discretion and which shall be set forth in an appendix (Exhibit B) to this Agreement (“Appendix”). Further, if you transfer residence and/or employment to another country or jurisdiction reflected in the Appendix, any special terms and conditions for such country or jurisdiction will apply to you to the extent the Committee determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable to comply with local law, rules and/or regulations or to facilitate the operation and administration of the Performance Shares and the Agreement (or HDI may establish additional special terms and conditions as may be necessary or advisable to accommodate your transfer). In all circumstances, the Appendix shall constitute part of this Agreement and the Plan.






Exhibit B
APPENDIX TO PERFORMANCE SHARES AGREEMENT

APPLICABLE TO PARTICIPANTS OUTSIDE THE UNITED STATES
This Appendix includes additional notices, terms and conditions that govern the Performance Shares granted pursuant to the Agreement and the Plan if you reside and/or work outside of the United States. If you transfer to another jurisdiction reflected in this Appendix, the additional terms and conditions for such jurisdiction (if any) will apply to you to the extent HDI determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable for legal or administrative reasons (or HDI may establish alternative terms as may be necessary or advisable to accommodate your transfer). Capitalized terms not defined in this Appendix but defined the Agreement or the Plan shall have the same meaning as in the Agreement or the Plan.
ALL NON-U.S. COUNTRIES
1.Nature of Grant. By acknowledging and accepting the Performance Shares, you acknowledge, understand and agree that:
(a)the Plan is established voluntarily by HDI, it is discretionary in nature and it may be modified, amended, suspended or terminated by HDI at any time, to the extent permitted by the Plan;
(b)the grant of the Performance Shares is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Shares, or benefits in lieu of the Performance Shares, even if Performance Shares have been granted in the past;
(c)all decisions with respect to future grants of Performance Shares, if any, will be at the sole discretion of HDI;
(d)the Participant is voluntarily participating in the Plan;
(e)the Performance Shares and the Shares subject to the Performance Shares, and the income from and value of same, are not intended to replace any pension rights or compensation;
(f)the Performance Shares and the Shares subject to the Performance Shares, and the income from and value of same, are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(g)unless otherwise agreed with HDI in writing, the Performance Shares and the Shares subject to the Performance Shares, and the income from and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of any Affiliate;
(h)the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
(i)no claim or entitlement to compensation or damages shall arise from forfeiture of the Performance Shares resulting from you ceasing to provide employment or other services to the Company (for any reason whatsoever and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment or service agreement, if any);
(j)unless otherwise provided in the Plan, in the Agreement or by HDI in its discretion, the Performance Shares and the benefits evidenced by this Agreement do not create any entitlement to have the Performance Shares transferred to, or assumed by, another company or be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares of HDI;
(k)subject to Section 13(b) of the Plan, for purposes of the Performance Shares, your employment will be considered terminated as of the date you are no longer actively providing services to the Company (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide services or the terms of your employment agreement, if any), and such date will not be extended by any notice period (e.g., your period of employment would not include any contractual notice period or any period of “garden leave” or similar period mandated



under employment laws in the jurisdiction where you provide services or the terms of your service agreement, if any); HDI shall have the exclusive discretion to determine when you are no longer actively providing service for purposes of Performance Shares (including whether you may still be considered to be providing service while on a leave of absence); and
(l)the Company shall not be liable for any foreign exchange rate fluctuation between your local currency and the U.S. Dollar that may affect the value of the Performance Shares or of any amounts due to you pursuant to the settlement of the Performance Shares or the subsequent sale of any Shares acquired upon settlement.
2.Taxes. This Section supplements the Tax Withholding provision of Exhibit A to the Agreement:
(a)Responsibility for Taxes. You acknowledge that, regardless of any action taken by the Company, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you or deemed by the Company in its discretion to be an appropriate charge to you even if legally applicable to the Company (“Tax-Related Items”), is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company. You further acknowledge that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Shares, including, but not limited to, the grant, vesting or settlement of the Performance Shares, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends, and (ii) does not commit to and is under no obligation to structure the terms of the grant or any aspect of the Performance Shares to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction between the date the Performance Shares is granted and the date of any relevant taxable or tax withholding event, as applicable, you acknowledge that the Company (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. HDI may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if you fail to comply with your obligations in connection with the Tax-Related Items.
(b)Withholding Generally. In connection with any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company to fulfill any and all liability for Tax-Related Items. In this regard, you authorize the Company, or its respective agents, at their discretion, to satisfy any applicable withholding obligations or rights with regard to Tax-Related Items by one or a combination of the following without the need for your consent: (i) withholding from your wages or other cash compensation payable to you by the Company, (ii) withholding from proceeds of the sale of Shares acquired upon settlement of the Performance Shares either through a voluntary sale or through a mandatory sale arranged by HDI (on your behalf pursuant to this authorization without further consent), (iii) withholding Shares otherwise issuable under the Performance Shares, (iv) requiring you to tender a cash payment to the Company, (v) requiring you to tender back Shares received in connection with such Performance Shares, (vi) requiring you to deliver other previously owned Shares, in each case having a Fair Market Value equal to the amount to be withheld and/or (vii) any other method of withholding determined by HDI to be permitted under applicable law and, to the extent required by the Plan or applicable law, approved by the Committee. Notwithstanding the foregoing, if you are subject to Section 16 of the Exchange Act, pursuant to Rule 16a-2 promulgated thereunder, any tax withholding obligations shall be satisfied by having HDI withhold Shares otherwise issuable under the Performance Shares.
(c)Withholding Rates. The Company may withhold for Tax-Related Items by considering statutory withholding rates (as determined by the Company in good faith and in its sole discretion) or other withholding rates, including up to the maximum applicable rates in your jurisdiction(s). In the event the application of such withholding rate leads to over-withholding, you may receive a refund of any over-withheld amount in cash from the Company (and, in no event, will you have any entitlement to the equivalent amount in Shares); alternatively, if not refunded by the Company, you may be able to seek a refund from the local tax authorities. In the event the application of such withholding rate leads to under-withholding, you may be required to pay any additional Tax-Related Items directly to the applicable tax authorities.
3.Language. If you are resident in a country where English is not an official language, you acknowledge and agree that it is your express intent that the Plan, the Agreement, and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Performance Shares be drawn up in English. Further, you acknowledge that you are sufficiently proficient in English to understand the terms and conditions of the Plan, this Agreement and any documents related to the Plan or have had the ability to consult with an advisor who is sufficiently proficient in the English language. If you have received this Agreement, the Plan or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.



4.Not a Public Offering. The grant of the Performance Shares is not intended to be a public offering of securities in your country of employment (or country of residence, if different). HDI has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law), and the grant of the Performance Shares is not subject to the supervision of the local securities authorities.
5.Compliance with Law. Notwithstanding any other provision of the Plan or Agreement, unless there is an exemption from any registration, qualification or other legal requirement applicable to the Shares, HDI shall not be required to deliver any of the Shares that are otherwise issuable upon settlement of the Performance Shares prior to the completion or approval of any registration or qualification of the Shares under any applicable law or under any rulings or regulations of any governmental regulatory body, which registration, qualification or approval HDI shall, in its absolute discretion, deem necessary or advisable. You understand that HDI is under no obligation to register or qualify the Shares with any securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, you agree that HDI shall have unilateral authority to amend this Agreement without your consent to the extent necessary to comply with securities, exchange control or other laws applicable to issuance of Shares.
6.Imposition of Other Requirements. HDI reserves the right to impose other requirements on your participation in the Plan, on the Performance Shares and on any Shares acquired under the Plan, to the extent HDI determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
7.No Advice Regarding Grant. HDI is not providing any tax, legal or financial advice, nor is HDI making any recommendations regarding your participation in the Plan or your acquisition or sale of the underlying Shares. You should consult with your own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
8.Insider Trading/Market Abuse Laws. You acknowledge that you may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including (but not limited to) the United States and your jurisdiction, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares or rights to Shares (e.g., Performance Shares) or rights linked to the value of shares during such times you are considered to have “inside information” regarding HDI as defined in the laws or regulations in the applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable insider trading policy of HDI. You are responsible for complying with any such restrictions and should speak to your personal legal advisor on this matter.
9.Foreign Asset/Account Reporting and Exchange Control Requirements. You acknowledge that there may be foreign asset and/or account reporting and/or exchange control requirements that may affect your ability to acquire or hold Shares or cash received from participating in the Plan in a brokerage or bank account outside your country. You may be required to report such accounts, balances, assets and/or the related transactions to the tax, exchange control or other authorities in your jurisdiction. You also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to your jurisdiction through a designated bank or broker and/or within a certain time after receipt. You are responsible for complying with such regulations and should speak to your personal legal advisor on this matter.
GERMANY
No country-specific provisions.
SINGAPORE
Securities Law Information. The Performance Shares under the Plan are being offered pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”) and are not made with a view to the Shares being subsequently offered for sale to any other party. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. You should note that the Performance Shares are subject to section 257 of the SFA and that you will not be able to make any subsequent sale of the Shares in Singapore or any offer of such subsequent sale of the Shares subject to the Performance Shares in Singapore, unless such sale or offer is made (a) after 6 months from the date of grant or (b) pursuant to the exemptions under Part XIII Division 1 Subdivision (4) (other than section 280) of the SFA.



UNITED KINGDOM
Taxes. The following provision supplements the Tax Withholding provision of Exhibit B to the Agreement and Section 2 under the “All Non-U.S. Countries” heading of this Appendix:
Without limitation to the Tax Withholding provision of Exhibit B to the Agreement and Section 2 under the “All Non-U.S. Countries” heading of this Appendix, you agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items, as and when requested by the Company or by HM Revenue and Customs (“HMRC”) (or any other tax or relevant authority). You also agree to indemnify and keep indemnified the Company against any Tax-Related Items that they are required to pay or withhold, or have paid or will pay, on your behalf to HMRC (or any other tax or relevant authority). For purposes of this Agreement, Tax-Related Items include (without limitation) employment income tax, employee National Insurance contributions (“NICs”) and the employee portion of the Health and Social Care levy.
Notwithstanding the foregoing, if you are a director or executive officer of HDI (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that you are a director or executive officer and income tax is not collected from or paid by you within 90 days of the end of the United Kingdom tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected tax may constitute a benefit to you on which additional income tax and NICs and Health and Social Care levy may be payable. You acknowledge that you ultimately will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company (as applicable) for the value of any employee NICs and employee Health and Social Care levy due on this additional benefit, which the Company may recover from you at any time thereafter by any of the means referred to in Section 2 under the “All Non-U.S. Countries” heading of this Appendix.

Exhibit 31.1
Chief Executive Officer Certification
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934

I, Jochen Zeitz, certify that:
1.I have reviewed this quarterly report on Form 10-Q 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: November 3, 2022/s/ Jochen Zeitz
Jochen Zeitz
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, Gina Goetter, certify that:
1.I have reviewed this quarterly report on Form 10-Q 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: November 3, 2022/s/ Gina Goetter
Gina Goetter
Chief Financial Officer

Exhibit 32.1
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 Chief Financial Officer of Harley-Davidson, Inc. (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 25, 2022 (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: November 3, 2022/s/ Jochen Zeitz
Jochen Zeitz
President and Chief Executive Officer
  
/s/ Gina Goetter
Gina Goetter
Chief Financial Officer