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 27, 2020~~March 28, 2021


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

For the transition period from to

Commission file number 1-9183

Harley-Davidson, Inc.

(Exact name of registrant as specified in its charter)


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

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

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

None

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

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock Par Value $.01 PER SHARE	HOG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The registrant had outstanding ~~153,278,729~~153,665,546 shares of common stock as of ~~October~~April 30, ~~2020.~~2021.

HARLEY-DAVIDSON, INC.

Form 10-Q

For The Quarter Ended ~~September 27, 2020~~March 28, 2021


Part I	Financial Information	3
Item 1.	Financial Statements	3
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Shareholders' Equity	8
	Notes to Consolidated Financial Statements	9
	1. Basis of Presentation and Use of Estimates	9
	2. New Accounting Standards	9
	3. Revenue	1110
	4. Restructuring Activities	1110
	5. Income Taxes	1311
	6. Earnings Per Share	1411
	7. Additional Balance Sheet and Cash Flow Information	1412
	8. Finance Receivables	1513

	9. ~~Goodwill, Intangible~~Derivative Financial Instruments and ~~Long-Lived Assets~~Hedging Activities	2118
	10. ~~Derivative Financial Instruments and Hedging Activities~~Leases	21
	11. ~~Leases~~Debt	22
	12. Asset-Backed Financing	24
	~~12. Debt~~	26
	13. ~~Asset-Backed Financing~~Fair Value	27
	14. ~~Fair Value~~Product Warranty and Recall Campaigns	29
	15. Employee Benefit Plans	30
	16. Commitments and Contingencies	31
	~~15. Product Warranty and Recall Campaigns~~17. Accumulated Other Comprehensive Loss	31
	18. Business Segments	32
	19. Supplemental Consolidating Data	33
	~~16. Employee Benefit Plans~~20. Subsequent Event	3436
	~~17. Commitments and Contingencies~~	34
	~~18. Accumulated Other Comprehensive Loss~~	35
	~~19. Business Segments~~	37
	~~20. Supplemental Consolidating Data~~	38

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4737
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6750
Item 4.	Controls and Procedures	6851
Part II	Other Information	6952
Item 1.	Legal Proceedings	6952
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6953
~~Item 5.~~	~~Other Information~~	70
Item 6.	Exhibits	7053
Signatures		7154

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Revenue:	Revenue:									Revenue:
Motorcycles and Related Products	Motorcycles and Related Products	$	964,029	$	1,068,942	$	2,733,091	$	3,698,583	Motorcycles and Related Products	$	1,232,107	$	1,099,788
Financial Services	Financial Services	201,655		203,577		596,064		590,935		Financial Services	190,400		198,456
		1,165,684		1,272,519		3,329,155		4,289,518			1,422,507		1,298,244
Costs and expenses:	Costs and expenses:									Costs and expenses:
Motorcycles and Related Products cost of goods sold	Motorcycles and Related Products cost of goods sold	676,796		748,878		2,019,310		2,576,342		Motorcycles and Related Products cost of goods sold	811,622		780,868
Financial Services interest expense	Financial Services interest expense	67,533		53,390		182,193		158,387		Financial Services interest expense	55,707		52,473
Financial Services provision for credit losses	Financial Services provision for credit losses	7,835		33,747		178,433		94,621		Financial Services provision for credit losses	(22,474)		79,419
Selling, administrative and engineering expense	Selling, administrative and engineering expense	231,721		309,031		734,057		885,273		Selling, administrative and engineering expense	231,844		277,971
Restructuring expense		43,915		7,629		85,864		31,682
Restructuring benefit										Restructuring benefit	(366)		0
		1,027,800		1,152,675		3,199,857		3,746,305			1,076,333		1,190,731
Operating income	Operating income	137,884		119,844		129,298		543,213		Operating income	346,174		107,513
Other income, net	Other income, net	155		3,160		466		11,857		Other income, net	277		155
Investment income		2,672		2,041		3,082		11,970
Investment income (loss)										Investment income (loss)	1,402		(5,347)
Interest expense	Interest expense	7,783		7,789		23,307		23,304		Interest expense	7,708		7,755
Income before provision for income taxes	Income before provision for income taxes	132,928		117,256		109,539		543,736		Income before provision for income taxes	340,145		94,566
Provision for income taxes	Provision for income taxes	12,710		30,693		11,843		133,597		Provision for income taxes	81,001		24,871
Net income	Net income	$	120,218	$	86,563	$	97,696	$	410,139	Net income	$	259,144	$	69,695
Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	0.78	$	0.55	$	0.64	$	2.59	Basic	$	1.69	$	0.46
Diluted	Diluted	$	0.78	$	0.55	$	0.64	$	2.58	Diluted	$	1.68	$	0.45
Cash dividends per share	Cash dividends per share	$	0.020	$	0.375	$	0.420	$	1.125	Cash dividends per share	$	0.15	$	0.38

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Net income	Net income	$	120,218	$	86,563	$	97,696	$	410,139	Net income	$	259,144	$	69,695
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	Foreign currency translation adjustments	12,737		(15,321)		(275)		(3,720)		Foreign currency translation adjustments	(17,338)		(34,455)
Derivative financial instruments	Derivative financial instruments	(2,101)		6,284		(28,255)		(6,080)		Derivative financial instruments	17,530		(19,845)

Pension and postretirement benefit plans	Pension and postretirement benefit plans	11,959		7,744		35,876		23,230		Pension and postretirement benefit plans	13,588		11,959
		22,595		(1,293)		7,346		13,430			13,780		(42,341)
Comprehensive income	Comprehensive income	$	142,813	$	85,270	$	105,042	$	423,569	Comprehensive income	$	272,924	$	27,354

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited) (Unaudited)
September 27,
2020 December 31,
2019 September 29,
2019
ASSETS
Current assets:
Cash and cash equivalents $ 3,560,950 $ 833,868 $ 862,381
Accounts receivable, net 232,845 259,334 307,616
Finance receivables, net of allowance of $74,111, $43,006, and $39,964 1,701,478 2,272,522 2,210,001
Inventories, net 322,375 603,571 489,098
Restricted cash 160,155 64,554 79,115
Other current assets 178,931 168,974 140,786
6,156,734 4,202,823 4,088,997
Finance receivables, net of allowance of $334,591, $155,575, and $158,612 5,142,014 5,101,844 5,305,579
Property, plant and equipment, net 785,165 847,382 844,446
Prepaid pension costs 82,378 56,014 0
Goodwill 64,884 64,160 63,727
Deferred income taxes 137,960 101,204 132,019
Lease assets 47,599 61,618 55,905
Other long-term assets 115,541 93,114 85,557
$ 12,532,275 $ 10,528,159 $ 10,576,230
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 289,103 $ 294,380 $ 348,951
Accrued liabilities 591,281 582,288 556,990
Short-term debt 1,227,763 571,995 1,013,137
Current portion of long-term debt, net 2,109,284 1,748,109 1,779,673
4,217,431 3,196,772 3,698,751
Long-term debt, net 6,171,676 5,124,826 4,607,041
Lease liabilities 31,225 44,447 39,408
Pension liabilities 57,853 56,138 82,561
Postretirement healthcare liabilities 68,379 72,513 89,032
Other long-term liabilities 215,813 229,464 223,218
Commitments and contingencies (Note 17)
Shareholders’ equity:
Preferred stock, NaN issued 0 0 0
Common stock 1,835 1,828 1,827
Additional paid-in-capital 1,501,410 1,491,004 1,482,669
Retained earnings 2,148,462 2,193,997 2,238,313
Accumulated other comprehensive loss (529,603) (536,949) (616,254)
Treasury stock, at cost (1,352,206) (1,345,881) (1,270,336)
1,769,898 1,803,999 1,836,219
$ 12,532,275 $ 10,528,159 $ 10,576,230


	(Unaudited)				(Unaudited)
	March 28, 2021		December 31, 2020		March 29, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	2,320,645	$	3,257,203	$	1,465,061

Accounts receivable, net	216,569		143,082		299,148
Finance receivables, net of allowance of $64,139, $72,632, and $63,881	1,798,194		1,509,539		2,358,989
Inventories, net	470,997		523,497		610,924
Restricted cash	185,374		131,642		99,903
Other current assets	195,356		280,470		142,357
	5,187,135		5,845,433		4,976,382
Finance receivables, net of allowance of $282,094, $318,304, and $271,615	4,958,583		4,933,469		4,933,418
Property, plant and equipment, net	718,968		743,784		826,845
Pension and postretirement assets	105,910		95,711		64,802
Goodwill	65,157		65,976		64,063
Deferred income taxes	135,387		158,538		127,856
Lease assets	44,765		45,203		56,496
Other long-term assets	123,083		122,487		90,085
	$	11,338,988	$	12,010,601	$	11,139,947
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	402,764	$	290,904	$	333,411
Accrued liabilities	570,440		557,214		584,535
Short-term deposits, net	93,887		79,965		0
Short-term debt	765,263		1,014,274		1,335,664
Current portion of long-term debt, net	1,622,243		2,039,597		2,326,460
	3,454,597		3,981,954		4,580,070
Long-term deposits, net	58,766		0		0
Long-term debt, net	5,478,091		5,932,933		4,478,078
Lease liabilities	30,061		30,115		40,053
Pension and postretirement liabilities	103,854		114,206		128,054
Deferred income taxes	8,682		8,607		6,219
Other long-term liabilities	228,551		220,001		215,490
Commitments and contingencies (Note 16)	0		0		0
Shareholders’ equity:

Common stock	1,690		1,685		1,834
Additional paid-in-capital	1,517,129		1,507,706		1,495,141
Retained earnings	1,520,862		1,284,823		2,126,646
Accumulated other comprehensive loss	(469,637)		(483,417)		(579,290)
Treasury stock, at cost	(593,658)		(588,012)		(1,352,348)
	1,976,386		1,722,785		1,691,983
	$	11,338,988	$	12,010,601	$	11,139,947

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands)


		(Unaudited)				(Unaudited)			(Unaudited)				(Unaudited)
		September 27, 2020		December 31, 2019		September 29, 2019			March 28, 2021		December 31, 2020		March 29, 2020
Balances held by consolidated variable interest entities (Note 13):
Balances held by consolidated variable interest entities (Note 12):								Balances held by consolidated variable interest entities (Note 12):
Finance receivables, net - current	Finance receivables, net - current	$	576,750	$	291,444	$	308,568	Finance receivables, net - current	$	567,887	$	530,882	$	381,904
Other assets	Other assets	$	3,129	$	2,420	$	1,618	Other assets	$	4,027	$	3,753	$	2,262
Finance receivables, net - non-current	Finance receivables, net - non-current	$	2,177,875	$	1,027,179	$	1,175,086	Finance receivables, net - non-current	$	2,113,344	$	1,889,472	$	1,435,832
Restricted cash - current and non-current	Restricted cash - current and non-current	$	170,925	$	63,812	$	78,334	Restricted cash - current and non-current	$	196,946	$	142,892	$	99,235
Current portion of long-term debt, net	Current portion of long-term debt, net	$	677,099	$	317,607	$	346,350	Current portion of long-term debt, net	$	692,903	$	608,987	$	437,488
Long-term debt, net	Long-term debt, net	$	1,886,594	$	937,212	$	1,079,278	Long-term debt, net	$	1,757,003	$	1,585,174	$	1,319,357

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine months ended					Three months ended
		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Net cash provided by operating activities (Note 7)		$	1,135,068	$	848,649
Net cash provided (used) by operating activities (Note 7)						Net cash provided (used) by operating activities (Note 7)	$	162,781	$	(8,582)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(92,295)		(121,161)		Capital expenditures	(18,813)		(32,928)
Origination of finance receivables	Origination of finance receivables	(2,873,259)		(3,141,626)		Origination of finance receivables	(909,138)		(780,061)
Collections on finance receivables	Collections on finance receivables	2,730,166		2,695,918		Collections on finance receivables	900,485		841,261

Sales and redemptions of marketable securities		0		10,007
Acquisition of business		0		(7,000)

Other investing activities	Other investing activities	334		12,388		Other investing activities	733		16
Net cash used by investing activities		(235,054)		(551,474)
Net cash (used) provided by investing activities						Net cash (used) provided by investing activities	(26,733)		28,288
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of medium-term notes		1,396,602		546,655

Repayments of medium-term notes	Repayments of medium-term notes	(1,400,000)		(1,350,000)		Repayments of medium-term notes	(1,050,000)		(600,000)

Proceeds from securitization debt	Proceeds from securitization debt	2,064,450		1,021,353		Proceeds from securitization debt	597,411		522,694
Repayments of securitization debt	Repayments of securitization debt	(735,885)		(244,250)		Repayments of securitization debt	(291,346)		(130,918)
Borrowings of asset-backed commercial paper	Borrowings of asset-backed commercial paper	225,187		177,950		Borrowings of asset-backed commercial paper	0		225,187
Repayments of asset-backed commercial paper	Repayments of asset-backed commercial paper	(236,846)		(240,008)		Repayments of asset-backed commercial paper	(66,894)		(67,809)
Net increase (decrease) in unsecured commercial paper		509,978		(120,707)
Net (decrease) increase in unsecured commercial paper						Net (decrease) increase in unsecured commercial paper	(262,517)		772,208
Net increase in credit facilities	Net increase in credit facilities	150,000		0		Net increase in credit facilities	15,629		0
Deposits		29,992		0
Net increase in deposits						Net increase in deposits	72,664		0
Dividends paid	Dividends paid	(65,002)		(179,409)		Dividends paid	(23,105)		(58,817)
Repurchase of common stock	Repurchase of common stock	(7,895)		(217,454)		Repurchase of common stock	(5,646)		(7,071)

Issuance of common stock under share-based plans	Issuance of common stock under share-based plans	96		2,180		Issuance of common stock under share-based plans	1,085		34
Net cash provided (used) by financing activities		1,930,677		(603,690)
Net cash (used) provided by financing activities						Net cash (used) provided by financing activities	(1,012,719)		655,508
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	6,071		(4,110)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,163)		(5,732)
Net increase (decrease) in cash, cash equivalents and restricted cash		$	2,836,762	$	(310,625)
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	$	(881,834)	$	669,482

Cash, cash equivalents and restricted cash:	Cash, cash equivalents and restricted cash:					Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	$	905,366	$	1,259,748	Cash, cash equivalents and restricted cash, beginning of period	$	3,409,168	$	905,366
Net increase (decrease) in cash, cash equivalents and restricted cash		2,836,762		(310,625)
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	(881,834)		669,482
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	3,742,128	$	949,123	Cash, cash equivalents and restricted cash, end of period	$	2,527,334	$	1,574,848

Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:	Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:					Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents	Cash and cash equivalents	$	3,560,950	$	862,381	Cash and cash equivalents	$	2,320,645	$	1,465,061
Restricted cash	Restricted cash	160,155		79,115		Restricted cash	185,374		99,903
Restricted cash included in Other long-term assets	Restricted cash included in Other long-term assets	21,023		7,627		Restricted cash included in Other long-term assets	21,315		9,884
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows	Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows	$	3,742,128	$	949,123	Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows	$	2,527,334	$	1,574,848

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except share amounts)

(Unaudited)

Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Issued
Shares Balance
Balance, December 31, 2019 182,816,536 $ 1,828 $ 1,491,004 $ 2,193,997 $ (536,949) $ (1,345,881) $ 1,803,999
Net income — — — 69,695 — — 69,695
Other comprehensive loss, net of tax (Note 18) — — — — (42,341) — (42,341)
Dividends ($0.380 per share) — — — (58,817) — — (58,817)
Repurchase of common stock — — — — — (7,071) (7,071)
Share-based compensation 585,053 6 4,137 — — 604 4,747
Cumulative effect of change in accounting (Note 2) — — — (78,229) — — (78,229)
Balance, March 29, 2020 183,401,589 1,834 1,495,141 2,126,646 (579,290) (1,352,348) 1,691,983
Net loss — — — (92,217) — — (92,217)
Other comprehensive income, net of tax (Note 18) — — — — 27,092 — 27,092
Dividends ($0.020 per share) — — — (3,100) — — (3,100)
Repurchase of common stock — — — — — (85) (85)
Share-based compensation 9,615 — (882) — — 914 32
Balance, June 28, 2020 183,411,204 1,834 1,494,259 2,031,329 (552,198) (1,351,519) 1,623,705
Net income — — — 120,218 — — 120,218
Other comprehensive income, net of tax (Note 18) — — — — 22,595 — 22,595
Dividends ($0.020 per share) — — — (3,085) — — (3,085)
Repurchase of common stock — — — — — (739) (739)
Share-based compensation 82,329 1 7,151 — — 52 7,204
Balance, September 27, 2020 183,493,533 $ 1,835 $ 1,501,410 $ 2,148,462 $ (529,603) $ (1,352,206) $ 1,769,898
Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Issued
Shares Balance
Balance, December 31, 2018 181,931,225 $ 1,819 $ 1,459,620 $ 2,007,583 $ (629,684) $ (1,065,389) $ 1,773,949
Net income — — — 127,945 — — 127,945
Other comprehensive income, net of tax (Note 18) — — — — 7,633 — 7,633
Dividends ($0.375 per share) — — — (60,859) — — (60,859)
Repurchase of common stock — — — — — (61,712) (61,712)
Share-based compensation 702,687 7 5,961 — — 4,687 10,655
Balance, March 31, 2019 182,633,912 1,826 1,465,581 2,074,669 (622,051) (1,122,414) 1,797,611
Net income — — — 195,631 — — 195,631
Other comprehensive income, net of tax (Note 18) — — — — 7,090 — 7,090
Dividends ($0.375 per share) — — — (59,982) — — (59,982)
Repurchase of common stock — — — — — (42,908) (42,908)
Share-based compensation 9,338 1 9,238 — — 3,960 13,199
Balance, June 30, 2019 182,643,250 1,827 1,474,819 2,210,318 (614,961) (1,161,362) 1,910,641
Net income — — — 86,563 — — 86,563
Other comprehensive loss, net of tax (Note 18) — — — — (1,293) — (1,293)
Dividends ($0.375 per share) — — — (58,568) — — (58,568)
Repurchase of common stock — — — — — (112,834) (112,834)
Share-based compensation 80,249 0 7,850 — — 3,860 11,710
Balance, September 29, 2019 182,723,499 $ 1,827 $ 1,482,669 $ 2,238,313 $ (616,254) $ (1,270,336) $ 1,836,219


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

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












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

The accompanying notes are integral to the consolidated financial statements.

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HARLEY-DAVIDSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Use of Estimates

The consolidated financial statements include the accounts of Harley-Davidson, Inc. and its subsidiaries, all of which are wholly-owned (the Company), including the accounts of the groups of companies referred to as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). In addition, certain variable interest entities (VIEs) related to secured financing are consolidated as the Company is the primary beneficiary. All intercompany accounts and material intercompany transactions have been eliminated.

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

In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Consolidated balance sheets as of ~~September 27,~~March 28, 2021 and March 29, 2020, ~~and September 29, 2019,~~ the Consolidated statements of operations for the three ~~and nine~~ month periods then ended, the Consolidated statements of comprehensive income for the three ~~and nine~~ month periods then ended, the Consolidated statements of cash flows for the ~~nine~~three month periods then ended, and the Consolidated statements of shareholders' equity for the three ~~and nine~~ month periods then ended.

Certain information and disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the 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, ~~2019.~~2020.

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

During the first quarter of 2020, the outbreak of a novel strain of coronavirus (COVID-19) spread throughout the world, and it was recognized as a pandemic in March 2020. The COVID-19 pandemic has ~~severely~~ restricted the level of economic activity in the U.S. and around the ~~world. The COVID-19 pandemic has led to supply chain destabilization, facility closures, workforce disruption,~~world and ~~volatility in~~ the ~~economy, and~~full extent of its ~~full~~ impact is not yet known. ~~These impacts may continue to expand in scope, type and severity.~~

The Company’s operations and demand for its products have been adversely impacted as a result of the COVID-19 pandemic. The Company acted quickly and in alignment with government efforts to protect the safety and health of its employees and the Harley-Davidson community. The Company implemented travel restrictions, enhanced sanitation practices, cancelled events and closed facilities including temporarily suspending its global manufacturing. While the Company's global manufacturing has resumed and the impacts on demand, facility closures and other restrictions resulting from the pandemic are expected to be temporary, the duration of the pandemic and its financial impact to the Company are unknown at this time. This uncertainty could have an impact in future periods on certainCertain estimates used in the preparation of financial results for the period ending ~~September 27, 2020, including, but not limited to,~~March 28, 2021 could be impacted in future periods as a result of the ~~allowance for credit losses, goodwill, long-lived assets, fair value measurements, the provision for income tax and hedge accounting with respect to forecasted future transactions.~~COVID-19 pandemic.

2. New Accounting Standards

Accounting Standards Recently Adopted

In ~~July 2016,~~December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU~~ ~~2016-13~~ changes how a company recognizes expected credit losses on financial instruments by requiring recognition of the full lifetime expected credit losses upon initial recognition of the financial instrument. ASU 2016-13 replaced the incurred loss methodology. The Company adopted ASU 2016-13 on January 1, 2020 using a modified retrospective approach for financial instruments measured at amortized cost.

~~Table of Contents~~

~~On January 1, 2020, the Company remeasured the allowance for credit losses on financial instruments under the new accounting standard. The difference was recorded as a cumulative effect adjustment to~~ ~~Retained earnings, net of income taxes. The initial adoption of ASU 2016-13 did not impact the Company’s~~ ~~Consolidated statements of operations. The effect of adopting ASU 2016-13 on the Company’s~~ ~~Consolidated balance sheets~~ ~~was as follows (in thousands):~~

December 31,
2019 Effect of Adoption January 1,
2020
ASSETS
Finance receivables(a)
$ 7,572,947 $ 0 $ 7,572,947
Allowance for credit losses on finance receivables(a)
$ (198,581) $ (100,604) $ (299,185)
Deferred income taxes $ 101,204 $ 22,484 $ 123,688
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities $ 582,288 $ 109 $ 582,397
Retained earnings $ 2,193,997 $ (78,229) $ 2,115,768

~~(a)Reported as~~ ~~Finance receivables, net~~ ~~on the~~ ~~Consolidated balance sheets, allocated between current and non-current~~

~~Financial Statement Comparability to Prior Periods~~ – Beginning in 2020, under ASU 2016-13, the Company recognized full lifetime expected credit losses upon initial recognition of the associated financial instrument. Under ASU 2016-13, changes in the allowance for credit losses and the impact on the provision for credit losses will be affected by the size and composition of the Company's finance receivables portfolios, economic conditions, reasonable and supportable forecasts, and other appropriate factors at each reporting period. Prior periods have not been restated and will continue to be reported in accordance with the previously applicable U.S. GAAP, which generally required that a credit loss be incurred before it was recognized.~~As such, prior periods will not be comparable to the current period. Additional information on the Company’s finance receivables is discussed further in Note 8.~~

In January 2017, the FASB issued ASU No. 2017-04 Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 simplified the subsequent measurement of goodwill by eliminating the requirement to calculate the implied fair value of goodwill. Rather, the goodwill impairment is calculated by comparing the fair value of a reporting unit to its carrying value, and an impairment loss is recognized for the amount by which the carrying amount exceeds the fair value, limited to the total goodwill allocated to the reporting unit. All reporting units apply the same impairment test under the new standard. The Company adopted ASU 2017-04 on January 1, 2020 on a prospective basis. The adoption of ASU 2017-04 did not have a material impact to the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). ASU 2018-13 amended ~~Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements~~ to eliminate, modify, and add certain disclosure requirements for fair value measurements. The amendments were required to be applied retrospectively, with the exception of a few disclosure additions, which were to be applied on a prospective basis. The Company adopted ASC 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company's disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) (ASU 2018-15). The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the existing internal-use software guidance to determine which implementation costs to capitalize as assets or expense as incurred. The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis. The adoption of ASU 2018-15 did not have a material impact on the Company's consolidated financial statements.

~~Accounting Standards Not Yet Adopted~~

~~In December 2019, the FASB issued ASU~~ No. 2019-12, Simplifying the Accounting for Income Taxes (ASU No. 2019-12). The new guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The ~~guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. Early~~Company adopted ASU 2019-12 on January 1, 2021 on a prospective basis. The adoption ~~is permitted. The Company is currently evaluating~~of ASU 2019-12 did not have a material impact on the ~~impact of adopting ASU 2019-12.~~Company's consolidated financial statements.

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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.

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


		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Motorcycles and Related Products Revenue:	Motorcycles and Related Products Revenue:									Motorcycles and Related Products Revenue:
Motorcycles	Motorcycles	$	684,344	$	779,344	$	2,030,447	$	2,871,982	Motorcycles	$	1,016,334	$	899,365
Parts & Accessories	Parts & Accessories	209,808		203,173		513,201		584,134		Parts & Accessories	149,859		134,685
General Merchandise	General Merchandise	49,356		60,334		136,321		180,379		General Merchandise	50,323		49,160
Licensing	Licensing	8,894		8,611		21,826		27,099		Licensing	5,512		8,029
Other	Other	11,627		17,480		31,296		34,989		Other	10,079		8,549
		964,029		1,068,942		2,733,091		3,698,583			1,232,107		1,099,788
Financial Services Revenue:	Financial Services Revenue:									Financial Services Revenue:
Interest income	Interest income	174,464		175,840		512,726		502,721		Interest income	159,814		170,001
Other	Other	27,191		27,737		83,338		88,214		Other	30,586		28,455
		201,655		203,577		596,064		590,935			190,400		198,456
		$	1,165,684	$	1,272,519	$	3,329,155	$	4,289,518		$	1,422,507	$	1,298,244

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


		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Balance, beginning of period	Balance, beginning of period	$	29,745	$	29,055	Balance, beginning of period	$	36,614	$	29,745
Balance, end of period	Balance, end of period	$	31,209	$	32,374	Balance, end of period	$	36,266	$	29,434

Previously deferred revenue recognized as revenue in the three months ended ~~September 27,~~March 28, 2021 and March 29, 2020 ~~and September 29, 2019~~ was ~~$6.3~~$6.2 million and ~~$6.0~~$6.9 million, ~~respectively, and $19.6 million and $18.3 million in the nine months ended September 27, 2020 and September 29, 2019.~~respectively. The Company expects to recognize approximately ~~$15.3~~$14.9 million of the remaining unearned revenue over the next 12 months and ~~$15.9~~$21.4 million thereafter.

4. Restructuring Activities

~~Expenses associated with the~~The Company's restructuring activities are included in Restructuring ~~expense~~benefit on the Consolidated statements of operations.

~~2020 Restructuring Activities –~~ In 2020, the Company initiated restructuring activities including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global independent dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. The workforce reduction ~~will result~~resulted in ~~the elimination of approximately 700 positions globally, including~~ the termination of approximately 500 employees. In addition, the India action ~~will result~~resulted in the termination of approximately 70 employees.

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~~Restructuring expenses related to~~Since the ~~2020~~inception of these restructuring activities byin 2020 through the three months ended March 28, 2021, the Company has incurred cumulative restructuring expenses of $129.6 million. This includes a restructuring benefit during the three months ended March 28, 2021 of $0.4 million, consisting of a $0.6 million benefit in the Motorcycles segment ~~were as follows (in millions):~~

Amount Incurred
Three months ended September 27, 2020 Nine months ended September 27, 2020
Motorcycles and Related Products $ 43.6 $ 84.6
Financial Services 0.3 1.3
$ 43.9 $ 85.9

and expense of $0.2 millionin the Financial Services segment. The Company expects total estimated restructuring expenses of approximately ~~$169~~$150 million, ~~primarily in 2020. This includes~~including approximately ~~$155~~$139 million and ~~$14~~$11 million expected to be in incurred in the Motorcycles and Financial Services segments, respectively. Total expected restructuring expenses ~~under the 2020 restructuring activities~~ include approximately ~~$34~~$30 million related to employee termination benefits, ~~$103~~$90 million related to contract termination and other costs and ~~$32~~$30 million related to non-current asset adjustments, including accelerated depreciation and other adjustments to the carrying value of non-current assets. The Company expects to incur the remaining estimated restructuring expenses of approximately $20 million in 2021.

Changes in accrued restructuring expenses, ~~for the 2020 restructuring activities initiated in the second quarter of 2020,~~ which are included in Accrued liabilities on the Consolidated balance sheets, were as follows (in thousands):

Three months ended September 27, 2020 Nine months ended September 27, 2020
Employee Termination Benefits Contract Terminations & Other Non-Current Asset Adjustments Total Employee Termination Benefits Contract Terminations & Other Non-Current Asset Adjustments Total
Balance, beginning of period $ 25,298 $ 14,270 $ 0 $ 39,568 $ 0 $ 0 $ 0 $ 0
Restructuring expense 4,493 23,422 16,000 43,915 29,814 37,692 18,358 85,864
Utilized – cash
(11,940) (5,899) 0 (17,839) (11,940) (5,899) 0 (17,839)
Utilized – non cash
0 0 (16,000) (16,000) 0 0 (18,358) (18,358)
Foreign currency changes 166 (54) 0 112 143 (54) 0 89
Balance, end of period $ 18,017 $ 31,739

$ 0 $ 49,756 $ 18,017 $ 31,739 $ 0 $ 49,756

~~2018 Restructuring Activities –~~ In 2018, the Company initiated a plan to further improve its manufacturing operations and cost structure by commencing a multi-year manufacturing optimization plan which included the consolidation of its motorcycle assembly plant in Kansas City, Missouri, into its plant in York, Pennsylvania, and the closure of its wheel operations in Adelaide, Australia (Manufacturing Optimization Plan). The consolidation of operations included the elimination of approximately 800 jobs at the Kansas City facility and the addition of approximately 450 jobs at the York facility through 2019. The Adelaide facility closure included the elimination of approximately 90 jobs. Through December 31, 2019, the Motorcycles segment incurred cumulative restructuring expenses of $122.2 million and other costs related to temporary inefficiencies of $23.2 million under the Manufacturing Optimization Plan. The Manufacturing Optimization Plan was completed in 2019.

~~In 2018, the Company initiated a reorganization of its workforce (Reorganization Plan), which was completed in 2019. As a result, approximately 70 employees left the Company on an involuntary basis.~~

~~Table of Contents~~

~~Changes in accrued restructuring expenses for the 2018 restructuring activities which are included in~~ ~~Accrued liabilities~~ ~~on the~~ ~~Consolidated balance sheets~~ ~~during 2019~~There were ~~as follows (in thousands). The changes in accrued restructuring expenses for the 2018~~no restructuring activities during the three ~~and nine~~ months ended ~~September 27, 2020 were immaterial.~~March 29, 2020.

Three months ended September 29, 2019
Manufacturing Optimization Plan Reorganization Plan
Employee Termination Benefits Accelerated Depreciation Other Total Employee Termination Benefits Total
Balance, beginning of period $ 9,661 $ 0 $ 23 $ 9,684 $ 144 $ 9,828
Restructuring (benefit) expense (1) 719 6,850 7,568 61 7,629
Utilized – cash
(6,617) 0 (6,535) (13,152) (205) (13,357)
Utilized – non cash
(2) (719) (336) (1,057) 0 (1,057)
Foreign currency changes (26) 0 0 (26) 0 (26)
Balance, end of period $ 3,015 $ 0 $ 2 $ 3,017 $ 0 $ 3,017
Nine months ended September 29, 2019
Manufacturing Optimization Plan Reorganization Plan
Employee Termination Benefits Accelerated Depreciation Other Total Employee Termination Benefits Total
Balance, beginning of period $ 24,958 $ 0 $ 79 $ 25,037 $ 3,461 $ 28,498
Restructuring expense (benefit) 16 14,684 17,316 32,016 (334) 31,682
Utilized – cash
(21,951) 0 (16,357) (38,308) (3,101) (41,409)
Utilized – non cash
(2) (14,684) (1,032) (15,718) 0 (15,718)
Foreign currency changes (6) 0 (4) (10) (26) (36)
Balance, end of period $ 3,015 $ 0 $ 2 $ 3,017 $ 0 $ 3,017

~~The Company incurred incremental~~ ~~Motorcycles and Related Products cost of goods sold~~ due to temporary inefficiencies resulting from implementing the Manufacturing Optimization Plan during the three and nine months ended September 29, 2019 of $2.5 million and $10.0 million, respectively.


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

5. Income Taxes

The Company’s effective income tax rate for the ~~nine~~three months ended ~~September 27, 2020~~March 28, 2021 was ~~10.8%~~23.8% compared to ~~24.6%~~26.3% for the ~~nine~~three months ended ~~September~~March 29, ~~2019.~~2020. The decrease in the ~~2020~~first quarter 2021 effective income tax rate ~~as compared to 2019~~from 2020 was due ~~primarily~~ to ~~net~~the increase in Income before provision for income taxes, resulting in discrete income tax ~~benefits recorded during~~adjustments having a reduced impact on the ~~nine months ended September 27, 2020, including favorable settlements with taxing authorities.~~effective income tax rate for the quarter. The effective income tax rate for the ~~nine~~three months ended ~~September 27, 2020~~March 28, 2021 was determined based on the Company's current projections for full-year ~~2020~~2021 financial results. Given uncertainty surrounding the impact of the COVID-19 pandemic, the Company's projection for full-year 2020 financial results, in total and across its numerous tax jurisdictions, may evolve and ultimately impact the Company's 2020 full-year effective income tax rate.

~~Table of Contents~~

6. Earnings Per Share

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


		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Net income	Net income	$	120,218	$	86,563	$	97,696	$	410,139	Net income	$	259,144	$	69,695

Basic weighted-average shares outstanding	Basic weighted-average shares outstanding	153,252		156,239		153,153		158,117		Basic weighted-average shares outstanding	153,478		153,004
Effect of dilutive securities – employee stock compensation plan	Effect of dilutive securities – employee stock compensation plan	663		705		637		677		Effect of dilutive securities – employee stock compensation plan	1,012		740
Diluted weighted-average shares outstanding	Diluted weighted-average shares outstanding	153,915		156,944		153,790		158,794		Diluted weighted-average shares outstanding	154,490		153,744
Net earnings per share:	Net earnings per share:									Net earnings per share:
Basic	Basic	$	0.78	$	0.55	$	0.64	$	2.59	Basic	$	1.69	$	0.46
Diluted	Diluted	$	0.78	$	0.55	$	0.64	$	2.58	Diluted	$	1.68	$	0.45

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 ~~1.3~~0.6 million and ~~1.1~~1.7 million shares for the three months ended ~~September 27,~~March 28, 2021 and March 29, 2020, ~~and September 29, 2019, respectively, and 1.6 million and 1.2 million shares for the nine months ended September 27, 2020 and September 29, 2019,~~ respectively.

Table of Contents

7. Additional Balance Sheet and Cash Flow Information

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

September 27,
2020 December 31,
2019 September 29,
2019
Mutual funds $ 48,845 $ 52,575 $ 49,821


	March 28, 2021		December 31, 2020		March 29, 2020

Mutual funds	$	50,239	$	52,061	$	44,144

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. Inventories, net consisted of the following (in thousands):


		September 27, 2020		December 31, 2019		September 29, 2019			March 28, 2021		December 31, 2020		March 29, 2020
Raw materials and work in process	Raw materials and work in process	$	152,740	$	235,433	$	189,144	Raw materials and work in process	$	251,199	$	211,979	$	245,384
Motorcycle finished goods	Motorcycle finished goods	125,930		280,306		206,324		Motorcycle finished goods	185,590		281,132		272,648
Parts & Accessories and General Merchandise	Parts & Accessories and General Merchandise	100,131		144,258		152,269		Parts & Accessories and General Merchandise	88,291		84,469		149,318
Inventory at lower of FIFO cost or net realizable value	Inventory at lower of FIFO cost or net realizable value	378,801		659,997		547,737		Inventory at lower of FIFO cost or net realizable value	525,080		577,580		667,350
Excess of FIFO over LIFO cost	Excess of FIFO over LIFO cost	(56,426)		(56,426)		(58,639)		Excess of FIFO over LIFO cost	(54,083)		(54,083)		(56,426)
		$	322,375	$	603,571	$	489,098		$	470,997	$	523,497	$	610,924

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

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


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

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


		Nine months ended					Three months ended
		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	97,696	$	410,139	Net income	$	259,144	$	69,695
Adjustments to reconcile Net income to Net cash provided by operating activities:
Adjustments to reconcile Net income to Net cash provided (used) by operating activities:						Adjustments to reconcile Net income to Net cash provided (used) by operating activities:
Depreciation and amortization	Depreciation and amortization	140,057		174,609		Depreciation and amortization	40,221		47,427
Amortization of deferred loan origination costs	Amortization of deferred loan origination costs	52,374		57,303		Amortization of deferred loan origination costs	19,200		16,739
Amortization of financing origination fees	Amortization of financing origination fees	10,628		7,032		Amortization of financing origination fees	3,614		2,999
Provision for long-term employee benefits	Provision for long-term employee benefits	23,557		10,888		Provision for long-term employee benefits	7,090		7,852
Employee benefit plan contributions and payments	Employee benefit plan contributions and payments	(5,456)		(11,166)		Employee benefit plan contributions and payments	(9,885)		(1,608)
Stock compensation expense	Stock compensation expense	12,076		25,323		Stock compensation expense	8,968		3,896
Net change in wholesale finance receivables related to sales	Net change in wholesale finance receivables related to sales	330,793		683		Net change in wholesale finance receivables related to sales	(308,532)		(208,183)
Provision for credit losses	Provision for credit losses	178,433		94,621		Provision for credit losses	(22,474)		79,419

Deferred income taxes	Deferred income taxes	(18,978)		3,535		Deferred income taxes	13,192		(3,803)

Other, net	Other, net	(9,320)		7,839		Other, net	1,171		3,579
Changes in current assets and liabilities:	Changes in current assets and liabilities:					Changes in current assets and liabilities:
Accounts receivable, net	Accounts receivable, net	29,630		(7,833)		Accounts receivable, net	(79,012)		(47,272)
Finance receivables – accrued interest and other	Finance receivables – accrued interest and other	5,097		(4,574)		Finance receivables – accrued interest and other	8,947		4,007
Inventories, net	Inventories, net	273,668		62,870		Inventories, net	45,086		(23,943)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(16,922)		13,138		Accounts payable and accrued liabilities	153,597		10,562
Derivative financial instruments	Derivative financial instruments	(1,543)		2,537		Derivative financial instruments	(3,309)		2,812
Other	Other	33,278		1,705		Other	25,763		27,240
		1,037,372		438,510			(96,363)		(78,277)
Net cash provided by operating activities		$	1,135,068	$	848,649
Net cash provided (used) by operating activities						Net cash provided (used) by operating activities	$	162,781	$	(8,582)

8. Finance Receivables

The Company provides retail financial services to customers of its independent dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to independent dealer sales of motorcycles to retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.

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

Finance receivables, net~~, consisted of the following~~ were as follows (in thousands):


		September 27, 2020		December 31, 2019		September 29, 2019			March 28, 2021		December 31, 2020		March 29, 2020
Retail finance receivables	Retail finance receivables	$	6,585,298	$	6,416,428	$	6,642,809	Retail finance receivables	$	6,310,982	$	6,344,195	$	6,269,247
Wholesale finance receivables	Wholesale finance receivables	666,896		1,156,519		1,071,347		Wholesale finance receivables	792,028		489,749		1,358,656
		7,252,194		7,572,947		7,714,156			7,103,010		6,833,944		7,627,903
Allowance for credit losses	Allowance for credit losses	(408,702)		(198,581)		(198,576)		Allowance for credit losses	(346,233)		(390,936)		(335,496)
		$	6,843,492	$	7,374,366	$	7,515,580		$	6,756,777	$	6,443,008	$	7,292,407

1513

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On January 1, 2020, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires an entity to recognize expected lifetime losses on finance receivables upon origination. The allowance for credit losses as of September 27, 2020 represents the Company’s estimate of lifetime losses for its finance receivables. Prior to the adoption of ASU 2016-13, the Company maintained an allowance for credit losses based on the Company’s estimate of probable losses inherent in its finance receivables as of the balance sheet date.

Under ASU 2016-13, 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. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for loan 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. ~~Prior to the adoption of ASU 2016-13, the Company’s investment in finance receivables included the same components as the amortized cost under the new accounting guidance.~~

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. ~~For periods after January 1, 2020, the~~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. For periods prior to January 1, 2020, the Company performed a periodic and systematic collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilized loss forecast models which considered a variety of factors including, but not limited to, historical loss trends, origination or vintage analysis, known and inherent risks in the portfolio, the value of the underlying collateral, recovery rates, and current economic conditions.

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. ~~For periods after January 1, 2020, the~~The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past loan loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries. For periods prior to January 1, 2020, the related allowance for credit losses was based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past loan loss experience, current economic conditions, and the value of the underlying collateral.

The Company considers various economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Changes in the Company’s outlook on economic conditions impacted the retail and wholesale estimates for expected credit losses at September 27, 2020. As part of the January 1, 2020 adoption of ASU 2016-13, the Company expected to be operating in a negative economic environment throughout 2020. The Company’s economic forecast worsened duringMarch 28, 2021. During the first ~~and second quarters of 2020 as a result of the impact of the COVID-19 pandemic. During the third~~ quarter of ~~2020,~~2021, the U.S. economy and the Company’s outlook on economic conditions improved ~~modestly~~ from the ~~second~~fourth quarter of 2020; however, ~~significant~~there is uncertainty ~~still exists~~ surrounding ~~future~~the pace of economic ~~outcomes.~~recovery as demonstrated by unemployment levels above those experienced prior to the COVID-19 pandemic and continuing COVID-19 pandemic-related challenges across the U.S., among other factors. As such, ~~the Company’s economic outlook~~ at the end of the ~~third~~first quarter of ~~2020~~2021, the Company’s economic outlook on economic conditions included economic improvement; however, given the uncertainty surrounding the pace of economic recovery, the Company also included some adverse economic ~~improvement with a heavier emphasis on deteriorating~~conditions in its economic ~~trend assumptions as~~scenario weighting.

Additionally, the ~~COVID-19 pandemic continues to restrain the U.S. economy as evidenced by continued high unemployment rates and a slow U.S. Gross Domestic Product (GDP) recovery.~~

~~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 ~~produce reasonable and supportable~~establish an appropriate allowance ~~balances.~~balance. These factors include motorcycle recovery value considerations, delinquency adjustments, ~~and~~ specific problem loan ~~trends.~~

~~Table of Contents~~

trends, and others, as appropriate.

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

Table of Contents

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


		Three months ended September 27, 2020
		Retail		Wholesale		Total
Balance, beginning of period		$	389,758	$	21,257	$	411,015
Provision for credit losses		8,024		(189)		7,835
Charge-offs		(20,378)		(2,442)		(22,820)
Recoveries		12,672		0		12,672
Balance, end of period		$	390,076	$	18,626	$	408,702
		Three months ended September 29, 2019							Three months ended March 28, 2021
		Retail		Wholesale		Total			Retail		Wholesale		Total
Balance, beginning of period	Balance, beginning of period	$	186,722	$	8,274	$	194,996	Balance, beginning of period	$	371,738	$	19,198	$	390,936
Provision for credit losses	Provision for credit losses	35,071		(1,324)		33,747		Provision for credit losses	(22,449)		(25)		(22,474)
Charge-offs	Charge-offs	(41,076)		0		(41,076)		Charge-offs	(34,589)		0		(34,589)
Recoveries	Recoveries	10,909		0		10,909		Recoveries	12,360		0		12,360
Balance, end of period	Balance, end of period	$	191,626	$	6,950	$	198,576	Balance, end of period	$	327,060	$	19,173	$	346,233
		Nine months ended September 27, 2020							Three months ended March 29, 2020
		Retail		Wholesale		Total			Retail		Wholesale		Total
Balance, beginning of period	Balance, beginning of period	$	188,501	$	10,080	$	198,581	Balance, beginning of period	$	188,501	$	10,080	$	198,581
Cumulative effect of change in accounting(a)	Cumulative effect of change in accounting(a)	95,558		5,046		100,604		Cumulative effect of change in accounting(a)	95,558		5,046		100,604
Provision for credit losses	Provision for credit losses	172,491		5,942		178,433		Provision for credit losses	70,417		9,002		79,419
Charge-offs	Charge-offs	(105,452)		(2,442)		(107,894)		Charge-offs	(55,215)		0		(55,215)
Recoveries	Recoveries	38,978		0		38,978		Recoveries	12,107		0		12,107
Balance, end of period	Balance, end of period	$	390,076	$	18,626	$	408,702	Balance, end of period	$	311,368	$	24,128	$	335,496

		Nine months ended September 29, 2019
		Retail		Wholesale		Total
Balance, beginning of period		$	182,098	$	7,787	$	189,885
Provision for credit losses		95,458		(837)		94,621
Charge-offs		(121,538)		0		(121,538)
Recoveries		35,608		0		35,608
Balance, end of period		$	191,626	$	6,950	$	198,576

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

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

~~Table of Contents~~

with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.

The amortized cost of the Company's U.S. and Canadian retail finance receivables by ~~credit quality indicator~~vintage and ~~vintage, as of September 27, 2020, was as follows (in thousands):~~

2020 2019 2018 2017 2016 2015 & Prior Total
U.S. Retail:
Super prime $ 730,539 $ 649,174 $ 408,201 $ 196,050 $ 90,179 $ 39,749 $ 2,113,892
Prime 993,429 877,714 570,851 336,134 187,067 101,403 3,066,598
Sub-prime 387,766 326,537 196,001 124,312 82,975 64,537 1,182,128
2,111,734 1,853,425 1,175,053 656,496 360,221 205,689 6,362,618
Canadian Retail:
Super prime 48,974 51,939 31,351 16,013 6,526 2,723 157,526
Prime 17,053 14,681 10,630 7,285 3,555 2,489 55,693
Sub-prime 2,790 2,630 1,706 1,171 685 479 9,461
68,817 69,250 43,687 24,469 10,766 5,691 222,680
$ 2,180,551 $ 1,922,675 $ 1,218,740 $ 680,965 $ 370,987 $ 211,380 $ 6,585,298

Prior to the adoption of ASU 2016-13, retail loans with a FICO score of 640 or above at origination were generally considered prime, and loans with a FICO score below 640 were generally considered sub-prime. These credit quality indicators were determined at the time of loan origination and were not updated subsequent to the loan origination date. The recorded investment in retail finance receivables, by credit quality indicator was as follows (in thousands):


		December 31, 2019		September 29, 2019			March 28, 2021
							2021		2020		2019		2018		2017		2016 & Prior		Total
U.S. Retail:						U.S. Retail:
Super prime						Super prime	$	260,359	$	725,383	$	502,847	$	301,839	$	134,213	$	74,086	$	1,998,727
Prime	Prime	$	5,278,093	$	5,454,920	Prime	349,662		1,026,080		706,940		445,201		249,327		183,217		2,960,427
Sub-prime	Sub-prime	1,138,335		1,187,889		Sub-prime	130,389		395,495		263,203		156,368		96,998		100,827		1,143,280
		$	6,416,428	$	6,642,809		740,410		2,146,958		1,472,990		903,408		480,538		358,130		6,102,434
Canadian Retail:						Canadian Retail:
Super prime						Super prime	13,938		48,309		42,993		24,549		11,116		4,831		145,736
Prime						Prime	4,245		17,350		13,055		9,263		5,808		4,178		53,899
Sub-prime						Sub-prime	601		2,949		2,227		1,407		951		778		8,913
							18,784		68,608		58,275		35,219		17,875		9,787		208,548
							$	759,194	$	2,215,566	$	1,531,265	$	938,627	$	498,413	$	367,917	$	6,310,982

Table of Contents


	December 31, 2020
	2020		2019		2018		2017		2016		2015 & Prior		Total
U.S. Retail:
Super prime	$	822,631	$	575,977	$	355,529	$	165,436	$	71,360	$	29,181	$	2,020,114
Prime	1,133,637		794,058		508,713		293,358		156,688		77,046		2,963,500
Sub-prime	435,875		295,403		177,598		111,163		72,556		52,060		1,144,655
	2,392,143		1,665,438		1,041,840		569,957		300,604		158,287		6,128,269
Canadian Retail:
Super prime	53,465		48,692		28,581		13,818		5,018		2,011		151,585
Prime	18,568		14,257		10,269		6,727		3,198		2,025		55,044
Sub-prime	3,172		2,498		1,560		1,095		607		365		9,297
	75,205		65,447		40,410		21,640		8,823		4,401		215,926
	$	2,467,348	$	1,730,885	$	1,082,250	$	591,597	$	309,427	$	162,688	$	6,344,195


	March 29, 2020
	2020		2019		2018		2017		2016		2015 & Prior		Total
U.S. Retail:
Super prime	$	204,937	$	825,176	$	539,296	$	275,621	$	140,284	$	62,924	$	2,048,238
Prime	265,365		1,065,132		717,234		441,284		262,421		155,338		2,906,774
Sub-prime	108,068		394,291		239,571		155,391		108,531		98,124		1,103,976
	578,370		2,284,599		1,496,101		872,296		511,236		316,386		6,058,988
Canadian Retail:
Super prime	12,819		61,889		39,516		22,186		10,565		4,989		151,964
Prime	3,968		16,479		12,389		8,441		4,549		3,929		49,755
Sub-prime	768		2,827		1,919		1,348		921		757		8,540
	17,555		81,195		53,824		31,975		16,035		9,675		210,259
	$	595,925	$	2,365,794	$	1,549,925	$	904,271	$	527,271	$	326,061	$	6,269,247

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. ~~The~~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 on a quarterly basis.

1816

Table of Contents

The amortized cost of wholesale financial receivables, by ~~credit quality indicator~~vintage and ~~vintage, was as follows as of September 27, 2020 (in thousands):~~

2020 2019 2018 2017 2016 2015 & Prior Total
Non-Performing $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Doubtful 0 0 14 0 0 0 14
Substandard 277 238 0 0 0 0 515
Special Mention 2,316 1,213 160 0 0 1,139 4,828
Medium Risk 1,283 448 33 0 0 0 1,764
Low Risk 505,328 118,466 18,602 8,551 5,525 3,303 659,775
$ 509,204 $ 120,365 $ 18,809 $ 8,551 $ 5,525 $ 4,442 $ 666,896

Dealer risk rating categories prior to the adoption of ASU 2016-13 were consistent with the current risk rating categories with the exception of the Non-Performing category for dealers identified as those in which foreclosure is probable, which was established in connection with the January 1, 2020 adoption. The recorded investment in wholesale finance receivables, by internal credit quality indicator, was as follows (in thousands):


		December 31, 2019		September 29, 2019			March 28, 2021
							2021		2020		2019		2018		2017		2016 & Prior		Total
Non-Performing						Non-Performing	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Doubtful	Doubtful	$	11,664	$	4,964	Doubtful	0		0		0		0		0		0		0
Substandard	Substandard	6,122		752		Substandard	0		0		0		0		0		0		0
Special Mention	Special Mention	16,125		14,813		Special Mention	567		530		262		17		0		0		1,376
Medium Risk	Medium Risk	16,800		11,544		Medium Risk	0		728		417		0		0		0		1,145
Low Risk	Low Risk	1,105,808		1,039,274		Low Risk	600,144		122,970		44,614		12,568		6,392		2,819		789,507
		$	1,156,519	$	1,071,347		$	600,711	$	124,228	$	45,293	$	12,585	$	6,392	$	2,819	$	792,028


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


	March 29, 2020
	2020		2019		2018		2017		2016		2015 & Prior		Total
Non-Performing	$	0	$	2,376	$	1,774	$	107	$	25	$	43	$	4,325
Doubtful	478		4,169		529		51		0		726		5,953
Substandard	5,375		6,374		391		131		0		0		12,271
Special Mention	5,239		8,001		977		6		0		1,268		15,491
Medium Risk	8,307		10,996		1,091		23		0		826		21,243
Low Risk	658,137		574,401		47,101		10,997		6,323		2,414		1,299,373
	$	677,536	$	606,317	$	51,863	$	11,315	$	6,348	$	5,277	$	1,358,656

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 interest income when the account is charged-off. The Company reversed ~~$3.1~~$5.2 million and ~~$14.5~~$6.4 million of accrued interest against interest income during the three ~~and nine~~ months ended ~~September 27,~~March 28, 2021 and March 29, 2020, respectively. All retail finance receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under ~~ASU 2016-13~~Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses (ASC Topic 326) to exclude accrued interest from its allowance for credit losses. Accordingly, as of ~~September 27, 2020,~~March 28, 2021, December 31, ~~2019~~2020 and ~~September~~March 29, ~~2019,~~2020, all retail finance receivables were accounted for as interest-earning ~~receivables, of which $22.9 million,~~ ~~$48.0 million~~ ~~and~~ ~~$35.6 million, respectively, were 90 days or more past due.~~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. ~~The Company reverse~~

~~d $0.4 million~~ Table of ~~accrued interest related to the charge-off of Non-Performing dealer loans~~Contents

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

Additional information related to the wholesale finance receivables on non-accrual status at ~~September 27,~~March 29, 2020 ~~December 31, 2019 and September 29, 2019 were $0.3 million, $2.6 million, and $2.0 million, respectively.~~includes (in thousands):

~~Table of Contents~~


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

The aging analysis of finance receivables was as follows (in thousands):

September 27, 2020
Current 31-60 Days
Past Due 61-90 Days
Past Due Greater than
90 Days
Past Due Total
Past Due Total
Retail finance receivables $ 6,434,642 $ 96,243 $ 31,467 $ 22,946 $ 150,656 $ 6,585,298
Wholesale finance receivables 666,335 244 3 314 561 666,896
$ 7,100,977 $ 96,487 $ 31,470 $ 23,260 $ 151,217 $ 7,252,194
December 31, 2019
Current 31-60 Days
Past Due 61-90 Days
Past Due Greater than
90 Days
Past Due Total
Past Due Total
Retail finance receivables $ 6,171,930 $ 142,479 $ 53,995 $ 48,024 $ 244,498 $ 6,416,428
Wholesale finance receivables 1,152,416 1,145 384 2,574 4,103 1,156,519
$ 7,324,346 $ 143,624 $ 54,379 $ 50,598 $ 248,601 $ 7,572,947
September 29, 2019
Current 31-60 Days
Past Due 61-90 Days
Past Due Greater than
90 Days
Past Due Total
Past Due Total
Retail finance receivables $ 6,425,097 $ 134,074 $ 48,033 $ 35,605 $ 217,712 $ 6,642,809
Wholesale finance receivables 1,068,510 615 209 2,013 2,837 1,071,347
$ 7,493,607 $ 134,689 $ 48,242 $ 37,618 $ 220,549 $ 7,714,156

Prior to the Company's January 1, 2020 adoption of ASU 2016-13, finance receivables were considered impaired when management determined it was probable that the Company would not be able to collect all amounts due according to the terms of the loan agreement. Portions of the allowance for credit losses were established to cover estimated losses on finance receivables specifically identified for impairment. The unspecified portion of the allowance for credit losses covered estimated losses on finance receivables which were collectively reviewed for impairment.

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

December 31, 2019
Retail Wholesale Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment $ 0 $ 2,100 $ 2,100
Collectively evaluated for impairment 188,501 7,980 196,481
$ 188,501 $ 10,080 $ 198,581
Finance receivables, ending balance:
Individually evaluated for impairment $ 0 $ 4,601 $ 4,601
Collectively evaluated for impairment 6,416,428 1,151,918 7,568,346
$ 6,416,428 $ 1,156,519 $ 7,572,947

~~Table of Contents~~

September 29, 2019
Retail Wholesale Total
Allowance for credit losses, ending balance:
Individually evaluated for impairment $ 0 $ 0 $ 0
Collectively evaluated for impairment 191,626 6,950 198,576
$ 191,626 $ 6,950 $ 198,576
Finance receivables, ending balance:
Individually evaluated for impairment $ 0 $ 0 $ 0
Collectively evaluated for impairment 6,642,809 1,071,347 7,714,156
$ 6,642,809 $ 1,071,347 $ 7,714,156


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

	December 31, 2020
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,164,369	$	106,818	$	39,933	$	33,075	$	179,826	$	6,344,195
Wholesale finance receivables	489,556		166		23		4		193		489,749
	$	6,653,925	$	106,984	$	39,956	$	33,079	$	180,019	$	6,833,944

	March 29, 2020
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,091,319	$	101,412	$	37,816	$	38,700	$	177,928	$	6,269,247
Wholesale finance receivables	1,352,084		2,051		1,437		3,084		6,572		1,358,656
	$	7,443,403	$	103,463	$	39,253	$	41,784	$	184,500	$	7,627,903

~~At September 29, 2019, there were no wholesale receivables that were individually deemed to be impaired under~~ ~~ASC Topic 310, Receivables.~~ ~~Additional information related to the wholesale finance receivables that were individually deemed to be impaired at December 31, 2019 included the following (in thousands):~~

Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized
Wholesale:
No related allowance recorded $ 0 $ 0 $ — $ 0 $ 0
Related allowance recorded 4,994 4,601 2,100 4,976 0
$ 4,994 $ 4,601 $ 2,100 $ 4,976 $ 0

~~Retail finance receivables were not evaluated individually for impairment prior to charge-off at December 31, 2019 or September 29, 2019.~~

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~~significant as of ~~September 27, 2020,~~March 28, 2021, December 31, ~~2019~~2020 and ~~September~~March 29, ~~2019.~~2020. Additionally, in certain situations, the Company may offer short-term adjustments to customer payment due dates without affecting the associated interest rate or loan term. During ~~the second~~2020 and into the first ~~part of the third~~ quarter of ~~2020,~~2021, the Company offered an increased amount of short-term payment due date extensions on eligible retail loans to help retail customers get through financial difficulties associated with the COVID-19 pandemic. During the first quarter of 2021, the volume of payment extensions granted for eligible retail loans declined from the levels experienced during the second quarter and into the third quarter of 2020 but had not yet returned to pre-COVID-19 pandemic levels. The Company continues to grant payment extensions to customers in accordance with its policies.

9. ~~Goodwill, Intangible and Long-Lived Assets~~

Goodwill is tested for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company also periodically evaluates whether there are indicators that the carrying value of long-lived assets to be held and used may not be recoverable. The Company has assessed the changes in events and circumstances related to the COVID-19 pandemic and determined there was no impairment of goodwill or long-lived assets during the three and nine months ended September 27, 2020.

On March 4, 2019, the Company purchased certain assets and liabilities of StaCyc, Inc. for total consideration of $14.9 million including cash paid at acquisition of $7.0 million. The primary assets acquired and included in the Motorcycles segment were goodwill of $9.5 million, which was tax deductible, and intangible assets of $5.3 million.

~~10.~~ 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.

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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, Thai baht, Indian rupee, Singapore dollar, and Pound sterling. The Company's foreign currency exchange contracts generally have maturities of less than one year.

~~Table of Contents~~

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

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

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

Changes in the fair value of derivative financial instruments that are designated as cash flow hedges are initially recorded in Other comprehensive income (loss) (OCI) and subsequently reclassified into earnings 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.

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


		Derivative Financial Instruments Designated as Cash Flow Hedging Instruments																			Derivative Financial Instruments Designated as Cash Flow Hedging Instruments
		September 27, 2020						December 31, 2019						September 29, 2019							March 28, 2021						December 31, 2020						March 29, 2020
		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities			Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities
Foreign currency contracts	Foreign currency contracts	$	352,933	$	2,334	$	6,132	$	434,321	$	3,505	$	3,661	$	441,131	$	11,459	$	790	Foreign currency contracts	$	402,814	$	6,356	$	6,071	$	533,925	$	11	$	21,927	$	414,753	$	12,108	$	575
Commodity contracts	Commodity contracts	801		95		0		616		0		80		744		0		56		Commodity contracts	668		3		20		671		0		52		482		0		74
Cross-currency swaps	Cross-currency swaps	1,367,460		57,787		292		660,780		8,326		0		0		0		0		Cross-currency swaps	1,367,460		73,449		0		1,367,460		138,622		0		660,780		0		41,283

Interest rate swap		450,000		0		6,184		900,000		0		9,181		900,000		0		11,164
Interest rate swaps																				Interest rate swaps	0		0		0		450,000		0		3,086		900,000		0		11,398
		$	2,171,194	$	60,216	$	12,608	$	1,995,717	$	11,831	$	12,922	$	1,341,875	$	11,459	$	12,010		$	1,770,942	$	79,808	$	6,091	$	2,352,056	$	138,633	$	25,065	$	1,976,015	$	12,108	$	53,330

		Derivative Financial Instruments Not Designated as Hedging Instruments																			Derivative Financial Instruments Not Designated as Hedging Instruments
		September 27, 2020						December 31, 2019						September 29, 2019							March 28, 2021						December 31, 2020						March 29, 2020
		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities			Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities		Notional Value		Other Current Assets		Accrued Liabilities
Foreign currency contracts	Foreign currency contracts	$	284,991	$	342	$	574	$	220,139	$	721	$	865	$	193,959	$	278	$	219	Foreign currency contracts	$	214,337	$	670	$	595	$	245,494	$	737	$	435	$	182,642	$	2,573	$	2,194
Commodity contracts	Commodity contracts	6,854		231		215		8,270		95		147		9,485		230		360		Commodity contracts	8,172		1,193		40		6,806		849		21		7,769		0		1,452
Interest rate caps	Interest rate caps	1,124,260		60		0		375,980		2		0		427,530		4		0		Interest rate caps	844,673		170		0		978,058		47		0		326,976		2		0
		$	1,416,105	$	633	$	789	$	604,389	$	818	$	1,012	$	630,974	$	512	$	579		$	1,067,182	$	2,033	$	635	$	1,230,358	$	1,633	$	456	$	517,387	$	2,575	$	3,646

2219

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


		Gain/(Loss) Recognized in OCI								Gain/(Loss) Reclassified from AOCL into Income									Gain/(Loss) Recognized in OCI				Gain/(Loss) Reclassified from AOCL into Income
		Three months ended				Nine months ended				Three months ended				Nine months ended					Three months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020				March 28, 2021		March 29, 2020
Foreign currency contracts	Foreign currency contracts	$	(6,587)	$	13,135	$	6,250	$	14,422	$	3,027	$	5,826	$	11,732	$	15,947	Foreign currency contracts	$	14,037	$	16,899			$	(4,953)	$	3,400
Commodity contracts	Commodity contracts	131		(15)		(26)		(55)		(12)		(28)		(201)		(45)		Commodity contracts	3		(129)				(32)		(135)
Cross-currency swaps	Cross-currency swaps	63,182		0		49,168		0		59,625		0		83,634		0		Cross-currency swaps	(65,174)		(49,609)				(65,788)		(12,906)
Treasury rate lock contracts	Treasury rate lock contracts	0		0		0		0		(124)		(124)		(370)		(369)		Treasury rate lock contracts	0		0				(124)		(124)
Interest rate swap		(994)		(708)		(7,503)		(9,569)		(3,931)		(1,463)		(10,500)		(2,899)
Interest rate swaps																		Interest rate swaps	397		(5,333)				(2,689)		(3,116)
		$	55,732	$	12,412	$	47,889	$	4,798	$	58,585	$	4,211	$	84,295	$	12,634		$	(50,737)	$	(38,172)			$	(73,586)	$	(12,881)

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

Motorcycles
cost of goods sold Selling, administrative &
engineering expense Interest expense Financial Services interest expense
Three months ended September 27, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded $ 676,796 $ 231,721 $ 7,783 $ 67,533
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts $ 3,027 $ — $ — $ —
Commodity contracts $ (12) $ — $ — $ —
Cross-currency swaps $ — $ 59,625 $ — $ —
Treasury rate lock contracts $ — $ — $ (91) $ (33)
Interest rate swap $ — $ — $ — $ (3,931)
Three months ended September 29, 2019
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded $ 748,878 $ 309,031 $ 7,789 $ 53,390
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts $ 5,826 $ — $ — $ —
Commodity contracts $ (28) $ — $ — $ —
Treasury rate lock contracts $ — $ — $ (91) $ (33)
Interest rate swap $ — $ — $ — $ (1,463)

~~Table of Contents~~


											Motorcycles cost of goods sold		Selling, administrative & engineering expense		Interest expense		Financial Services interest expense

		Motorcycles cost of goods sold		Selling, administrative & engineering expense		Interest expense		Financial Services interest expense
		Nine months ended September 27, 2020									Three months ended March 28, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	2,019,310	$	734,057	$	23,307	$	182,193	Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	811,622	$	231,844	$	7,708	$	55,707

Gain/(loss) reclassified from AOCL into income:	Gain/(loss) reclassified from AOCL into income:									Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts	Foreign currency contracts	$	11,732	$	—	$	—	$	—	Foreign currency contracts	$	(4,953)	$	—	$	—	$	—
Commodity contracts	Commodity contracts	$	(201)	$	—	$	—	$	—	Commodity contracts	$	(32)	$	—	$	—	$	—
Cross-currency swaps	Cross-currency swaps	$	—	$	83,634	$	—	$	—	Cross-currency swaps	$	—	$	(65,788)	$	—	$	—
Treasury rate lock contracts	Treasury rate lock contracts	$	—	$	—	$	(272)	$	(98)	Treasury rate lock contracts	$	—	$	—	$	(91)	$	(33)
Interest rate swap	Interest rate swap	$	—	$	—	$	—	$	(10,500)	Interest rate swap	$	—	$	—	$	—	$	(2,689)
		Nine months ended September 29, 2019									Three months ended March 29, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	2,576,342	$	885,273	$	23,304	$	158,387	Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	780,868	$	277,971	$	7,755	$	52,473

Gain/(loss) reclassified from AOCL into income:	Gain/(loss) reclassified from AOCL into income:									Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts	Foreign currency contracts	$	15,947	$	—	$	—	$	—	Foreign currency contracts	$	3,400	$	—	$	—	$	—
Commodity contracts	Commodity contracts	$	(45)	$	—	$	—	$	—	Commodity contracts	$	(135)	$	—	$	—	$	—

Cross-currency swaps										Cross-currency swaps	$	—	$	(12,906)	$	—	$	—
Treasury rate lock contracts	Treasury rate lock contracts	$	—	$	—	$	(272)	$	(97)	Treasury rate lock contracts	$	—	$	—	$	(91)	$	(33)
Interest rate swap		$	—	$	—	$	—	$	(2,899)
Interest rate swaps										Interest rate swaps	$	—	$	—	$	—	$	(3,116)

The amount of net loss included in Accumulated other comprehensive loss (AOCL) at ~~September 27, 2020,~~March 28, 2021, estimated to be reclassified into income over the next 12 months was ~~$23.8~~$17.1 million.

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


		Amount of Gain/(Loss) Recognized in Income									Amount of Gain/(Loss) Recognized in Income
		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Foreign currency contracts	Foreign currency contracts	$	(3,569)	$	1,719	$	(1,897)	$	1,602	Foreign currency contracts	$	(3,629)	$	2,194
Commodity contracts	Commodity contracts	134		(15)		(859)		(8)		Commodity contracts	703		(1,551)
Interest rate caps	Interest rate caps	92		(1)		519		(142)		Interest rate caps	123		0
		$	(3,343)	$	1,703	$	(2,237)	$	1,452		$	(2,803)	$	643

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.

~~11.~~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.

~~Table of Contents~~

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

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

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 1211 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 27,~~March 28, 2021 and March 29, 2020 ~~and September 29, 2019~~ was ~~$7.1~~$8.2 million and ~~$7.4~~$7.3 million, ~~respectively, and $20.9 million and $20.1 million for the nine months ended September 27, 2020 and September 29, 2019,~~ respectively. This includes variable lease costs related to leases involving assets operated by a third party of approximately ~~$2.1~~$3.1 million and ~~$1.6~~$1.9 million for the three months ended ~~September 27,~~March 28, 2021 and March 29, 2020, ~~and September 29, 2019, respectively, and $5.2 million and $4.8 million for the nine months ended September 27, 2020 and September 29, 2019,~~ respectively. Other variable and short-term lease costs were not material.

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


		September 27, 2020		December 31, 2019		September 29, 2019			March 28, 2021		December 31, 2020		March 29, 2020
Lease assets	Lease assets	$	47,599	$	61,618	$	55,905	Lease assets	$	44,765	$	45,203	$	56,496

Accrued liabilities	Accrued liabilities	$	17,704	$	19,013	$	18,421	Accrued liabilities	$	17,021	$	17,081	$	17,939
Lease liabilities	Lease liabilities	31,225		44,447		39,408		Lease liabilities	30,061		30,115		40,053
		$	48,929	$	63,460	$	57,829		$	47,082	$	47,196	$	57,992

Future maturities of the Company's operating lease liabilities as of ~~September 27, 2020~~March 28, 2021 were as follows (in thousands):

Operating Leases
2020 $ 5,090
2021 18,024
2022 12,808
2023 6,369
2024 4,443
Thereafter 4,927
Future lease payments 51,661
Present value discount (2,732)
Lease liabilities $ 48,929

~~Table of Contents~~


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

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


		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Cash outflows for amounts included in the measurement of lease liabilities	Cash outflows for amounts included in the measurement of lease liabilities	$	5,274	$	6,073	$	15,893	$	15,944	Cash outflows for amounts included in the measurement of lease liabilities	$	4,947	$	5,378
ROU assets obtained in exchange for lease obligations, net of modifications	ROU assets obtained in exchange for lease obligations, net of modifications	$	(1,327)	$	6,724	$	327	$	10,986	ROU assets obtained in exchange for lease obligations, net of modifications	$	5,305	$	557


		September 27, 2020		December 31, 2019		September 29, 2019			March 28, 2021		December 31, 2020		March 29, 2020
Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)	3.92		4.68		4.23		Weighted-average remaining lease term (in years)	3.81		3.78		4.20
Weighted-average discount rate	Weighted-average discount rate	3.1	%	2.1	%	3.3	%	Weighted-average discount rate	2.9	%	3.1	%	3.3	%

~~12.~~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 27, 2020		December 31, 2019		September 29, 2019			March 28, 2021		December 31, 2020		March 29, 2020
Unsecured commercial paper	Unsecured commercial paper	$	1,077,763	$	571,995	$	1,013,137	Unsecured commercial paper	$	749,801	$	1,014,274	$	1,335,664
364-day credit facility borrowings		150,000		0		0
Global credit facility borrowings								Global credit facility borrowings	15,462		0		0
		$	1,227,763	$	571,995	$	1,013,137		$	765,263	$	1,014,274	$	1,335,664

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

September 27,
2020 December 31,
2019 September 29,
2019
Secured debt:
Asset-backed Canadian commercial paper conduit facility $ 127,500 $ 114,693 $ 128,368
Asset-backed U.S. commercial paper conduit facilities 467,338 490,427 552,757
Asset-backed securitization debt 2,106,258 766,965 875,966
Unamortized discounts and debt issuance costs (9,903) (2,573) (3,095)
2,691,193 1,369,512 1,553,996
Unsecured notes (at par value):
Medium-term notes:
Due in 2020, issued February 2015 2.15 % 0 600,000 600,000
Due in 2020, issued May 2018 LIBOR + 0.50% 0 450,000 450,000
Due in 2020, issued March 2017 2.40 % 0 350,000 350,000
Due in 2021, issued January 2016 2.85 % 600,000 600,000 600,000
Due in 2021, issued November 2018 LIBOR + 0.94% 450,000 450,000 450,000
Due in 2021, issued May 2018 3.55 % 350,000 350,000 350,000
Due in 2022, issued February 2019 4.05 % 550,000 550,000 550,000
Due in 2022, issued June 2017 2.55 % 400,000 400,000 400,000
Due in 2023, issued February 2018 3.35 % 350,000 350,000 350,000
Due in 2023, issued May 2020(a)
4.94 % 760,890 0 0
Due in 2024, issued November 2019(b)
3.14 % 702,360 672,936 0
Due in 2025, issued June 2020 3.35 % 700,000 0 0
Unamortized discounts and debt issuance costs (17,289) (12,809) (10,409)
4,845,961 4,760,127 4,089,591

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													March 28, 2021		December 31, 2020		March 29, 2020
Secured debt:										Secured debt:
Asset-backed Canadian commercial paper conduit facility										Asset-backed Canadian commercial paper conduit facility			$	102,543	$	116,678	$	155,243
Asset-backed U.S. commercial paper conduit facilities										Asset-backed U.S. commercial paper conduit facilities			350,648		402,205		600,000
Asset-backed securitization debt										Asset-backed securitization debt			2,109,046		1,800,393		1,161,047
Unamortized discounts and debt issuance costs										Unamortized discounts and debt issuance costs			(9,788)		(8,437)		(4,202)
													2,552,449		2,310,839		1,912,088
Unsecured notes (at par value):										Unsecured notes (at par value):
Medium-term notes:										Medium-term notes:

Due in 2020, issued May 2018										Due in 2020, issued May 2018	LIBOR + 0.50%		0		0		450,000
Due in 2020, issued March 2017										Due in 2020, issued March 2017	2.40	%	0		0		350,000
Due in 2021, issued January 2016										Due in 2021, issued January 2016	2.85	%	0		600,000		600,000
Due in 2021, issued November 2018										Due in 2021, issued November 2018	LIBOR + 0.94%		0		450,000		450,000
Due in 2021, issued May 2018										Due in 2021, issued May 2018	3.55	%	350,000		350,000		350,000
Due in 2022, issued February 2019										Due in 2022, issued February 2019	4.05	%	550,000		550,000		550,000
Due in 2022, issued June 2017										Due in 2022, issued June 2017	2.55	%	400,000		400,000		400,000
Due in 2023, issued February 2018										Due in 2023, issued February 2018	3.35	%	350,000		350,000		350,000
Due in 2023, issued May 2020(a)										Due in 2023, issued May 2020(a)	4.94	%	762,996		797,206		0
Due in 2024, issued November 2019(b)										Due in 2024, issued November 2019(b)	3.14	%	704,304		735,882		660,030
Due in 2025, issued June 2020										Due in 2025, issued June 2020	3.35	%	700,000		700,000		0
Unamortized discounts and debt issuance costs										Unamortized discounts and debt issuance costs			(13,564)		(15,374)		(11,046)
													3,803,736		4,917,714		4,148,984
				September 27, 2020		December 31, 2019		September 29, 2019
Senior notes:	Senior notes:									Senior notes:
Due in 2025, issued July 2015	Due in 2025, issued July 2015	3.50	%	450,000		450,000		450,000		Due in 2025, issued July 2015	3.50	%	450,000		450,000		450,000
Due in 2045, issued July 2015	Due in 2045, issued July 2015	4.625	%	300,000		300,000		300,000		Due in 2045, issued July 2015	4.625	%	300,000		300,000		300,000
Unamortized discounts and debt issuance costs	Unamortized discounts and debt issuance costs			(6,194)		(6,704)		(6,873)		Unamortized discounts and debt issuance costs			(5,851)		(6,023)		(6,534)
				743,806		743,296		743,127					744,149		743,977		743,466
				5,589,767		5,503,423		4,832,718					4,547,885		5,661,691		4,892,450
Long-term debt	Long-term debt			8,280,960		6,872,935		6,386,714		Long-term debt			7,100,334		7,972,530		6,804,538
Current portion of long-term debt, net	Current portion of long-term debt, net			(2,109,284)		(1,748,109)		(1,779,673)		Current portion of long-term debt, net			(1,622,243)		(2,039,597)		(2,326,460)
Long-term debt, net	Long-term debt, net			$	6,171,676	$	5,124,826	$	4,607,041	Long-term debt, net			$	5,478,091	$	5,932,933	$	4,478,078

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

(b)Euro denominated, €600.0 million par value remeasured to U.S. dollar at ~~September 27,~~March 28, 2021, December 31, 2020, and ~~December 31, 2019,~~March 29, 2020, respectively

~~13.~~The Company's future principal payments on debt obligations as of March 28, 2021 were as follows (in thousands):


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

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12. Asset-Backed Financing

The Company participates in asset-backed financing both through asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. In the Company's asset-backed financing programs, the Company transfers retail motorcycle finance receivables to special purpose entities (SPEs), which are considered VIEs under U.S. GAAP. Each SPE then converts those assets into cash, through the issuance of debt. The Company retains servicing rights for all of the retail motorcycle finance receivables transferred to SPEs as part of an asset-backed financing. The accounting treatment for asset-backed financings depends on the terms of the related transaction and the Company’s continuing involvement with the VIE.

In transactions where the Company has power over the significant activities of the VIE and has an obligation to absorb losses or the right to receive benefits from the VIE that are potentially significant to the VIE, the Company is the primary beneficiary of the VIE and consolidates the VIE within its consolidated financial statements. On a consolidated basis, the asset-backed financing is treated as a secured borrowing in this type of transaction and is referred to as an on-balance sheet asset-backed financing.

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

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

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

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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 27, 2020													March 28, 2021
		Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt			Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt
On-balance sheet assets and liabilities:	On-balance sheet assets and liabilities:													On-balance sheet assets and liabilities:
Consolidated VIEs:	Consolidated VIEs:													Consolidated VIEs:
Asset-backed securitizations	Asset-backed securitizations	$	2,422,841	$	(143,775)	$	138,276	$	1,923	$	2,419,265	$	2,096,355	Asset-backed securitizations	$	2,448,681	$	(126,053)	$	166,694	$	2,852	$	2,492,174	$	2,099,258
Asset-backed U.S. commercial paper conduit facilities		505,507		(29,948)		32,649		1,206		509,414		467,338
Asset-backed U.S. commercial paper conduit facility														Asset-backed U.S. commercial paper conduit facility	378,035		(19,432)		30,252		1,175		390,030		350,648
Unconsolidated VIEs:	Unconsolidated VIEs:													Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility	219,466		(6,878)		10,253		142		222,983		127,500		Asset-backed Canadian commercial paper conduit facility	115,742		(5,388)		9,743		206		120,303		102,543
		$	3,147,814	$	(180,601)	$	181,178	$	3,271	$	3,151,662	$	2,691,193		$	2,942,458	$	(150,873)	$	206,689	$	4,233	$	3,002,507	$	2,552,449

		December 31, 2019
		Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations		$	826,047	$	(24,935)	$	36,037	$	778	$	837,927	$	764,392
Asset-backed U.S. commercial paper conduit facilities		533,587		(16,076)		27,775		1,642		546,928		490,427
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility		232,699		(2,786)		7,686		296		237,895		114,693
		$	1,592,333	$	(43,797)	$	71,498	$	2,716	$	1,622,750	$	1,369,512

		September 29, 2019
		Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations		$	929,773	$	(27,517)	$	45,096	$	469	$	947,821	$	872,871
Asset-backed U.S. commercial paper conduit facilities		599,099		(17,701)		33,238		1,149		615,785		552,757
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility		242,244		(3,182)		8,408		258		247,728		128,368
		$	1,771,116	$	(48,400)	$	86,742	$	1,876	$	1,811,334	$	1,553,996

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

	March 29, 2020
	Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations	$	1,250,382	$	(62,159)	$	61,945	$	852	$	1,251,020	$	1,156,845
Asset-backed U.S. commercial paper conduit facilities	662,385		(32,872)		37,290		1,410		668,213		600,000
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	182,353		(6,671)		10,552		148		186,382		155,243
	$	2,095,120	$	(101,702)	$	109,787	$	2,410	$	2,105,615	$	1,912,088

On-Balance Sheet Asset-Backed Securitization VIEs – The Company transfers U.S. retail motorcycle finance receivables to SPEs which in turn issue secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. Each on-balance sheet asset-backed securitization SPE is a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the asset-backed securitization ~~transaction~~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 ~~2021~~2022 to 2028.

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

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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~~During the first quarter of 2021, the Company transferred $663.1 million of U.S. retail motorcycle finance receivables to ~~SPEs, the respective proceeds, and the respective proceeds,~~an SPE which, in turn, issued $600.0 million, or $597.4 million net of ~~discounts~~discount and issuance costs, ~~were as follows (in thousands):~~

2020 2019
Transfers Proceeds Proceeds, net Transfers Proceeds Proceeds, net
First quarter $ 580,200 $ 525,000 $ 522,700 $ 0 $ 0 $ 0
Second quarter 1,840,500 1,550,200 $ 1,541,800 1,120,000 1,025,000 1,021,300
Third quarter 0 0 0 0 0 0
$ 2,420,700 $ 2,075,200 $ 2,064,500 $ 1,120,000 $ 1,025,000 $ 1,021,300
of secured notes through an on-balance sheet asset-backed securitization transaction. During the first quarter of 2020, the Company transferred $580.2 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $525.0 million, or $522.7 million net of discount and issuance costs, of secured notes through an on-balance sheet asset-backed securitization transaction.

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discretion, of up to ~~an additional~~ $300.0 ~~million in excess of~~million. Availability under the ~~$300.0 million commitment. In November 2019, the Company renewed its existing $600.0 million and the amended $300.0~~$900.0 million revolving facility ~~agreements with third-party bank-sponsored asset-backed U.S. commercial paper conduits. Availability under the revolving facilities (together, the~~(the U.S. Conduit ~~Facilities)~~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 ~~Facilities,~~Facility, the assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, the terms of the interest are based on LIBOR. In each of these cases, a program fee is assessed based on the outstanding principal. The U.S. Conduit ~~Facilities~~Facility also ~~provide~~provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment ~~for the $300.0 million agreement~~ does not include any unused portion of the $300.0 million ~~incremental~~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 ~~Facilities,~~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 54 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of ~~September 27, 2020,~~March 28, 2021, the U.S. Conduit ~~Facilities have~~Facility has an expiration date of November ~~25, 2020.~~19, 2021.

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

~~Quarterly~~There were 0 finance receivable transfers under the U.S. Conduit Facility during the first quarter of 2021. During the first quarter of 2020, the Company transferred $195.3 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $163.6 million of debt under the Former U.S. Conduit ~~Facilities and the respective proceeds were as follows (in thousands):~~

2020 2019
Transfers Proceeds Transfers Proceeds
First quarter $ 195,300 $ 163,600 $ 0 $ 0
Second quarter 0 0 0 0
Third quarter 0 0 174,400 154,600
$ 195,300 $ 163,600 $ 174,400 $ 154,600
Facilities.

On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – In June 2020, 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$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused

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commitment fee based on the unused portion of the total aggregate commitment of C$220.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 4 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of ~~September 27, 2020,~~March 28, 2021, the Canadian Conduit has an expiration date of June 25, 2021.

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 ~~$95.5~~$17.8 million at ~~September 27, 2020.~~March 28, 2021. The maximum exposure is not an indication of the Company's expected loss exposure.

~~Quarterly~~There were 0 finance receivable transfers under the Canadian Conduit Facility during the first quarter of 2021. During the first quarter of 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit ~~and the respective~~for proceeds ~~were as follows (in thousands):~~

2020 2019
Transfers Proceeds Transfers Proceeds
First quarter $ 77,900 $ 61,600 $ 0 $ 0
Second quarter 0 0 28,200 23,400
Third quarter 0 0 0 0
$ 77,900 $ 61,600 $ 28,200 $ 23,400
of $61.6 million.

Off-Balance Sheet Asset-Backed Securitization VIE – There were 0 off-balance sheet asset-backed securitization transactions during the ~~nine months ended September 27, 2020~~first quarter of 2021 or ~~September 29, 2019.~~2020. During the second quarter of 2016, the Company sold retail motorcycle finance receivables with a principal balance of $301.8 million into a securitization VIE that was not consolidated, recognized a gain of $9.3 million and received cash proceeds of $312.6 million. The gain on sale was included in Financial Services revenue on the Consolidated statements of operations. In April 2020, the Company repurchased the finance receivables associated with this off-balance sheet asset-backed securitization VIE for $27.4 million.

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Similar to an on-balance sheet asset-backed securitization, the Company transferred U.S. retail motorcycle finance receivables to an SPE which in turn issued secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. The off-balance sheet asset-backed securitization SPE was a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitization were only available for payment of the secured debt and other obligations arising from the asset-backed securitization transaction and were not available to pay other obligations or claims of the Company’s creditors. In an on-balance sheet asset-backed securitization, the Company retains a financial interest in the VIE in the form of a debt security. As part of this off-balance sheet securitization, the Company did not retain any financial interest in the VIE beyond servicing rights and ordinary representations and warranties and related covenants.

The Company was not the primary beneficiary of the off-balance sheet asset-backed securitization VIE because it only retained servicing rights and did not have the obligation to absorb losses or the right to receive benefits from the VIE which could potentially be significant to the VIE. Accordingly, this transaction met the accounting sale requirements under ASC Topic 860 and was recorded as a sale for accounting purposes. Upon the sale in 2016, the retail motorcycle finance receivables were removed from the Company’s Consolidated balance sheets and a gain was recognized for the difference between the cash proceeds received, the assets derecognized and the liabilities recognized as part of the transaction.

Servicing Activities – The Company services all retail motorcycle finance receivables that it originates. When the Company transfers retail motorcycle finance receivables to SPEs through asset-backed financings, the Company retains the right to service the finance receivables and receives servicing fees based on the securitized finance receivables balance and certain ancillary fees. In on-balance sheet asset-backed financings, servicing fees are eliminated in consolidation and therefore are not recorded on a consolidated basis. In off-balance sheet asset-backed financings, servicing fees and ancillary fees are recorded in Financial Services revenue on the Consolidated statements of operations. The fees the Company is paid for servicing represent adequate compensation, and consequently, the Company does not recognize a servicing asset or liability. The Company repurchased the finance receivables associated with the off-balance sheet securitization VIE in April 2020. As such, the Company did not recognize any servicing fee income in 2021. The Company recognized servicing fee income of $0.1 million ~~and $0.5 million~~ during the ~~nine months ended September 27, 2020 and September 29, 2019, respectively.~~

~~Table~~first quarter of ~~Contents~~2020.

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

September 27,
2020 December 31,
2019 September 29,
2019
On-balance sheet retail motorcycle finance receivables $ 6,423,104 $ 6,274,551 $ 6,500,938
Off-balance sheet retail motorcycle finance receivables 0 35,197 43,938
$ 6,423,104 $ 6,309,748 $ 6,544,876

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

September 27,
2020 December 31,
2019 September 29,
2019
On-balance sheet retail motorcycle finance receivables $ 150,656 $ 244,498 $ 217,712
Off-balance sheet retail motorcycle finance receivables 0 885 954
$ 150,656 $ 245,383 $ 218,666

~~Credit losses, net of recoveries for the~~off-balance sheet retail motorcycle finance receivables serviced by the Company were $27.4 million as ~~follows (in thousands):~~

Three months ended Nine months ended
September 27,
2020 September 29,
2019 September 27,
2020 September 29,
2019
On-balance sheet retail motorcycle finance receivables $ 7,706 $ 30,167 $ 66,474 $ 85,930
Off-balance sheet retail motorcycle finance receivables 0 (18) 13 375
$ 7,706 $ 30,149 $ 66,487 $ 86,305

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

~~14.~~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, cross-currency swaps and treasury rate lock contracts are valued using quoted forward rates and prices; interest rate swaps and caps are valued using quoted interest rates and yield curves; investments in marketable securities and cash equivalents are valued using quoted prices.

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.

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

September 27, 2020
Balance Level 1 Level 2
Assets:
Cash equivalents $ 3,250,891 $ 3,150,891 $ 100,000
Marketable securities 48,845 48,845 0
Derivative financial instruments 60,849 0 60,849
$ 3,360,585 $ 3,199,736 $ 160,849
Liabilities:
Derivative financial instruments $ 13,397 $ 0 $ 13,397

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		December 31, 2019						March 28, 2021
		Balance		Level 1		Level 2				Balance		Level 1		Level 2
Assets:	Assets:								Assets:
Cash equivalents	Cash equivalents	$	624,832	$	459,885	$	164,947		Cash equivalents	$	2,069,400	$	1,919,400	$	150,000
Marketable securities	Marketable securities	52,575		52,575		0			Marketable securities	50,239		50,239		0
Derivative financial instruments	Derivative financial instruments	12,649		0		12,649			Derivative financial instruments	81,841		0		81,841
		$	690,056	$	512,460	$	177,596			$	2,201,480	$	1,969,639	$	231,841
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments	Derivative financial instruments	$	13,934	$	0	$	13,934		Derivative financial instruments	$	6,726	$	0	$	6,726
		September 29, 2019						December 31, 2020
		Balance		Level 1		Level 2				Balance		Level 1		Level 2
Assets:	Assets:								Assets:
Cash equivalents	Cash equivalents	$	624,789	$	496,900	$	127,889		Cash equivalents	$	3,019,884	$	2,819,884	$	200,000
Marketable securities	Marketable securities	49,821		49,821		0			Marketable securities	52,061		52,061		0
Derivative financial instruments	Derivative financial instruments	11,971		0		11,971			Derivative financial instruments	140,266		0		140,266
		$	686,581	$	546,721	$	139,860			$	3,212,211	$	2,871,945	$	340,266
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments	Derivative financial instruments	$	12,589	$	0	$	12,589		Derivative financial instruments	$	25,521	$	0	$	25,521
										March 29, 2020
										Balance		Level 1		Level 2
Assets:									Assets:
Cash equivalents									Cash equivalents	$	1,207,799	$	1,144,800	$	62,999
Marketable securities									Marketable securities	44,144		44,144		0
Derivative financial instruments									Derivative financial instruments	14,683		0		14,683
										$	1,266,626	$	1,188,944	$	77,682
Liabilities:									Liabilities:
Derivative financial instruments									Derivative financial instruments	$	56,976	$	0	$	56,976

Nonrecurring Fair Value Measurements – Repossessed inventory is recorded at the lower of cost or net realizable value through a nonrecurring fair value measurement. Repossessed inventory was ~~$17.1~~$18.6 million, ~~$21.4~~$17.7 million and ~~$19.4~~$22.2 million at ~~September 27, 2020,~~March 28, 2021, December 31, ~~2019~~2020 and ~~September~~March 29, ~~2019,~~2020, respectively, for which the fair value adjustment was ~~$2.9~~$2.4 million, ~~$11.9~~$4.2 million and ~~$8.8~~$10.9 million, respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.

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Fair Value of Financial Instruments Measured at Cost – The carrying value of the Company's Cash and cash equivalents and Restricted cash approximates their fair values. The fair value and carrying value of the Company’s remaining financial instruments that are measured at cost or amortized cost were as follows (in thousands):

September 27, 2020 December 31, 2019 September 29, 2019
Fair Value Carrying Value Fair Value Carrying Value Fair Value Carrying Value
Assets:
Finance receivables, net $ 6,954,661 $ 6,843,492 $ 7,419,627 $ 7,374,366 $ 7,561,797 $ 7,515,580
Liabilities:
Deposits $ 29,999 $ 29,999 $ 0 $ 0 $ 0 $ 0
Debt:
Unsecured commercial paper $ 1,077,763 $ 1,077,763 $ 571,995 $ 571,995 $ 1,013,137 $ 1,013,137
364-day credit facility borrowings $ 150,000 $ 150,000 $ 0 $ 0 $ 0 $ 0
Asset-backed U.S. commercial paper conduit facilities $ 467,338 $ 467,338 $ 490,427 $ 490,427 $ 552,757 $ 552,757
Asset-backed Canadian commercial paper conduit facility $ 127,500 $ 127,500 $ 114,693 $ 114,693 $ 128,368 $ 128,368
Asset-backed securitization debt $ 2,123,715 $ 2,096,355 $ 768,094 $ 764,392 $ 877,423 $ 872,871
Medium-term notes $ 4,895,006 $ 4,845,961 $ 4,816,153 $ 4,760,127 $ 4,138,941 $ 4,089,591
Senior notes $ 798,411 $ 743,806 $ 774,949 $ 743,296 $ 773,434 $ 743,127

~~Table of Contents~~


	March 28, 2021				December 31, 2020				March 29, 2020
	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value
Assets:
Finance receivables, net	$	6,930,531	$	6,756,777	$	6,586,348	$	6,443,008	$	7,391,948	$	7,292,407
Liabilities:
Deposits, net	$	152,715	$	152,653	$	79,965	$	79,965	$	0	$	0
Debt:
Unsecured commercial paper	$	749,801	$	749,801	$	1,014,274	$	1,014,274	$	1,335,664	$	1,335,664
Global credit facility borrowings	$	15,462	$	15,462	$	0	$	0	$	0	$	0

Asset-backed U.S. commercial paper conduit facilities	$	350,648	$	350,648	$	402,205	$	402,205	$	600,000	$	600,000
Asset-backed Canadian commercial paper conduit facility	$	102,543	$	102,543	$	116,678	$	116,678	$	155,243	$	155,243
Asset-backed securitization debt	$	2,120,855	$	2,099,258	$	1,817,892	$	1,791,956	$	1,139,076	$	1,156,845
Medium-term notes	$	3,955,743	$	3,803,736	$	5,118,928	$	4,917,714	$	4,013,409	$	4,148,984
Senior notes	$	789,967	$	744,149	$	828,141	$	743,977	$	685,805	$	743,466

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

Deposits, net – The carrying value of deposits is amortized cost. The fair value of deposits is estimated based upon rates currently available for deposits with similar terms and maturities. Fair value is calculated using Level ~~2 inputs and approximates carrying value due to its short maturity.~~3 inputs.

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

~~15.~~14. Product Warranty and Recall Campaigns

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

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


		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Balance, beginning of period	Balance, beginning of period	$	83,513	$	108,804	$	89,793	$	131,740	Balance, beginning of period	$	69,208	$	89,793
Warranties issued during the period	Warranties issued during the period	8,564		12,988		25,821		41,955		Warranties issued during the period	11,672		11,025
Settlements made during the period	Settlements made during the period	(12,886)		(26,906)		(37,780)		(73,291)		Settlements made during the period	(8,585)		(14,157)
Recalls and changes to pre-existing warranty liabilities	Recalls and changes to pre-existing warranty liabilities	239		1,990		1,596		(3,528)		Recalls and changes to pre-existing warranty liabilities	132		(353)
Balance, end of period	Balance, end of period	$	79,430	$	96,876	$	79,430	$	96,876	Balance, end of period	$	72,427	$	86,308

The liability for recall campaigns, included in the balance above, was ~~$29.8~~$25.3 million, ~~$36.4~~$24.7 million and ~~$40.5~~$33.6 million at ~~September 27, 2020,~~March 28, 2021, December 31, ~~2019~~2020 and ~~September~~March 29, ~~2019,~~2020, respectively. ~~Additionally, during the nine months ended September 29, 2019 the Company recorded supplier recoveries within operating expenses separate from the amounts disclosed above of $28.0 million.~~

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~~16.~~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 cost are presented in Other income, net. Components of net periodic benefit cost for the Company's defined benefit plans were as follows (in thousands):


		Three months ended				Nine months ended					Three months ended
		September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Pension and SERPA Benefits:	Pension and SERPA Benefits:									Pension and SERPA Benefits:
Service cost	Service cost	$	6,806	$	6,072	$	20,418	$	19,336	Service cost	$	6,348	$	6,806
Interest cost	Interest cost	19,112		21,371		57,335		64,113		Interest cost	15,470		19,112
Expected return on plan assets	Expected return on plan assets	(33,764)		(35,581)		(101,292)		(106,743)		Expected return on plan assets	(32,720)		(33,764)
Amortization of unrecognized:	Amortization of unrecognized:									Amortization of unrecognized:
Prior service credit	Prior service credit	(272)		(483)		(816)		(1,449)		Prior service credit	(312)		(272)
Net loss	Net loss	16,372		11,128		49,116		33,384		Net loss	18,386		16,372
Settlement loss	Settlement loss	0		1,500		0		1,500		Settlement loss	816		0

Net periodic benefit cost	Net periodic benefit cost	$	8,254	$	4,007	$	24,761	$	10,141	Net periodic benefit cost	$	7,988	$	8,254

Postretirement Healthcare Benefits:	Postretirement Healthcare Benefits:									Postretirement Healthcare Benefits:
Service cost	Service cost	$	1,202	$	1,040	$	3,605	$	3,409	Service cost	$	1,288	$	1,201
Interest cost	Interest cost	2,336		2,938		7,008		8,814		Interest cost	1,626		2,336
Expected return on plan assets	Expected return on plan assets	(3,467)		(3,507)		(10,401)		(10,521)		Expected return on plan assets	(3,495)		(3,467)
Amortization of unrecognized:	Amortization of unrecognized:									Amortization of unrecognized:
Prior service credit	Prior service credit	(595)		(595)		(1,785)		(1,785)		Prior service credit	(581)		(595)
Net loss	Net loss	123		69		369		207		Net loss	264		123
Special retirement benefit cost		0		0		0		1,583
Curtailment gain		0		0		0		(960)

Net periodic benefit cost	Net periodic benefit cost	$	(401)	$	(55)	$	(1,204)	$	747	Net periodic benefit cost	$	(898)	$	(402)

There are no required or planned voluntary qualified pension plan contributions for ~~2020.~~2021. The Company expects it will continue to make ongoing benefit payments under the SERPA and postretirement healthcare plans.

~~17.~~

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16. Commitments and Contingencies

The Company is subject to lawsuits and other claims related to environmental, product and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter.

~~Environmental Protection Agency Notice~~ – In December 2009, the Company received formal, written requests for information from the United States Environmental Protection Agency (EPA) regarding: (i) certificates of conformity for motorcycle emissions and related designations and labels, (ii) aftermarket parts, and (iii) warranty claims on emissions related components. The Company promptly submitted written responses to the EPA’s inquiry and has engaged in information exchanges and discussions with the EPA. In August 2016, the Company entered into a consent decree with the EPA regarding these issues, and the consent decree was subsequently revised in July 2017 (the Settlement). In the Settlement, the Company agreed to, among other things, pay a fine, and not sell tuning products unless they are approved by the EPA or California Air Resources Board. In December 2017, the Department of Justice (DOJ), on behalf of the EPA, filed the Settlement with the U.S. District Court for the District of Columbia for the purpose of obtaining court approval of the Settlement. On September 14, 2020, the U.S. District Court for the District of Columbia approved the Settlement. The Company has an accrual for this matter recorded in ~~Accrued liabilities~~ ~~on the~~ ~~Consolidated balance sheets. The payment of the settlement amount will not have a~~

~~Table of Contents~~

~~material adverse effect on the Company's financial condition or results of operations. The Company will continue to comply with the non-monetary terms of the consent decree entered into with the EPA.~~

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

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

~~18.~~17. Accumulated Other Comprehensive Loss

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


		Three months ended September 27, 2020						Three months ended March 28, 2021
		Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans			Total			Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans		Total
Balance, beginning of period	Balance, beginning of period	$	(53,825)	$	(40,740)	$	(457,633)		$	(552,198)	Balance, beginning of period	$	(7,589)	$	(46,116)	$	(429,712)	$	(483,417)
Other comprehensive income, before reclassifications		13,331		55,732		0			69,063
Income tax expense		(594)		(12,299)		0			(12,893)
Other comprehensive loss, before reclassifications											Other comprehensive loss, before reclassifications	(17,074)		(50,737)		0		(67,811)
Income tax (expense) benefit											Income tax (expense) benefit	(264)		11,092		0		10,828
		12,737		43,433		0			56,170			(17,338)		(39,645)		0		(56,983)
Reclassifications:	Reclassifications:										Reclassifications:

Net gains on derivative financial instruments		—		(58,585)		—			(58,585)
Net loss on derivative financial instruments											Net loss on derivative financial instruments	—		73,586		—		73,586
Prior service credits(a)	Prior service credits(a)	—		—		(867)			(867)		Prior service credits(a)	—		—		(893)		(893)
Actuarial losses(a)	Actuarial losses(a)	—		—		16,495			16,495		Actuarial losses(a)	—		—		18,650		18,650
Reclassifications before tax	Reclassifications before tax	0		(58,585)		15,628			(42,957)		Reclassifications before tax	0		73,586		17,757		91,343
Income tax benefit (expense)		0		13,051		(3,669)			9,382
Income tax expense											Income tax expense	0		(16,411)		(4,169)		(20,580)
		0		(45,534)		11,959			(33,575)			0		57,175		13,588		70,763
Other comprehensive income (loss)		12,737		(2,101)		11,959			22,595
Other comprehensive (loss) income											Other comprehensive (loss) income	(17,338)		17,530		13,588		13,780
Balance, end of period	Balance, end of period	$	(41,088)	$	(42,841)	$	(445,674)		$	(529,603)	Balance, end of period	$	(24,927)	$	(28,586)	$	(416,124)	$	(469,637)

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		Three months ended September 29, 2019						Three months ended March 29, 2020
		Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans			Total			Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans		Total
Balance, beginning of period	Balance, beginning of period	$	(38,007)	$	(10,579)	$	(566,375)		$	(614,961)	Balance, beginning of period	$	(40,813)	$	(14,586)	$	(481,550)	$	(536,949)
Other comprehensive (loss) income, before reclassifications		(15,451)		12,412		0			(3,039)
Income tax benefit (expense)		130		(2,923)		0			(2,793)
Other comprehensive loss, before reclassifications											Other comprehensive loss, before reclassifications	(35,821)		(38,172)		0		(73,993)
Income tax benefit											Income tax benefit	1,366		8,267		0		9,633
		(15,321)		9,489		0			(5,832)			(34,455)		(29,905)		0		(64,360)
Reclassifications:	Reclassifications:										Reclassifications:

Net gains on derivative financial instruments		—		(4,211)		—			(4,211)
Net loss on derivative financial instruments											Net loss on derivative financial instruments	—		12,881		—		12,881
Prior service credits(a)	Prior service credits(a)	—		—		(1,078)			(1,078)		Prior service credits(a)	—		—		(867)		(867)
Actuarial losses(a)	Actuarial losses(a)	—		—		11,197			11,197		Actuarial losses(a)	—		—		16,495		16,495
Reclassifications before tax	Reclassifications before tax	0		(4,211)		10,119			5,908		Reclassifications before tax	0		12,881		15,628		28,509
Income tax benefit (expense)		0		1,006		(2,375)			(1,369)
Income tax expense											Income tax expense	0		(2,821)		(3,669)		(6,490)
		0		(3,205)		7,744			4,539			0		10,060		11,959		22,019
Other comprehensive (loss) income	Other comprehensive (loss) income	(15,321)		6,284		7,744			(1,293)		Other comprehensive (loss) income	(34,455)		(19,845)		11,959		(42,341)
Balance, end of period	Balance, end of period	$	(53,328)	$	(4,295)	$	(558,631)		$	(616,254)	Balance, end of period	$	(75,268)	$	(34,431)	$	(469,591)	$	(579,290)

Nine months ended September 27, 2020
Foreign currency translation adjustments Derivative financial instruments Pension and postretirement benefit plans Total
Balance, beginning of period $ (40,813) $ (14,586) $ (481,550) $ (536,949)
Other comprehensive (loss) income, before reclassifications (434) 47,889 0 47,455
Income tax benefit (expense) 159 (10,718) 0 (10,559)
(275) 37,171 — 36,896
Reclassifications:
Net gains on derivative financial instruments — (84,295) — (84,295)
Prior service credits(a)
— — (2,601) (2,601)
Actuarial losses(a)
— — 49,485 49,485
Reclassifications before tax — (84,295) 46,884 (37,411)
Income tax benefit (expense) 0 18,869 (11,008) 7,861
— (65,426) 35,876 (29,550)
Other comprehensive (loss) income (275) (28,255) 35,876 7,346
Balance, end of period $ (41,088) $ (42,841) $ (445,674) $ (529,603)

~~Table of Contents~~

Nine months ended September 29, 2019
Foreign currency translation adjustments Derivative financial instruments Pension and postretirement benefit plans Total
Balance, beginning of period $ (49,608) $ 1,785 $ (581,861) $ (629,684)
Other comprehensive (loss) income, before reclassifications (3,693) 4,798 0 1,105
Income tax expense (27) (1,247) 0 (1,274)
(3,720) 3,551 0 (169)
Reclassifications:
Net gains on derivative financial instruments — (12,634) — (12,634)
Prior service credits(a)
— — (3,234) (3,234)
Actuarial losses(a)
— — 33,591 33,591
Reclassifications before tax — (12,634) 30,357 17,723
Income tax benefit (expense) — 3,003 (7,127) (4,124)
— (9,631) 23,230 13,599
Other comprehensive (loss) income (3,720) (6,080) 23,230 13,430
Balance, end of period $ (53,328) $ (4,295) $ (558,631) $ (616,254)

(a)Amounts reclassified are included in the computation of net periodic benefit cost, discussed further in Note 1615

~~19.~~18. Business Segments

Harley-Davidson, Inc. is the parent company for the groups of companies referred to as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in 2 business segments: Motorcycles and Related Products (Motorcycles) and Financial Services. The Company's reportable segments are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.

The Motorcycles segment consists of HDMC which designs, manufactures and sells Harley-Davidson motorcycles as well as motorcycle parts, accessories, general merchandise and services. The Company's products are sold to retail customers primarily through a network of independent dealers.

The Financial Services segment consists of HDFS which is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans, primarily for the purchase of Harley-Davidson motorcycles. HDFS also works with certain unaffiliated insurance companies to provide motorcycle insurance and protection products to motorcycle owners.

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

Three months ended Nine months ended
September 27,
2020 September 29,
2019 September 27,
2020 September 29,
2019
Motorcycles and Related Products:
Motorcycles revenue $ 964,029 $ 1,068,942 $ 2,733,091 $ 3,698,583
Gross profit 287,233 320,064 713,781 1,122,241
Selling, administrative and engineering expense 196,912 265,464 618,912 754,479
Restructuring expense 43,581 7,629 84,586 31,682
Operating income 46,740 46,971 10,283 336,080
Financial Services:
Financial Services revenue 201,655 203,577 596,064 590,935
Financial Services expense 110,177 130,704 475,771 383,802
Restructuring expense 334 0 1,278 0
Operating income 91,144 72,873 119,015 207,133
Operating income $ 137,884 $ 119,844 $ 129,298 $ 543,213


	Three months ended
	March 28, 2021		March 29, 2020
Motorcycles and Related Products:
Motorcycles revenue	$	1,232,107	$	1,099,788
Gross profit	420,485		318,920
Selling, administrative and engineering expense	193,546		234,353
Restructuring benefit	(593)		0
Operating income	227,532		84,567
Financial Services:
Financial Services revenue	190,400		198,456
Financial Services expense	71,531		175,510
Restructuring expense	227		0
Operating income	118,642		22,946
Operating income	$	346,174	$	107,513

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~~20.~~Total assets for the Motorcycles and Financial Services segments were $2.4 billion and $8.9 billion, respectively, as of March 28, 2021, $2.5 billion and $9.5 billion, respectively, as of December 31, 2020, and $2.5 billion and $8.6 billion, respectively, as of March 29, 2020.

19. Supplemental Consolidating Data

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


		Three months ended September 27, 2020									Three months ended March 28, 2021
		HDMC Entities		HDFS Entities		Consolidating Adjustments		Consolidated			HDMC Entities		HDFS Entities		Consolidating Adjustments		Consolidated
Revenue:	Revenue:									Revenue:
Motorcycles and Related Products	Motorcycles and Related Products	$	969,399	$	0	$	(5,370)	$	964,029	Motorcycles and Related Products	$	1,238,468	$	0	$	(6,361)	$	1,232,107
Financial Services	Financial Services	0		200,448		1,207		201,655		Financial Services	0		188,750		1,650		190,400
		969,399		200,448		(4,163)		1,165,684			1,238,468		188,750		(4,711)		1,422,507
Costs and expenses:	Costs and expenses:									Costs and expenses:
Motorcycles and Related Products cost of goods sold	Motorcycles and Related Products cost of goods sold	676,796		0		0		676,796		Motorcycles and Related Products cost of goods sold	811,622		0		0		811,622
Financial Services interest expense	Financial Services interest expense	0		67,533		0		67,533		Financial Services interest expense	0		55,707		0		55,707
Financial Services provision for credit losses	Financial Services provision for credit losses	0		7,835		0		7,835		Financial Services provision for credit losses	0		(22,474)		0		(22,474)
Selling, administrative and engineering expense	Selling, administrative and engineering expense	199,829		35,774		(3,882)		231,721		Selling, administrative and engineering expense	196,359		40,275		(4,790)		231,844
Restructuring expense		43,581		334		0		43,915
Restructuring (benefit) expense										Restructuring (benefit) expense	(593)		227		0		(366)
		920,206		111,476		(3,882)		1,027,800			1,007,388		73,735		(4,790)		1,076,333
Operating income	Operating income	49,193		88,972		(281)		137,884		Operating income	231,080		115,015		79		346,174
Other income, net	Other income, net	155		0		0		155		Other income, net	277		0		0		277
Investment income	Investment income	2,672		0		0		2,672		Investment income	1,402		0		0		1,402
Interest expense	Interest expense	7,783		0		0		7,783		Interest expense	7,708		0		0		7,708
Income before income taxes	Income before income taxes	44,237		88,972		(281)		132,928		Income before income taxes	225,051		115,015		79		340,145
Income tax (benefit) provision		(6,347)		19,057		0		12,710
Provision for income taxes										Provision for income taxes	55,996		25,005		0		81,001
Net income	Net income	$	50,584	$	69,915	$	(281)	$	120,218	Net income	$	169,055	$	90,010	$	79	$	259,144

		Nine months ended September 27, 2020
		HDMC Entities		HDFS Entities		Consolidating Adjustments		Consolidated
Revenue:
Motorcycles and Related Products		$	2,743,562	$	0	$	(10,471)	$	2,733,091
Financial Services		0		591,206		4,858		596,064
		2,743,562		591,206		(5,613)		3,329,155
Costs and expenses:
Motorcycles and Related Products cost of goods sold		2,019,310		0		0		2,019,310
Financial Services interest expense		0		182,193		0		182,193
Financial Services provision for credit losses		0		178,433		0		178,433
Selling, administrative and engineering expense		627,874		111,903		(5,720)		734,057
Restructuring expense		84,586		1,278		0		85,864
		2,731,770		473,807		(5,720)		3,199,857
Operating income		11,792		117,399		107		129,298
Other income, net		466		0		0		466
Investment income		103,082		0		(100,000)		3,082
Interest expense		23,307		0				23,307
Income before income taxes		92,033		117,399		(99,893)		109,539
Income tax (benefit) provision		(14,014)		25,857		0		11,843
Net income		$	106,047	$	91,542	$	(99,893)	$	97,696

~~Table of Contents~~

Three months ended September 29, 2019
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Revenue:
Motorcycles and Related Products $ 1,074,397 $ 0 $ (5,455) $ 1,068,942
Financial Services 0 201,308 2,269 203,577
1,074,397 201,308 (3,186) 1,272,519
Costs and expenses:
Motorcycles and Related Products cost of goods sold 748,878 0 0 748,878
Financial Services interest expense 0 53,390 0 53,390
Financial Services provision for credit losses 0 33,747 0 33,747
Selling, administrative and engineering expense 269,080 42,996 (3,045) 309,031
Restructuring expense 7,629 0 0 7,629
1,025,587 130,133 (3,045) 1,152,675
Operating income 48,810 71,175 (141) 119,844
Other income, net 3,160 0 0 3,160
Investment income 52,041 0 (50,000) 2,041
Interest expense 7,789 0 0 7,789
Income before provision for income taxes 96,222 71,175 (50,141) 117,256
Provision for income taxes 13,517 17,176 0 30,693
Net income $ 82,705 $ 53,999 $ (50,141) $ 86,563
Nine months ended September 29, 2019
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Revenue:
Motorcycles and Related Products $ 3,714,091 $ 0 $ (15,508) $ 3,698,583
Financial Services 0 584,258 6,677 590,935
3,714,091 584,258 (8,831) 4,289,518
Costs and expenses:
Motorcycles and Related Products cost of goods sold 2,576,342 0 0 2,576,342
Financial Services interest expense 0 158,387 0 158,387
Financial Services provision for credit losses 0 94,621 0 94,621
Selling, administrative and engineering expense 764,848 129,170 (8,745) 885,273
Restructuring expense 31,682 0 0 31,682
3,372,872 382,178 (8,745) 3,746,305
Operating income 341,219 202,080 (86) 543,213
Other income, net 11,857 0 0 11,857
Investment income 151,970 0 (140,000) 11,970
Interest expense 23,304 0 0 23,304
Income before provision for income taxes 481,742 202,080 (140,086) 543,736
Provision for income taxes 85,422 48,175 0 133,597
Net income $ 396,320 $ 153,905 $ (140,086) $ 410,139

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September 27, 2020
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 733,704 $ 2,827,246 $ 0 $ 3,560,950
Accounts receivable, net 473,530 0 (240,685) 232,845
Finance receivables, net 0 1,701,478 0 1,701,478
Inventories, net 322,375 0 0 322,375
Restricted cash 0 160,155 0 160,155
Other current assets 81,551 102,156 (4,776) 178,931
1,611,160 4,791,035 (245,461) 6,156,734
Finance receivables, net 0 5,142,014 0 5,142,014
Property, plant and equipment, net 736,589 48,576 0 785,165
Prepaid pension costs 82,378 0 0 82,378
Goodwill 64,884 0 0 64,884
Deferred income taxes 46,676 92,318 (1,034) 137,960
Lease assets 42,639 4,960 0 47,599
Other long-term assets 176,873 32,853 (94,185) 115,541
$ 2,761,199 $ 10,111,756 $ (340,680) $ 12,532,275
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 265,263 $ 264,525 $ (240,685) $ 289,103
Accrued liabilities 424,391 170,830 (3,940) 591,281
Short-term debt 0 1,227,763 0 1,227,763
Current portion of long-term debt, net 0 2,109,284 0 2,109,284
689,654 3,772,402 (244,625) 4,217,431
Long-term debt, net 743,806 5,427,870 0 6,171,676
Lease liabilities 26,951 4,274 0 31,225
Pension liabilities 57,853 0 0 57,853
Postretirement healthcare liabilities 68,379 0 0 68,379
Other long-term liabilities 168,037 45,256 2,520 215,813
Commitments and contingencies (Note 17)
Shareholders’ equity 1,006,519 861,954 (98,575) 1,769,898
$ 2,761,199 $ 10,111,756 $ (340,680) $ 12,532,275


	March 28, 2021
	HDMC Entities		HDFS Entities		Consolidating Adjustments		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	607,941	$	1,712,704	$	0	$	2,320,645

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

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December 31, 2019
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 470,649 $ 363,219 $ 0 $ 833,868
Accounts receivable, net 369,717 0 (110,383) 259,334
Finance receivables, net 0 2,272,522 0 2,272,522
Inventories, net 603,571 0 0 603,571
Restricted cash 0 64,554 0 64,554
Other current assets 110,145 59,665 (836) 168,974
1,554,082 2,759,960 (111,219) 4,202,823
Finance receivables, net 0 5,101,844 0 5,101,844
Property, plant and equipment, net 794,131 53,251 0 847,382
Prepaid pension costs 56,014 0 0 56,014
Goodwill 64,160 0 0 64,160
Deferred income taxes 62,768 39,882 (1,446) 101,204
Lease assets 55,722 5,896 0 61,618
Other long-term assets 166,972 19,211 (93,069) 93,114
$ 2,753,849 $ 7,980,044 $ (205,734) $ 10,528,159
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 266,710 $ 138,053 $ (110,383) $ 294,380
Accrued liabilities 463,491 119,186 (389) 582,288
Short-term debt 0 571,995 0 571,995
Current portion of long-term debt, net 0 1,748,109 0 1,748,109
730,201 2,577,343 (110,772) 3,196,772
Long-term debt, net 743,296 4,381,530 0 5,124,826
Lease liabilities 38,783 5,664 0 44,447
Pension liabilities 56,138 0 0 56,138
Postretirement healthcare liabilities 72,513 0 0 72,513
Other long-term liabilities 186,252 40,609 2,603 229,464
Commitments and contingencies (Note 17)
Shareholders’ equity 926,666 974,898 (97,565) 1,803,999
$ 2,753,849 $ 7,980,044 $ (205,734) $ 10,528,159


	Three months ended March 28, 2021
	HDMC Entities		HDFS Entities		Consolidating Adjustments		Consolidated
Cash flows from operating activities:
Net income	$	169,055	$	90,010	$	79	$	259,144
Adjustments to reconcile Net income to Net cash (used) provided by operating activities:
Depreciation and amortization	37,778		2,443		0		40,221
Amortization of deferred loan origination costs	0		19,200		0		19,200
Amortization of financing origination fees	172		3,442		0		3,614
Provision for long-term employee benefits	7,090		0		0		7,090
Employee benefit plan contributions and payments	(9,885)		0		0		(9,885)
Stock compensation expense	8,174		794		0		8,968
Net change in wholesale finance receivables related to sales	0		0		(308,532)		(308,532)
Provision for credit losses	0		(22,474)		0		(22,474)



Deferred income taxes	3,811		9,812		(431)		13,192

Other, net	476		775		(80)		1,171
Changes in current assets and liabilities:
Accounts receivable, net	(388,688)		0		309,676		(79,012)
Finance receivables – accrued interest and other	0		8,947		0		8,947
Inventories, net	45,086		0		0		45,086
Accounts payable and accrued liabilities	104,486		354,507		(305,396)		153,597
Derivative financial instruments	(3,219)		(90)		0		(3,309)
Other	18,222		11,271		(3,730)		25,763
	(176,497)		388,627		(308,493)		(96,363)
Net cash (used) provided by operating activities	(7,442)		478,637		(308,414)		162,781

Cash flows from investing activities:
Capital expenditures	(18,427)		(386)		0		(18,813)
Origination of finance receivables	0		(1,923,911)		1,014,773		(909,138)
Collections on finance receivables	0		1,606,844		(706,359)		900,485




Other investing activities	733		0		0		733
Net cash used by investing activities	(17,694)		(317,453)		308,414		(26,733)

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September 29, 2019
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
ASSETS
Current assets:
Cash and cash equivalents $ 482,106 $ 380,275 $ 0 $ 862,381
Accounts receivable, net 635,997 0 (328,381) 307,616
Finance receivables, net 0 2,210,001 0 2,210,001
Inventories, net 489,098 0 0 489,098
Restricted cash 0 79,115 0 79,115
Other current assets 109,724 46,013 (14,951) 140,786
1,716,925 2,715,404 (343,332) 4,088,997
Finance receivables, net 0 5,305,579 0 5,305,579
Property, plant and equipment, net 791,107 53,339 0 844,446
Goodwill 63,727 0 0 63,727
Deferred income taxes 92,921 40,411 (1,313) 132,019
Lease assets 49,706 6,199 0 55,905
Other long-term assets 157,341 20,401 (92,185) 85,557
$ 2,871,727 $ 8,141,333 $ (436,830) $ 10,576,230
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 314,843 $ 362,489 $ (328,381) $ 348,951
Accrued liabilities 462,644 108,719 (14,373) 556,990
Short-term debt 0 1,013,137 0 1,013,137
Current portion of long-term debt, net 0 1,779,673 0 1,779,673
777,487 3,264,018 (342,754) 3,698,751
Long-term debt, net 743,127 3,863,914 0 4,607,041
Lease liabilities 33,296 6,112 0 39,408
Pension liabilities 82,561 0 0 82,561
Postretirement healthcare liabilities 89,032 0 0 89,032
Other long-term liabilities 180,103 40,261 2,854 223,218
Commitments and contingencies (Note 17)
Shareholders’ equity 966,121 967,028 (96,930) 1,836,219
$ 2,871,727 $ 8,141,333 $ (436,830) $ 10,576,230


	Three months ended March 28, 2021
	HDMC Entities		HDFS Entities		Consolidating Adjustments		Consolidated
Cash flows from financing activities:



Repayments of medium-term notes	0		(1,050,000)		0		(1,050,000)

Proceeds from securitization debt	0		597,411		0		597,411
Repayments of securitization debt	0		(291,346)		0		(291,346)

Repayments of asset-backed commercial paper	0		(66,894)		0		(66,894)
Net decrease in unsecured commercial paper	0		(262,517)		0		(262,517)
Net increase in credit facilities	0		15,629		0		15,629
Net increase in deposits	0		72,664		0		72,664

Dividends paid	(23,105)		0		0		(23,105)
Repurchase of common stock	(5,646)		0		0		(5,646)

Issuance of common stock under share-based plans	1,085		0		0		1,085
Net cash used by financing activities	(27,666)		(985,053)		0		(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,418)		255		0		(5,163)
Net decrease in cash, cash equivalents and restricted cash	$	(58,220)	$	(823,614)	$	0	$	(881,834)

Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	$	666,161	$	2,743,007	$	0	$	3,409,168
Net decrease in cash, cash equivalents and restricted cash	(58,220)		(823,614)		0		(881,834)
Cash, cash equivalents and restricted cash, end of period	$	607,941	$	1,919,393	$	0	$	2,527,334

20. Subsequent Event

~~Table~~In April 2021, the Company received notification from the Economic Ministry of ~~Contents~~

Nine months ended September 27, 2020
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Cash flows from operating activities:
Net income $ 106,047 $ 91,542 $ (99,893) $ 97,696
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization 133,679 6,378 0 140,057
Amortization of deferred loan origination costs 0 52,374 0 52,374
Amortization of financing origination fees 510 10,118 0 10,628
Provision for long-term employee benefits 23,557 0 0 23,557
Employee benefit plan contributions and payments (5,456) 0 0 (5,456)
Stock compensation expense 10,959 1,117 0 12,076
Net change in wholesale finance receivables related to sales 0 0 330,793 330,793
Provision for credit losses 0 178,433 0 178,433
Deferred income taxes 6,171 (24,737) (412) (18,978)
Other, net (13,628) 4,416 (108) (9,320)
Changes in current assets and liabilities:
Accounts receivable, net (100,672) 0 130,302 29,630
Finance receivables - accrued interest and other 0 5,097 0 5,097
Inventories, net 273,668 0 0 273,668
Accounts payable and accrued liabilities (38,815) 154,121 (132,228) (16,922)
Derivative financial instruments (1,584) 41 0 (1,543)
Other 26,704 2,634 3,940 33,278
315,093 389,992 332,287 1,037,372
Net cash provided by operating activities 421,140 481,534 232,394 1,135,068
Cash flows from investing activities:
Capital expenditures (90,592) (1,703) 0 (92,295)
Origination of finance receivables 0 (4,697,675) 1,824,416 (2,873,259)
Collections on finance receivables 0 4,886,976 (2,156,810) 2,730,166
Other investing activities 334 0 0 334
Net cash (used) provided by investing activities (90,258) 187,598 (332,394) (235,054)
Belgium that, following a request from the European Union (EU), the Company would be subject to the revocation of Binding Origin Information (BOI) rulings, effective April 19, 2021. Beginning in 2019, the Company has operated under BOIs which allowed it to supply its EU markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. Following the revocation, all non-electric motorcycles that Harley-Davidson imports into the EU, regardless of origin, will be subject to a total tariff rate of 31% from April 19, 2021 through May 31, 2021. This rate is expected to increase to 56% effective June 1, 2021. This ruling will effectively prohibit the Company from functioning competitively in the EU. The Company estimates the impact of the additional EU tariffs in 2021, if unmitigated, to be approximately $135 million and expects the impact to be approximately $200 million to $225 million on annual basis in future years. The Company is appealing the revocation of the BOIs. It has also sought temporary extended reliance on the 6% tariff rate for motorcycles produced in Thailand, ordered prior to April 19, 2021. There is no assurance that the appeal will be successful or that the Company will receive the extended reliance.

~~Table of Contents~~

Nine months ended September 27, 2020
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Cash flows from financing activities:
Proceeds from issuance of medium-term notes 0 1,396,602 0 1,396,602
Repayments of medium-term notes 0 (1,400,000) 0 (1,400,000)
Proceeds from securitization debt 0 2,064,450 0 2,064,450
Repayments of securitization debt 0 (735,885) 0 (735,885)
Borrowings of asset-backed commercial paper 0 225,187 0 225,187
Repayments of asset-backed commercial paper 0 (236,846) 0 (236,846)
Net increase in unsecured commercial paper 0 509,978 0 509,978
Net increase in credit facilities 0 150,000 0 150,000
Deposits 0 29,992 0 29,992
Dividends paid (65,002) (100,000) 100,000 (65,002)
Repurchase of common stock (7,895) 0 0 (7,895)
Issuance of common stock under share-based plans 96 0 0 96
Net cash (used) provided by financing activities (72,801) 1,903,478 100,000 1,930,677
Effect of exchange rate changes on cash, cash equivalents and restricted cash 4,974 1,097 0 6,071
Net increase in cash, cash equivalents and restricted cash $ 263,055 $ 2,573,707 $ 0 $ 2,836,762
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period $ 470,649 $ 434,717 $ 0 $ 905,366
Net increase in cash, cash equivalents and restricted cash 263,055 2,573,707 0 2,836,762
Cash, cash equivalents and restricted cash, end of period $ 733,704 $ 3,008,424 $ 0 $ 3,742,128

~~Table of Contents~~

Nine months ended September 29, 2019
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Cash flows from operating activities:
Net income $ 396,320 $ 153,905 $ (140,086) $ 410,139
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization 168,013 6,596 0 174,609
Amortization of deferred loan origination costs 0 57,303 0 57,303
Amortization of financing origination fees 503 6,529 0 7,032
Provision for long-term employee benefits 10,888 0 0 10,888
Employee benefit plan contributions and payments (11,166) 0 0 (11,166)
Stock compensation expense 22,869 2,454 0 25,323
Net change in wholesale finance receivables related to sales 0 0 683 683
Provision for credit losses 0 94,621 0 94,621
Deferred income taxes 5,514 (1,765) (214) 3,535
Other, net 9,126 (1,372) 85 7,839
Changes in current assets and liabilities:
Accounts receivable, net (216,961) 0 209,128 (7,833)
Finance receivables - accrued interest and other 0 (4,574) 0 (4,574)
Inventories, net 62,870 0 0 62,870
Accounts payable and accrued liabilities 8,729 207,971 (203,562) 13,138
Derivative financial instruments 2,443 94 0 2,537
Other (19,516) 12,144 9,077 1,705
43,312 380,001 15,197 438,510
Net cash provided by operating activities 439,632 533,906 (124,889) 848,649
Cash flows from investing activities:
Capital expenditures (118,182) (2,979) 0 (121,161)
Origination of finance receivables 0 (5,757,384) 2,615,758 (3,141,626)
Collections on finance receivables 0 5,326,787 (2,630,869) 2,695,918
Sales and redemptions of marketable securities 10,007 0 0 10,007
Acquisition of business (7,000) 0 0 (7,000)
Other investing activities 12,388 0 0 12,388
Net cash used by investing activities (102,787) (433,576) (15,111) (551,474)

~~Table of Contents~~

Nine months ended September 29, 2019
HDMC Entities HDFS Entities Consolidating Adjustments Consolidated
Cash flows from financing activities:
Proceeds from issuance of medium-term notes 0 546,655 0 546,655
Repayments of medium-term notes 0 (1,350,000) 0 (1,350,000)
Proceeds from securitization debt 0 1,021,353 0 1,021,353
Repayments of securitization debt 0 (244,250) 0 (244,250)
Borrowings of asset-backed commercial paper 0 177,950 0 177,950
Repayments of asset-backed commercial paper 0 (240,008) 0 (240,008)
Net decrease in unsecured commercial paper 0 (120,707) 0 (120,707)
Dividends paid (179,409) (140,000) 140,000 (179,409)
Repurchase of common stock (217,454) 0 0 (217,454)
Issuance of common stock under share-based plans 2,180 0 0 2,180
Net cash used by financing activities (394,683) (349,007) 140,000 (603,690)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (4,604) 494 0 (4,110)
Net decrease in cash, cash equivalents and restricted cash $ (62,442) $ (248,183) $ 0 $ (310,625)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period $ 544,548 $ 715,200 $ 0 $ 1,259,748
Net decrease in cash, cash equivalents and restricted cash (62,442) (248,183) 0 (310,625)
Cash, cash equivalents and restricted cash, end of period $ 482,106 $ 467,017 $ 0 $ 949,123

4636

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

Harley-Davidson, Inc. is the parent company of ~~the group of companies referred to as~~ Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). Unless the context otherwise requires, all references to the ~~"Company"~~“Company” include Harley-Davidson, Inc. and all of 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~~ section 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”~~“estimates,” “targets,” “intend” 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 and 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, ~~2019.~~2020. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in the “Overview” and ~~“Outlook”~~“Guidance” sections in this Item 2 are only made as of ~~October 27, 2020~~April 19, 2021 and the remaining forward-looking statements in this report are made as of the date of the filing of this report ~~(November 5, 2020)~~(May 6, 2021), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Overview(1)

The Company's net income was ~~$120.2~~$259.1 million, or ~~$0.78~~$1.68 per diluted share, in the ~~third~~first quarter of ~~2020,~~2021, compared to ~~$86.6~~$69.7 million, or ~~$0.55~~$0.45 per diluted share, in the ~~third~~first quarter of ~~2019.~~2020. The Motorcycles segment reported operating income of ~~$46.7~~$227.5 million for the ~~third~~first quarter of ~~2020~~2021 which was ~~down slightly~~up $143.0 million over the first quarter of 2020. Operating income from ~~$47.0 million~~the Motorcycles segment for the ~~third~~first quarter of ~~2019. Current year operating income~~2021 was favorably impacted by a ~~6.2% decline~~3.5% increase in wholesale motorcycle shipments, ~~unfavorable~~favorable product mix, ~~and higher restructuring expenses which were mostly offset by~~ lower ~~manufacturing costs~~sales incentives and reduced selling, administrative and engineering expenses.

Operating income from the Financial Services segment in the ~~third~~first quarter of ~~2020~~2021 was ~~$91.1~~$118.6 million, up ~~25.1%~~417.0% compared to the year-ago quarter due primarily to a lower provision for credit losses and lower operating expenses. The provision for credit losses benefited from lower credit losses and a modest improvement in the Company’s outlook on economic conditions during the third quarter of 2020. The current year provision also reflects a new accounting standard that changed how companies recognize expected credit losses on financial instruments. The new standard requires recognition of full lifetime expected credit losses upon initial recognition of a financial instrument, replacing the prior, incurred loss methodology. The Company adopted the new accounting standard on January 1, 2020 using a modified retrospective approach. As a result, prior period results were not restated.losses.

Worldwide independent dealer retail sales of new Harley-Davidson motorcycles in the ~~third~~first quarter of 2021 were up 9.4% compared to the first quarter of 2020 ~~were down 8.1%~~led by a 30.6% increase in the U.S., partially offset by declines in Europe/Middle East/Africa (EMEA) and Latin America. Refer to the Motorcycles Retail Sales and Registration Data section for further discussion of retail sales results.

The Company is pleased with the pace of recovery that it has experienced across the business as compared to prior year when the Company's results were adversely impacted by the onset of the COVID-19 pandemic. The Company continues to manage through the impacts of the COVID-19 pandemic keeping safety and community well-being at the forefront. The Company believes its actions during 2020 to reshape the business through The Rewire and its initial execution of The Hardwire 5-year strategic plan are having a positive impact on the Company's results. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for more information on The Rewire and The Hardwire.

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Guidance(1)

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

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

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

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

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

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

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

In the second half of 2021, the Company expects retail inventory to decrease from its expected peak level at the end of the second quarter. In the fourth quarter the Company will prepare its manufacturing facilities to begin production of model year 2022 motorcycles. The Company believes the pattern for inventory and shipments in the second half of 2021 will be similar to what the Company experienced in the second half of 2020. In addition, during 2020, the Company benefited from cost reductions associated with COVID-19 pandemic cash preservation efforts, which started in the second quarter of 2020, and The Rewire restructuring savings, which started in the third quarter of ~~2019, due primarily~~2020. Refer to ~~a 10.3% decline in the U.S. The Company believes U.S. retail sales~~"Restructuring Plan Costs and Savings" for the third quarter of 2020, compared to prior year, were adversely impacted by a shift in new model year launch timing from the third quarter to the first quarter. The Company believes its new approach to supply and inventory management also adversely impacted retail sales in the U.S. during the third quarter of 2020 compared to the third quarter of last year.

additional discussion.

~~Outlook~~Additional EU Tariffs(1)

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

COVID-19 Pandemic

The full impact of the COVID-19 pandemic on future results depends on future developments, such as the ~~Company withdrew all of its forward-looking guidance on March 26, 2020. While the impacts on demand, facility closures~~ultimate duration and ~~other restrictions resulting from the pandemic are expected to be temporary, the duration~~scope of the pandemic, the success of vaccination programs, and its ~~financial~~ impact toon the ~~Company are unknown at this time. To the extent these~~Company's customers, independent dealers, distributors, and suppliers. Future impacts ~~continue, they are likely to~~and disruptions could have an adverse effect on production, supply chains, distribution, and demand for the Company's ~~results of operations, financial condition and liquidity.~~products.

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~~COVID-19 Pandemic Response and Recovery Actions(1)~~

~~Cash Preservation~~Supply Chain – During the first quarter of 2021, the Company experienced some disruption and increased cost related to the adverse impacts of the COVID-19 pandemic on its global supply chain. To date, the Company has been successful in mitigating these disruptions to avoid material adverse impacts on its ability to produce and supply product. The Company ~~is executing its previously disclosed plans~~expects the global supply chain disruptions to ~~reduce planned capital~~continue through the remainder of 2021, and ~~planned non-capital spending. In total,~~ the Company ~~continues to expect that these efforts~~ will preserve approximately $250 million of cash in 2020 with approximately 15% related to capital spending. The planned spending reductions exclude the impact of restructuring charges as discussed further under "Restructuring Plan Costs and Savings." Also, discretionary share repurchases continue to be suspended, and the Company's Board of Directors approved a cash dividend of $0.02 per share for the fourth quarter of 2020, which was down from last year's fourth quarter, but in line with the 2020 second and third quarter dividends.actively work to mitigate these impacts on its business.

Liquidity – The Company continues to closely monitor its liquidity in light of the COVID-19 pandemic. At the end of the ~~third~~first quarter of ~~2020,~~2021, the Company had ~~$4.7~~$4.0 billion of available liquidity through cash, cash equivalents and availability under its credit and conduit facilities. Liquidity is discussed in more detail underLiquidity and Capital Resources.

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

~~Community Strength~~Safety – The Company continues to proactively manage through the COVID-19 pandemic and has implemented robust protocols to keep workers safe in its ~~factories. The Company expects most~~manufacturing facilities. Most non-production workers ~~will~~ continue ~~working from home at least until the end~~to work remotely in light of the ~~year.~~

~~The Rewire~~

~~The Company is executing a set of actions, referred to as~~ ~~The Rewire~~. ~~The Rewire~~ ~~is a critical overhaul of the Company's business setting a strong foundation for the Company. Key elements of~~ ~~The Rewire~~ ~~and highlights to date include the following:~~

~~New operating model with reduced complexity and increased speed~~– The Company has implemented a new operating model to eliminate duplication and complexity across its global operations. The streamlined structure requires 700 fewer positions across the Company's global operations and is expected to result in significant annual ongoing savings as discussed further under "Restructuring Plan Costs and Savings."

~~Reset global business and focus on high-potential market~~s – The Company plans to concentrate on approximately 50 markets primarily in North America, Europe and parts of Asia Pacific that represent a high percentage of the Company’s expected volume and growth potential. The Company’s international business has been significantly re-set and re-focused with investment and resources aligned with projected market potential. The 36 highest potential markets will remain with the resources and autonomy, within a clearly defined framework, to best drive growth and profitability. Approximately 17 markets will remain as or transition to a cost-effective dealer-direct or distributor model. This includes the India market where the Company will wholesale it products through a third-party distributor in the future. Th~~e Company will exit approximately 39 markets due to volume, profitability or potential that does not support continued investment.~~

~~Refined motorcycle line-up and high-impact product launches~~ – The Company has streamlined its planned product portfolio by approximately 30% and overhauled launch timing and go-to-market practices for maximum impact and success. Highlights of the new approach include:

•~~Further streamlining the product portfolio to reduce complexity~~

•~~Sharper focus - reducing complexity and directing resources toward highest priority and core, stronghold products~~

•Seasonal alignment - plans underway for a virtual, new model year launch for dealers and consumers in the first quarter (shifted annual model year launch from August to the first quarter to be closer to the start of the riding season)

•Marketing that drives desirability - the Company has executed new marketing campaigns featuring celebrities, generating significant leads and growing awareness, excitement and desirability for the Harley-Davidson brand and products

~~Growth through Parts & Accessories (P&A) and General Merchandise (GM)~~ – The P&A and GM businesses are now organized around dedicated leaders and business units with strategies poised for new growth as the Company invests in new channel strategies and better product assortments.

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~~Protecting value~~ – The Company is operating with a remodeled approach to supply and inventory management with a focus on a strong dealer network to better preserve the value and desirability of Harley-Davidson motorcycles for customers. Some initial outcomes of this approach include:

•~~A reduced gap between new and used Harley-Davidson motorcycles pricing in the U.S. during the third quarter of 2020~~

•~~Global dealer inventory reduced over 30% at the end of September 2020 compared to the same time last year~~

•~~Essentially eliminated promotions and discounting with a focus on brand building in the third quarter of 2020~~

The Company is seeking to optimize its dealer network and believes an integrated customer experience driven by a strong network of profitable dealers is essential to delivering the most desirable Harley-Davidson experience. The Company reduced its global dealer network during the first nine months of 2020 and continues to seek to optimize its network of independent dealers to strengthen priority markets and provide and improve the customer experience.

~~The Hardwire~~

~~The Hardwire~~ is the Company's forthcoming 5-year (2021-2025) strategic plan to deliver profitable, growth and shareholder value based on building and expanding the desirability of Harley-Davidson. The following is an initial look at the framework for ~~The Hardwire~~:

~~The Hardwire~~ ~~will be guided by Harley-Davidson's vision and mission.~~

•~~Vision: To build on its legend and lead its industry through innovation, evolution and emotion~~

•~~Mission: More than building machines, we stand for the timeless pursuit of adventure. Freedom for the soul.~~

~~Both statements will keep the Company grounded in its authentic brand delivering adventure and freedom for the soul.~~

~~Harley-Davidson as the most desirable motorcycle brand in the world and the Company that defines motorcycle culture globally is the basis of~~ ~~The Hardwire. Desirability provides the framework for the Company’s work and for its success measures.~~ ~~The Hardwire~~ ~~framework will be organized around desirable:~~

•~~Growth strategy for motorcycles, P&A and GM in priority markets~~

•~~Customer focus inclusive of distinct products, brand and purchase experiences~~

•~~Operations that are high-performance, lean and efficient~~

•~~Impact with emphasis on inclusive stakeholder management and delivering long-term value~~

•~~Workplace that is diverse, inclusive and built around top talent rooted in a high-performance, winning culture~~

~~Desirability will also help define success measures. Through~~ ~~The Hardwire, the Company~~will target growth that is focused and profitable across the businesses, rooted in a clear understanding of sources of growth associated with value. The Company intends to set achievable targets and it will not pursue growth merely for growth sake.

~~The Company believes its brand is powerful and recognized globally – backed by an incredible heritage and iconic products.~~ ~~TheRewire~~ ~~will set a strong foundation to execute the Company's forthcoming 2021-2025 strategic plan to achieve its ambition as the most desirable motorcycle brand in the world.~~COVID-19 pandemic.

Restructuring Plan Costs and Savings(1)

During 2020, the Company initiated certain restructuring activities as part of The Rewire including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global independent dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. These actions ~~will result in~~included restructuring expenses ~~including~~related to employee termination costs, contract termination costs and non-current asset adjustments. The workforce reduction ~~will result~~resulted in the elimination of approximately 700 positions globally, including the termination of approximately 500 employees. In addition, the India action ~~will result~~resulted in the termination of approximately 70 employees. ~~Based on~~The Company incurred approximately $130 million of restructuring expense in connection with these actions ~~the~~during 2020. The Company expects to incur total restructuring expenses for these actions of approximately ~~$169~~$150 million, ~~primarily~~including approximately $20 million in ~~2020, and~~2021. The Company continues to expect annual ongoing gross savings resulting from these restructuring activities of approximately $115 ~~million beginning in 2021.~~million. Refer to Note 4 of the Notes to Consolidated financial statements for additional information regarding the Company's restructuring activities.

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Results of Operations for the Three Months Ended ~~September 27, 2020~~March 28, 2021

Compared to the Three Months Ended ~~September~~March 29, ~~2019~~2020

Consolidated Results


		Three months ended									Three months ended
(in thousands, except earnings per share)	(in thousands, except earnings per share)	September 27, 2020		September 29, 2019		(Decrease) Increase		% Change		(in thousands, except earnings per share)	March 28, 2021		March 29, 2020		Increase (Decrease)		% Change
Operating income from Motorcycles and Related Products	Operating income from Motorcycles and Related Products	$	46,740	$	46,971	$	(231)	(0.5)	%	Operating income from Motorcycles and Related Products	$	227,532	$	84,567	$	142,965	169.1	%
Operating income from Financial Services	Operating income from Financial Services	91,144		72,873		18,271		25.1		Operating income from Financial Services	118,642		22,946		95,696		417.0
Operating income	Operating income	137,884		119,844		18,040		15.1		Operating income	346,174		107,513		238,661		222.0
Other income, net	Other income, net	155		3,160		(3,005)		(95.1)		Other income, net	277		155		122		78.7
Investment income		2,672		2,041		631		30.9
Investment income (loss)										Investment income (loss)	1,402		(5,347)		6,749		(126.2)
Interest expense	Interest expense	7,783		7,789		(6)		(0.1)		Interest expense	7,708		7,755		(47)		(0.6)
Income before income taxes	Income before income taxes	132,928		117,256		15,672		13.4		Income before income taxes	340,145		94,566		245,579		259.7
Provision for income taxes	Provision for income taxes	12,710		30,693		(17,983)		(58.6)		Provision for income taxes	81,001		24,871		56,130		225.7
Net income	Net income	$	120,218	$	86,563	$	33,655	38.9	%	Net income	$	259,144	$	69,695	$	189,449	271.8	%
Diluted earnings per share	Diluted earnings per share	$	0.78	$	0.55	$	0.23	41.8	%	Diluted earnings per share	$	1.68	$	0.45	$	1.23	273.3	%

~~The Company reported~~During the first quarter of 2021, operating income of $137.9 million in the third quarter of 2020 compared to $119.8 million in the same period last year. Motorcycles segment operating income was $46.7 million in the third quarter of 2020, a decline of $0.2increased $238.7 million, or ~~0.5%~~222.0%, compared to the third quarter of 2019. Operating income from the Financial Services segment increased $18.3 million, or 25.1%, compared to the third quarter of 2019. 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 incomein the third quarter of 2020 was unfavorably impacted by lower non-operating income related to the Company's defined benefit plans. Investment income was up in the third quarter of 2020~~ compared to the same period last year, driven by ~~higher income from investments in marketable securities and cash equivalents.~~

The effective income tax rate for the third quarter of 2020 was 9.6% compared to 26.2% for the third quarter of 2019. The lower effective income tax rate was primarily due to discrete tax benefits recorded in the third quarter of 2020, including favorable settlements with taxing authorities.

Diluted earnings per share was $0.78 in the third quarter of 2020, up 41.8% from the same period last year. Diluted weighted average shares outstanding decreased from 156.9 million in the third quarter of 2019 to 153.9 million in the third quarter of 2020, driven by the Company's discretionary repurchases of common stock during 2019. Refer to ~~Liquidity and Capital Resources~~ ~~for additional information concerning the Company's share repurchase activity.~~

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

~~Retail unit sales of Harley-Davidson motorcycles were as follows:~~

Three months ended
September 30,
2020 September 30,
2019 (Decrease)
Increase %
Change
United States 31,304 34,903 (3,599) (10.3) %
Canada 1,915 2,560 (645) (25.2)
Total North America 33,219 37,463 (4,244) (11.3)
Europe(b)
9,742 9,018 724 8.0
EMEA - Other 1,442 1,465 (23) (1.6)
Total EMEA 11,184 10,483 701 6.7
Asia Pacific(c)
4,444 4,889 (445) (9.1)
Asia Pacific - Other 3,187 3,189 (2) (0.1)
Total Asia Pacific 7,631 8,078 (447) (5.5)
Latin America 1,768 2,498 (730) (29.2)
Worldwide retail sales 53,802 58,522 (4,720) (8.1) %

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

~~(b)~~Includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. Retail sales for Greece and Portugal were reclassified from Europe to EMEA – Other for 2019 to be consistent with the 2020 presentation.

~~(c)Includes Japan, Australia, New Zealand and South Korea.~~

Worldwide retail sales of new Harley-Davidson motorcycles were down 8.1% during the third quarter of 2020 compared to the same period last year due primarily to a 10.3% decline in the U.S. The Company believes U.S. retail sales for the third quarter of 2020, compared to the third quarter of 2019, were adversely impacted by the change in model year launch timing and lower retail inventory due to the Company's new approach to supply and inventory management. In Europe, Middle East and Africa (EMEA), retail sales were up nearly 6.7% in the third quarter of 2020, compared to last year, driven by strong performance in ~~northern European markets. Overall, Asia Pacific was down 5.5% compared to last year driven by declines in Japan and Australia, partially offset by growth in China and South Korea.~~

Previously, the Company's new model year motorcycles were launched in the third quarter with new product available in U.S. markets in August, followed by international markets as product was distributed globally. The Company has shifted its annual new model year launch from August to early in the first quarter. While the Company believes the initial shift from August will adversely impact year-over-year retail sales comparisons, it also believes an early-year launch allows products a full season to sell and minimizes aged inventory and floor plan costs that might accumulate during the off season. Given the model year timing shift, U.S. retail sales in the third quarter of 2020 were in line with the Company's expectations, with solid performance through August followed by a higher rate of decline in September.

The Company's new approach to supply and inventory management, as discussed under "The Rewire," is focused on profitable and desirable volume aimed at helping drive retail pricing to preserve the value and desirability of Harley-Davidson motorcycles for customers. Under this approach, the Company will continue to aggressively manage the supply of motorcycles into the independent dealer network. The Company is encouraged by the value that it believes this has driven in 2020. On average, new Harley-Davidson motorcycles were selling at Manufacturer's Suggested Retail Prices in the U.S. during the third quarter of 2020. In addition, at the end of the third quarter of 2020 compared to the end of the third quarter of 2019, independent dealer retail inventory of new Harley-Davidson motorcycles was down approximately 39% or 13,400 units in the U.S. and approximately 34% worldwide.

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U.S. industry registrations of new 601+cc motorcycles were up 7.5% in the third quarter of 2020 compared to the third quarter of 2019. The Company's U.S. market share of new 601+cc motorcycles for the third quarter of 2020 was 41.4%, down 8.5 percentage points from the same period last year (source: Motorcycle Industry Council). While the underlying industry performance in the third quarter of 2020 was strong compared to the prior year, the Company's market share fell on relatively weaker retail sales performance which the Company believes was adversely impacted by the change in new model year launch timing and lower retail inventory resulting from its new approach to supply and inventory management, as well as, stronger performance in segments outside of the Company's Touring and Cruiser segments.

The Company expects global retail sales of new Harley-Davidson motorcycles will continue to decline throughout the fourth quarter of 2020 and that market share will be volatile over the coming quarters given the new model year launch timing and as the Company continues to focus on inventory management.~~(1)~~

~~Motorcycles and Related Products Segment~~

~~Motorcycle Unit Shipments~~

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

Three months ended
September 27, 2020 September 29, 2019 Unit Unit
Units Mix % Units Mix % (Decrease)
Increase % Change
U.S. motorcycle shipments 25,284 58.8 % 25,572 55.8 % (288) (1.1) %
Worldwide motorcycle shipments:
Touring motorcycle units 16,505 38.4 % 19,905 43.4 % (3,400) (17.1) %
Cruiser motorcycle units(a)
15,500 36.1 % 16,225 35.4 % (725) (4.5) %
Sportster® / Street motorcycle units
10,978 25.5 % 9,707 21.2 % 1,271 13.1 %
42,983 100.0 % 45,837 100.0 % (2,854) (6.2) %

~~(a)Includes Softail~~®~~, CVO~~TM~~, and LiveWire~~TM

The Company shipped 42,983 Harley-Davidson motorcycles worldwide during the third quarter of 2020, which was 6.2% lower than the third quarter of 2019. The mix of Touring and Cruiser motorcycles shipped during the third quarter of 2020 decreased as a percent of total shipments while the mix of Sportster/Street motorcycles increased compared to the same period last year.

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~~Segment Results~~

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

Three months ended
September 27, 2020 September 29, 2019 (Decrease)
Increase %
Change
Revenue:
Motorcycles $ 684,344 $ 779,344 $ (95,000) (12.2) %
Parts & Accessories 209,808 203,173 6,635 3.3
General Merchandise 49,356 60,334 (10,978) (18.2)
Licensing 8,894 8,611 283 3.3
Other 11,627 17,480 (5,853) (33.5)
964,029 1,068,942 (104,913) (9.8)
Cost of goods sold 676,796 748,878 (72,082) (9.6)
Gross profit 287,233 320,064 (32,831) (10.3)
Operating expenses:
Selling & administrative expense 149,780 212,633 (62,853) (29.6)
Engineering expense 47,132 52,831 (5,699) (10.8)
Restructuring expense 43,581 7,629 35,952 471.3
240,493 273,093 (32,600) (11.9)
Operating income $ 46,740 $ 46,971 $ (231) (0.5) %
Operating margin 4.8 % 4.4 % 0.5 pts.

~~The estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold~~ and ~~gross profit from the third quarter of 2019 to the third quarter of 2020 were as follows (in millions):~~

Net
Revenue Cost of
Goods Sold Gross
Profit
Three months ended September 29, 2019 $ 1,068.9 $ 748.9 $ 320.0
Volume (62.6) (44.8) (17.8)
Price and incentives 8.5 — 8.5
Foreign currency exchange rates and hedging 3.9 9.4 (5.5)
Shipment mix (54.7) (15.8) (38.9)
Raw material prices — (3.7) 3.7
Manufacturing and other costs — (17.2) 17.2
(104.9) (72.1) (32.8)
Three months ended September 27, 2020 $ 964.0 $ 676.8 $ 287.2

~~Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the third quarter of 2019 to the third quarter of 2020 were as follows:~~

•~~The decrease in volume was due to lower wholesale motorcycle shipments and lower General Merchandise sales, partially offset by higher P&A sales.~~

•~~During the period, revenue benefited from slightly higher wholesale prices and lower sales incentives.~~

•Revenue benefited from favorable foreign currency exchange rates relative to the U.S. dollar however, this benefit was more than offset by unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements as compared to the prior year.

•~~Changes in the shipment mix between motorcycle families had an adverse impact on revenue and gross profit in the current quarter compared to the same period last year.~~

•Manufacturing and other costs were favorably impacted by a reduction in tariff costs and the absence in 2020 of temporary inefficiencies related to the Company's manufacturing restructuring activities that were incurred in the prior year. The impact of tariffs was $2.7 million in the third quarter of 2020 compared to $21.6 million in the third quarter of 2019 as the Company's European Union (EU) markets are now sourced primarily from its Thailand facility. The impact of tariffs includes incremental EU and China tariffs imposed beginning in 2018 on the Company's products shipped from the U.S., as well as incremental U.S. tariffs imposed beginning in 2018 on certain items imported from China. The

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~~favorable impacts on manufacturing and other costs were partially offset by lower fixed-cost absorption on lower production in the third quarter as compared to the same quarter last year.~~

Operating expenses were lower in the third quarter of 2020 compared to the same period last year due primarily to lower spending as the Company aggressively managed cost, including lower employee-related costs and other discretionary spending. The decrease was partially offset by increases in restructuring expenses. Refer to ~~Note 4 of the Notes to Consolidated financial statements~~ ~~for additional information regarding restructuring expenses.~~

~~Financial Services Segment~~

~~Segment Results~~

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

Three months ended
September 27, 2020 September 29, 2019 (Decrease)
Increase %
Change
Revenue:
Interest income $ 174,464 $ 175,840 $ (1,376) (0.8) %
Other income 27,191 27,737 (546) (2.0)
201,655 203,577 (1,922) (0.9)
Expenses:
Interest expense 67,533 53,390 14,143 26.5
Provision for credit losses 7,835 33,747 (25,912) (76.8)
Operating expense 34,809 43,567 (8,758) (20.1)
Restructuring expense 334 — 334 100.0
110,511 130,704 (20,193) (15.4)
Operating income $ 91,144 $ 72,873 $ 18,271 25.1 %

Interest income was unfavorable in the third quarter of 2020, compared to the same period last year, primarily due to lower average outstanding finance receivables, partially offset by a higher average retail yield. Interest expense increased in the third quarter of 2020 due to higher average outstanding debt, partially offset by a lower cost of funds.

The provision for credit losses decreased $25.9 million compared to the third quarter of 2019 primarily driven by a decrease in retail credit losses and a modest improvement in economic conditions during the quarter. Retail credit losses during the third quarter of 2020 were favorably impacted by a high volume of COVID-19 pandemic related short-term retail loan payment-due-date extensions for qualified customers as well as improved used motorcycle values at auction in the U.S. The high volume of short-term extensions that occurred during the second quarter of 2020 and into the first part of the third quarter of 2020 resulted in fewer past due accounts and lower related repossessions and losses during the third quarter. Favorable used motorcycle values stemmed from a lower number of motorcycles at auction and limited new motorcycle inventory in dealerships.

The provision for credit losses was also favorably impacted by a modest improvement in the Company’s outlook on economic conditions during the third quarter of 2020. However, significant uncertainty still exists surrounding future economic outcomes. As such, the Company considered various economic forecast scenarios and applied a probability-weighting to those economic forecast scenarios. At the end of the third quarter of 2020, the Company's outlook on economic conditions included some economic improvement with heavier emphasis on deteriorating economic trend assumptions as the COVID-19 pandemic continues to restrain the U.S. economy as evidenced by continued high unemployment rates and a slow U.S. Gross Domestic Product (GDP) recovery. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.

The allowance for credit losses at September 27, 2020 was determined in accordance with ASU 2016-13, a new accounting standard adopted by the Company on January 1, 2020 that changed how companies recognize expected credit losses on financial instruments. The new standard requires recognition of full lifetime expected credit losses upon initial recognition of a financial instrument, replacing the prior, incurred loss methodology. The Company adopted the new accounting standard using a modified retrospective approach. As a result, prior period results were not restated.

~~Operating expenses decreased $8.8 million compared to the third quarter of 2019 as the Company aggressively managed costs.~~

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

Three months ended
September 27,
2020 September 29,
2019
Balance, beginning of period $ 411,015 $ 194,996
Provision for credit losses 7,835 33,747
Charge-offs, net of recoveries (10,148) (30,167)
Balance, end of period $ 408,702 $ 198,576

~~Results of Operations for the Nine Months Ended September 27, 2020~~

~~Compared to the Nine Months Ended September 29, 2019~~

~~Consolidated Results~~

Nine months ended
(in thousands, except earnings per share) September 27,
2020 September 29,
2019 (Decrease)
Increase %
Change
Operating income from Motorcycles and Related Products $ 10,283 $ 336,080 $ (325,797) (96.9) %
Operating income from Financial Services 119,015 207,133 (88,118) (42.5)
Operating income 129,298 543,213 (413,915) (76.2)
Other income, net 466 11,857 (11,391) (96.1)
Investment income 3,082 11,970 (8,888) (74.3)
Interest expense 23,307 23,304 3 —
Income before income taxes 109,539 543,736 (434,197) (79.9)
Provision for income taxes 11,843 133,597 (121,754) (91.1)
Net income $ 97,696 $ 410,139 $ (312,443) (76.2) %
Diluted earnings per share $ 0.64 $ 2.58 $ (1.94) (75.2) %

The Company reported operating income of $129.3 million in the first nine months of 2020 compared to $543.2 million in the same period last year. Operating income from the Motorcycles segment fell $325.8 million from the same period last year and operating income from Financial Services fell $88.1 million compared to the same period last year.segments. 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~~

Table of ~~2020 was unfavorably impacted by lower non-operating income related to the Company's defined benefit plans.~~ Contents

Investment income ~~was down~~increased $6.7 million in ~~first nine months of~~2021 as compared to 2020, ~~compared the same period last year~~ driven by ~~lower~~higher income from investments in marketable ~~securities and cash equivalents.~~securities.

The Company's effective income tax rate for the first ~~nine months~~quarter of ~~2020~~2021 was ~~10.8%~~23.8% compared to ~~24.6%~~26.3% for the same period in ~~2019.~~2020. The decrease in the ~~2020~~2021 effective income tax rate as compared to ~~2019~~2020 was due ~~primarily~~ to ~~net~~the increase in Income before provision for income taxes, resulting in discrete income tax ~~benefits recorded in~~adjustments having a reduced impact on the ~~first nine months of 2020, including favorable settlements with taxing authorities. The~~ effective income tax rate for the nine months ended September 27, 2020 was determined based on the Company's current projections for full-year 2020 financial results. Given uncertainty surrounding the impact of the COVID-19 pandemic, the Company's projections for full-year 2020 financial results, in total and across its numerous tax jurisdictions, may evolve and ultimately impact the Company's 2020 full-year effective income tax rate~~(1)~~.quarter.

Diluted earnings per share was ~~$0.64~~$1.68 in the first ~~nine months~~quarter of ~~2020, down 75.2%~~2021, up 273.3% from diluted earnings per share of ~~$2.58~~$0.45 for the same period last year. Diluted weighted average shares outstanding ~~decreased~~increased from ~~158.8~~153.7 million in the first ~~nine~~three months of ~~2019~~2020 to ~~153.8~~154.5 million in the first ~~nine~~three months of ~~2020, driven by the Company's discretionary repurchases of common stock during 2019. Refer to~~ ~~Liquidity and Capital Resources~~ ~~for additional information concerning the Company's share repurchase activity.~~

2021.

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Motorcycles Retail Sales and Registration Data

Harley-Davidson Motorcycle Retail Sales(a)

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

Nine months ended
September 30,
2020 September 30,
2019 Decrease % Change
United States 86,376 105,756 (19,380) (18.3) %
Canada 5,668 7,787 (2,119) (27.2)
Total North America 92,044 113,543 (21,499) (18.9)
Europe(b)
26,014 31,997 (5,983) (18.7)
EMEA – Other 3,864 4,902 (1,038) (21.2)
Total EMEA 29,878 36,899 (7,021) (19.0)
Asia Pacific(c)
12,517 13,219 (702) (5.3)
Asia Pacific – Other 7,754 8,603 (849) (9.9)
Total Asia Pacific 20,271 21,822 (1,551) (7.1)
Latin America 4,760 7,255 (2,495) (34.4)
Worldwide retail sales 146,953 179,519 (32,566) (18.1) %


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

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

~~(c)Includes Japan, Australia, New Zealand and South Korea.~~

Worldwide retail sales of new Harley-Davidson motorcycles were ~~down 18.1%~~up 9.4% during the first ~~three quarters~~quarter of 2020 compared to the same period last year. September 2020 year-to date retail sales results reflect the adverse impact of the COVID-19 pandemic, including the temporary closure of independent dealers, lower retail inventory and the change in model year timing. During 2020, the Company's retail sales have been adversely impacted by the COVID-19 pandemic with the greatest impact occurring in the first half of 2020 when many of the Company's independent dealerships were closed. Retail sales have also been adversely impacted by lower retail inventory as the Company continues to aggressively manage the supply of motorcycles into the independent dealer network, under its new supply and inventory management approach. Annual model year launch timing will change from August to the first quarter has also impacted U.S. retail sales as compared to the prior year.

~~The Company's U.S. market share of new 601+cc motorcycles for the first three quarters of 2020 was 42.0%, down 6.8 percentage points~~2021 compared to the same period last year, ~~(source: Motorcycle Industry Council). The Company's U.S. market share fell on relatively weaker retail sales performance which it believes was adversely~~when results were first impacted by the ~~change~~initial effects of the COVID-19 pandemic. The increase in retail sales during 2021 was led by the U.S. market which was positively impacted by the Company's shift in new model year launch timing ~~lower~~from August to the first quarter of 2021 and strong demand for the Company's new model year Touring and Large Cruiser motorcycles. Retail sales in EMEA declined compared to the same quarter last year due to the Company's decision not to continue selling Street or Sportster motorcycles in Europe, shipping delays, as well as continued COVID-19 pandemic lockdowns. Latin America retail sales were adversely impacted during the first quarter of 2021 by the reduction of independent dealers and pricing actions executed as part of The Rewire actions in 2020 to restore profitability in those markets.

Across the independent dealer network, worldwide retail inventory ~~resulting from its~~of new Harley-Davidson motorcycles was down approximately 50% at the end of March 2021 compared to March 2020 behind the Company's new approach to supply and inventory management which was implemented in the second quarter of 2020. Retail inventory at the end of March 2021 was up approximately 60% over the end of December 2020, as ~~well as, stronger performance in segments outside~~the Company worked to build inventory ahead of the ~~Company's Touring~~riding season. The Company expects retail inventory at the end of the second and ~~Cruiser segments~~

third quarters of 2021 to be lower than average historical levels. The ~~Company's 2020 market share~~Company believes its approach to inventory management is continuing to improve profitability and strengthen retail pricing, with 2021 first quarter retail motorcycle transaction pricing in the U.S. up for all families, most of ~~new 601+cc motorcycles in Europe was 7.7% through September, compared to 9.2% for the same period last year (Source: Management Services Helwig Schmitt GmbH).~~which are at or near Manufacturer's Suggested Retail Prices.

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

Industry retail ~~motorcycle~~ registration data for new motorcycles and the Company's market share was as follows:


		Nine months ended						Three months ended
		September 30, 2020	September 30, 2019	Decrease	% Change			March 31, 2021		March 31, 2020		Increase (Decrease)	% Change
Industry new motorcycle registrations:							Industry new motorcycle registrations:
United States(b)	United States(b)	201,822	213,876	(12,054)	(5.6)	%	United States(b)	63,412		47,232		16,180	34.3	%
Europe(c)	Europe(c)	349,993	360,320	(10,327)	(2.9)	%	Europe(c)	100,341		95,504		4,837	5.1	%

Harley-Davidson market share data:							Harley-Davidson market share data:
United States(b)							United States(b)	48.3	%	48.9	%	(0.6)	pts.
Europe(c)							Europe(c)	3.9	%	7.6	%	(3.7)	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. ~~Prior year registrations have been revised to exclude Greece and Portugal registrations.~~ This third-party data is subject to revision and update.

Motorcycles and Related Products Segment

Motorcycle Unit Shipments

Wholesale Harley-Davidson motorcycle unit shipments were as follows:


		Nine months ended										Three months ended
		September 27, 2020			September 29, 2019			Unit	Unit			March 28, 2021			March 29, 2020			Unit	Unit
		Units	Mix %		Units	Mix %		Decrease	% Change			Units	Mix %		Units	Mix %		Increase (Decrease)	% Change

U.S. motorcycle shipments	U.S. motorcycle shipments	69,359	55.8	%	101,481	58.5	%	(32,122)	(31.7)	%	U.S. motorcycle shipments	40,153	73.3	%	33,024	62.3	%	7,129	21.6	%

Worldwide motorcycle shipments:	Worldwide motorcycle shipments:										Worldwide motorcycle shipments:
Touring motorcycle units	Touring motorcycle units	47,811	38.5	%	75,871	43.7	%	(28,060)	(37.0)	%	Touring motorcycle units	27,316	49.8	%	21,597	40.8	%	5,719	26.5	%
Cruiser motorcycle units(a)	Cruiser motorcycle units(a)	47,505	38.2	%	59,367	34.2	%	(11,862)	(20.0)		Cruiser motorcycle units(a)	20,468	37.3	%	20,131	38.0	%	337	1.7
Sportster® / Street motorcycle units	Sportster® / Street motorcycle units	29,009	23.3	%	38,247	22.1	%	(9,238)	(24.2)		Sportster® / Street motorcycle units	7,026	12.9	%	11,245	21.2	%	(4,219)	(37.5)
		124,325	100.0	%	173,485	100.0	%	(49,160)	(28.3)	%		54,810	100.0	%	52,973	100.0	%	1,837	3.5	%

(a) Includes Softail®, CVOTM, and LiveWireTM

The Company shipped ~~124,325~~54,810 Harley-Davidson motorcycles worldwide during the first ~~nine months~~quarter of ~~2020,~~2021, which was ~~28.3% lower~~3.5% higher than the same period in ~~2019~~2020 reflecting the positive impact of ~~lower retail sales including~~the change in new model year launch timing from August to the first quarter of 2021. In addition, wholesale shipments in the first quarter of 2020 were adversely impacted by the temporary suspension of the Company's global manufacturing operations in ~~the first half of~~March 2020 resulting from the COVID-19 pandemic. The mix of Touring and Cruiser motorcycles shipped during the ~~nine months~~first quarter of ~~2020 decreased~~2021 increased as a percent of total shipments while the mix of ~~Cruiser and~~ Sportster/Street motorcycles ~~increased~~decreased compared to the same period last year.

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Segment Results

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


		Nine months ended											Three months ended
		September 27, 2020			September 29, 2019			(Decrease) Increase		% Change			March 28, 2021			March 29, 2020			Increase (Decrease)		% Change
Revenue:	Revenue:											Revenue:
Motorcycles	Motorcycles	$	2,030,447		$	2,871,982		$	(841,535)	(29.3)	%	Motorcycles	$	1,016,334		$	899,365		$	116,969	13.0	%
Parts & Accessories	Parts & Accessories	513,201			584,134			(70,933)		(12.1)		Parts & Accessories	149,859			134,685			15,174		11.3
General Merchandise	General Merchandise	136,321			180,379			(44,058)		(24.4)		General Merchandise	50,323			49,160			1,163		2.4
Licensing	Licensing	21,826			27,099			(5,273)		(19.5)		Licensing	5,512			8,029			(2,517)		(31.3)
Other	Other	31,296			34,989			(3,693)		(10.6)		Other	10,079			8,549			1,530		17.9
		2,733,091			3,698,583			(965,492)		(26.1)			1,232,107			1,099,788			132,319		12.0
Cost of goods sold	Cost of goods sold	2,019,310			2,576,342			(557,032)		(21.6)		Cost of goods sold	811,622			780,868			30,754		3.9
Gross profit	Gross profit	713,781			1,122,241			(408,460)		(36.4)		Gross profit	420,485			318,920			101,565		31.8
Operating expenses:	Operating expenses:											Operating expenses:
Selling & administrative expense	Selling & administrative expense	477,286			598,102			(120,816)		(20.2)		Selling & administrative expense	152,689			185,577			(32,888)		(17.7)
Engineering expense	Engineering expense	141,626			156,377			(14,751)		(9.4)		Engineering expense	40,857			48,776			(7,919)		(16.2)
Restructuring expense		84,586			31,682			52,904		167.0
Restructuring benefit												Restructuring benefit	(593)			—			(593)		NM
		703,498			786,161			(82,663)		(10.5)			192,953			234,353			(41,400)		(17.7)
Operating income	Operating income	$	10,283		$	336,080		$	(325,797)	(96.9)	%	Operating income	$	227,532		$	84,567		$	142,965	169.1	%
Operating margin	Operating margin	0.4		%	9.1		%	(8.7)		pts.		Operating margin	18.5		%	7.7		%	10.8		pts.

The estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first ~~nine~~three months of ~~2019~~2020 to the first ~~nine~~three months of ~~2020~~2021 were as follows (in millions):


		Net Revenue		Cost of Goods Sold		Gross Profit			Net Revenue		Cost of Goods Sold		Gross Profit
Nine months ended September 29, 2019		$	3,698.5	$	2,576.3	$	1,122.2
Three months ended March 29, 2020								Three months ended March 29, 2020	$	1,100	$	781	$	319
Volume	Volume	(944.0)		(613.7)		(330.3)		Volume	35		25		10
Price and incentives		44.3		7.2		37.1
Price and sales incentives, net of related costs								Price and sales incentives, net of related costs	13		(4)		17
Foreign currency exchange rates and hedging	Foreign currency exchange rates and hedging	(17.1)		14.7		(31.8)		Foreign currency exchange rates and hedging	19		11		8
Shipment mix	Shipment mix	(48.6)		10.0		(58.6)		Shipment mix	65		8		57
Raw material prices	Raw material prices	—		(7.5)		7.5		Raw material prices	—		1		(1)
Manufacturing and other costs	Manufacturing and other costs	—		32.3		(32.3)		Manufacturing and other costs	—		(11)		11
		(965.4)		(557.0)		(408.4)			132		30		102
Nine months ended September 27, 2020		$	2,733.1	$	2,019.3	$	713.8
Three months ended March 28, 2021								Three months ended March 28, 2021	$	1,232	$	811	$	421

Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first ~~nine~~three months of ~~2019~~2020 to the first ~~nine~~three months of ~~2020~~2021 were as follows:

•The ~~decrease~~increase in volume was due to ~~lower~~higher wholesale motorcycle shipments and ~~lower P&A and General Merchandise~~higher Parts & Accessories sales.

•During the first ~~nine~~three months of ~~2020,~~2021, revenue benefited from ~~higher wholesale prices for motorcycles and~~ lower sales incentives. ~~The positive impact on revenue was partially offset by increased costs related to additional content added to motorcycles shipped in the current period as compared to the same period last year.~~

•Revenue was ~~adversely~~favorably impacted by ~~weaker~~stronger foreign currency exchange rates relative to the U.S. dollar. ~~In addition,~~The favorable revenue benefit was partially offset by unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements ~~also reduced gross profit as compared to the same period last year.~~recorded in cost of goods sold.

•Changes in the shipment mix between motorcycle families had ~~an adverse~~a favorable impact on gross profit during the first ~~nine months~~quarter of ~~2020. Additionally, unfavorable mix within P&A contributed to~~2021 as the ~~impact.~~increased contribution from Touring models more than offset the impact of unit declines of less profitable small Cruiser models.

•Manufacturing and other costs ~~were adversely impacted by~~benefited from cost savings resulting from the Company's 2020 restructuring actions and lower fixed cost absorption and productivity related to lower production volumes including the impact of the temporary suspension of global manufacturing that occurred during the first half of 2020 as a result of the COVID-19 pandemic. These unfavorable impacts weretariff costs, partially offset ~~with a~~by higher COVID-19 pandemic related supply chain costs.

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favorable reduction in tariff costs and the absence of temporary inefficiencies related to the Company's manufacturing restructuring activities that were incurred in the prior year. The impact of tariffs was $22.4 million in the first nine months of 2020 compared to $77.0 million for the same period last year.

Operating expenses were lower in the first ~~nine months~~quarter of ~~2020~~2021 compared to the same period in ~~2019~~2020 due primarily to lower ~~spending~~costs as a result of the ~~Company aggressively managed costs, including lower employee-related costs~~Company's 2020 restructuring actions and ~~other discretionary spending.~~a shift in the timing of expenses, related to initiatives under The ~~decrease was partially offset by an increase~~Hardwire, to subsequent quarters in ~~restructuring expenses.~~2021. Refer to Note 4 of the Notes to Consolidated financial statements for additional information regarding restructuring ~~expenses.~~activities.

Financial Services Segment

Segment Results

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


		Nine months ended									Three months ended
		September 27, 2020		September 29, 2019		Increase (Decrease)		% Change			March 28, 2021		March 29, 2020		(Decrease) Increase		% Change
Revenue:	Revenue:									Revenue:
Interest income	Interest income	$	512,726	$	502,721	$	10,005	2.0	%	Interest income	$	159,814	$	170,001	$	(10,187)	(6.0)	%
Other income	Other income	83,338		88,214		(4,876)		(5.5)		Other income	30,586		28,455		2,131		7.5
		596,064		590,935		5,129		0.9			190,400		198,456		(8,056)		(4.1)
Expenses:	Expenses:									Expenses:
Interest expense	Interest expense	182,193		158,387		23,806		15.0		Interest expense	55,707		52,473		3,234		6.2
Provision for credit losses	Provision for credit losses	178,433		94,621		83,812		88.6		Provision for credit losses	(22,474)		79,419		(101,893)		(128.3)
Operating expense	Operating expense	115,145		130,794		(15,649)		(12.0)		Operating expense	38,298		43,618		(5,320)		(12.2)
Restructuring expense	Restructuring expense	1,278		—		1,278		100.0		Restructuring expense	227		—		227		NM
		477,049		383,802		93,247		24.3			71,758		175,510		(103,752)		(59.1)
Operating income	Operating income	$	119,015	$	207,133	$	(88,118)	(42.5)	%	Operating income	$	118,642	$	22,946	$	95,696	417.0	%

Interest income was ~~higher~~unfavorable in the first ~~nine months~~quarter of ~~2020, compared to the same period last year,~~2021, primarily due to ~~a higher average retail yield, partially offset by~~ lower average outstanding finance ~~receivables.~~receivables, partially offset by a higher average yield. Other income ~~decreased in the first nine months of 2020, compared to the first nine months of 2019,~~increased due in part to ~~lower investment~~higher insurance income. Interest expense increased ~~in the first nine months of 2020, compared to the same period last year,~~ due to higher average outstanding debt, partially offset by a lower cost of funds.

The provision for credit losses ~~increased $83.8~~decreased $101.9 million compared to the first ~~nine months~~quarter of ~~2019~~2021 driven primarily by ~~unfavorable~~improving economic conditions ~~partially offset by a decrease in~~during the first quarter of 2021 and favorable retail credit ~~losses.~~loss performance. The provision for credit losses was ~~up significantly,~~favorable as ~~compared to the first nine months~~a result of ~~2019 driven by the impact of the COVID-19 pandemic on~~improvement in the U.S. economy and the Company’s outlook on future economic conditions. ~~The Company believes that significant~~However, there is uncertainty ~~still exists~~ surrounding ~~future~~the pace of economic ~~outcomes.~~recovery as demonstrated by unemployment levels above those experienced prior to the COVID-19 pandemic and continuing COVID-19 pandemic-related challenges across the U.S., among other factors. As such, the Company considered various third-party economic forecast scenarios and applied a probability-weighting to those economic forecast scenarios. At the end of the ~~third~~first quarter of ~~2020,~~2021, the Company's outlook on economic conditions included economic improvement; however, the pace of economic recovery remains uncertain. As a result, the Company included some adverse economic ~~improvement with heavier emphasis on deteriorating~~conditions in its economic ~~trend assumptions as the COVID-19 pandemic continues to restrain the U.S. economy as evidenced by continued high unemployment rates and a slow U.S. Gross Domestic Product (GDP) recovery.~~scenario weighting. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.

The allowance for credit losses at September 27, 2020 was determined in accordance with ASU 2016-13, a new accounting standard the Company adopted on January 1, 2020 that changed how companies recognize expected credit losses on financial instruments. The new standard requires recognition of full lifetime expected credit losses upon initial recognition of a financial instrument, replacing the prior, incurred loss methodology. The Company adopted the new accounting standard using a modified retrospective approach. As a result, prior period results were not restated.

~~Annualized credit losses for the Company's retail motorcycle loans were 1.40% through September 27, 2020 compared to 1.83% through September 29, 2019. The~~ 30-day delinquency rate for retail motorcycle loans at ~~September 27, 2020~~March 28, 2021 was ~~2.59%~~2.14% compared to ~~3.75%~~3.37% at ~~September~~March 29, ~~2019.~~2020. The improved delinquency rate was primarily driven by ~~a high volume of short-term~~the benefits provided by U.S. federal stimulus packages as well as continued COVID-19 ~~pandemic related~~pandemic-related extensions ~~during the second quarter of 2020 and into the first part of the third quarter of 2020 on eligible retail loans~~granted to help customers get through financial difficulties associated with the pandemic. During the first quarter of 2021, the volume of payment extensions declined from the levels experienced during the second quarter and into the third quarter of 2020 but has not yet returned to pre-COVID-19 pandemic levels. The Company continues to grant payment extensions to customers in accordance with its policies. Annualized credit losses for the Company's retail motorcycle loans were 1.46% through March 28, 2021 compared to 2.73% through March 29, 2020. The favorable retail credit loss performance was due to the low delinquency levels as well as improved used motorcycle values at auction due to a limited supply of new and used motorcycles.

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

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~~Operating expenses decreased $15.6 million compared to the first nine months of 2019 as the Company aggressively managed costs.~~

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


		Nine months ended					Three months ended
		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Balance, beginning of period	Balance, beginning of period	$	198,581	$	189,885	Balance, beginning of period	$	390,936	$	198,581

Cumulative effect of change in accounting(a)	Cumulative effect of change in accounting(a)	100,604		—		Cumulative effect of change in accounting(a)	—		100,604
Provision for credit losses	Provision for credit losses	178,433		94,621		Provision for credit losses	(22,474)		79,419
Charge-offs, net of recoveries	Charge-offs, net of recoveries	(68,916)		(85,930)		Charge-offs, net of recoveries	(22,229)		(43,108)
Balance, end of period	Balance, end of period	$	408,702	$	198,576	Balance, end of period	$	346,233	$	335,496

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

Other Matters

~~Critical Accounting Estimates~~

~~As a result of the January 1, 2020 adoption ASU 2016-13, the Company has updated the Critical Accounting Estimate disclosure from~~ ~~Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 as follows:~~

~~Allowance for Credit Losses on Retail Finance Receivables~~ – The allowance for credit losses represents the Company’s estimate of future lifetime losses for its retail finance receivables portfolio. The Company performs a collective evaluation of the adequacy of its retail allowance for credit losses. Subsequent to the January 1, 2020 adoption of ASU 2016-13, 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 for a three-year period using a mean-reversion process. 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.

~~Contractual Obligations~~

~~As of September 27, 2020, the Company has updated the contractual obligations table from~~ ~~Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 to reflect the new projected principal and interest payments for the remainder of 2020 and beyond as follows (in thousands):

2020 2021-2022 2023-2024 Thereafter Total
Debt:
Principal payments on debt $ 1,270,429 $ 3,965,831 $ 2,855,849 $ 1,450,000 $ 9,542,109
Interest payments on debt 62,395 398,843 198,584 319,945 979,767
$ 1,332,824 $ 4,364,674 $ 3,054,433 $ 1,769,945 $ 10,521,876

Interest for floating rate instruments, as calculated above, assume rates in effect at September 27, 2020 remain constant. For purposes of the above, the principal payment balances for medium-term notes, on-balance sheet asset-backed securitizations, and senior notes are shown without reduction for unamortized discounts and debt issuance costs. Refer to ~~Note 12 of the Notes to Consolidated financial statements~~ ~~for a breakout of the finance costs.~~

As of September 27, 2020, there have been no other material changes to the Company’s summary of expected payments for significant contractual obligations in the contractual obligations table in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

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Commitments and Contingencies

~~Environmental Protection Agency Notice~~ – In December 2009, the Company received formal, written requests for information from the United States Environmental Protection Agency (EPA) regarding: (i) certificates of conformity for motorcycle emissions and related designations and labels, (ii) aftermarket parts, and (iii) warranty claims on emissions related components. The Company promptly submitted written responses to the EPA’s inquiry and has engaged in information exchanges and discussions with the EPA. In August 2016, the Company entered into a consent decree with the EPA regarding these issues, and the consent decree was subsequently revised in July 2017 (the Settlement). In the Settlement, the Company agreed to, among other things, pay a fine, and not sell tuning products unless they are approved by the EPA or California Air Resources Board. In December 2017, the Department of Justice (DOJ), on behalf of the EPA, filed the Settlement with the U.S. District Court for the District of Columbia for the purpose of obtaining court approval of the Settlement. On September 14, 2020, the U.S. District Court for the District of Columbia approved the Settlement. The Company has an accrual for this matter recorded in ~~Accrued liabilities~~ ~~on the~~ ~~Consolidated balance sheets~~. The payment of the settlement amount will not have a material adverse effect on the Company's financial condition or results of operations. The Company will continue to comply with the non-monetary terms of the consent decree entered into with the EPA.

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

~~Product Liability Matters~~ – The Company is periodically involved in product liability suits related to the operation of its business. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and that product liability suits will not have a material adverse effect on the Company’s consolidated financial statements.~~(1)~~

~~Off-Balance Sheet Arrangements~~

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 variable interest entities (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 SPEs are separate legal entities that assume the risks and rewards of ownership of the retail motorcycle finance receivables they hold. The assets of the VIEs are not available to pay other obligations or claims of the Company’s creditors. The Company’s economic exposure related to the VIEs is generally limited to restricted cash reserve accounts, retained interests and ordinary representations and warranties and related covenants. The VIEs have a limited life and generally terminate upon final distribution of amounts owed to investors.

The accounting treatment for asset-backed financings depends on the terms of the related transaction and the Company’s continuing involvement with the VIE. Most of the Company’s asset-backed financings do not meet the criteria to be treated as a sale for accounting purposes as the Company, in addition to retaining servicing rights, retains a financial interest in the VIE in the form of a debt security. These transactions are treated as secured borrowings. As secured borrowings, the retail motorcycle finance receivables remain on the balance sheet with a corresponding obligation reflected as debt.

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During 2016, the Company sold finance receivables with a principal balance of $301.8 million into a securitization VIE. The transaction met the criteria to be treated as a sale for accounting purposes and resulted in an off-balance sheet arrangement as the Company did not retain any financial interest in the VIE beyond servicing rights and ordinary representations and warranties and related covenants. In April 2020, the Company repurchased this off-balance sheet asset-backed securitization VIE for $27.4 million. Refer to Note 1316 of the Notes to Consolidated financial statementsfor ~~additional information.~~a discussion of the Company's commitments and contingencies.

Liquidity and Capital Resources ~~as of September 27, 2020~~(1)

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

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

The Company's strategy is to maintain a ~~number~~minimum of ~~specific actions to reduce spending. The Company expects~~twelve months of its ~~planned reductions in spending will preserve approximately $250 million~~projected liquidity needs through a combination of cash ~~in 2020, with approximately 15%~~and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to ~~capital spending. The planned spending reductions exclude~~ the ~~impact of restructuring charges.In addition,~~COVID-19 pandemic, the Company ~~has made no discretionary share repurchases~~increased its cash and cash equivalents during 2020. The Company's cash and cash equivalents remain elevated at the end of March 2021, but during the first quarter of 2021, the Company began to gradually reduce its cash and cash equivalents from December 2020 ~~and does not intend to repurchase shares on a discretionary basis for the remainder of 2020.~~

levels. The Company’s cash and cash equivalents and availability under its credit and conduit facilities at ~~September 27, 2020~~March 28, 2021 were as follows (in thousands):


	~~September 27, 2020~~
Cash and cash equivalents	$	~~3,560,950~~2,320,645



Availability under credit and conduit facilities:
Credit facilities	~~537,237~~999,737
Asset-backed U.S. commercial paper conduit ~~facilities~~facility(a)	600,000
Asset-backed Canadian commercial paper conduit facility(a)	~~36,908~~71,895
	$	~~4,735,095~~3,992,277

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

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To access the debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings. ~~The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper.~~ 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 ~~credit~~short-term debt ratings ~~all remain investment grade allowing it~~affect its ability to ~~maintain access to~~issue unsecured commercial ~~paper markets, which is an efficient source of funding for the Company.~~paper. The Company’s short- and long-term debt ratings, as of ~~the issuance date of this Quarterly Report on Form 10-Q,~~March 28, 2021 were as follows:

Short-Term

Long-Term

Outlook

Moody’s

Baa3

Stable

Standard & Poor’s

A2A3

~~BBB~~BBB-

~~Negative~~Stable

Fitch

A-BBB+

Negative

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

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Cash Flow Activity

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

Nine months ended
September 27, 2020 September 29, 2019
Net cash provided by operating activities $ 1,135,068 $ 848,649
Net cash used by investing activities (235,054) (551,474)
Net cash provided (used) by financing activities 1,930,677 (603,690)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 6,071 (4,110)
Net increase (decrease) in cash, cash equivalents and restricted cash $ 2,836,762 $ (310,625)


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

Operating Activities

The increase in net cash from operating activities for the first ~~nine~~three months of ~~2020~~2021 compared to the same period in ~~2019 was primarily due to a reduction in inventory levels~~2020 reflects benefits from improved net income and favorable changes in working capital, including lower inventory. The Company continues to expect that it will generate sufficient cash ~~flows~~inflows from ~~wholesale financing activity due~~operations to ~~lower loan originations, partially offset by lower net income.~~ 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 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 ~~were~~are no ~~voluntary~~required qualified pension plan contributions in 2021. The Company’s expected future contributions and benefit payments related to its defined benefit retirement plans are discussed further in Note 15 of the ~~first nine months of 2020 or 2019, and no contributions are planned~~Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the ~~remainder~~year ended December 31, 2020. The Company has a liability for unrecognized tax benefits of ~~2020.(1)~~$51.4 million and related accrued interest and penalties of $26.1 million as of March 28, 2021. The Company cannot reasonably estimate the period of cash settlement for either the liability for unrecognized tax benefits or accrued interest and penalties.

Investing Activities

The Company’s most significant investing activities consist of capital expenditures and retail finance receivable originations and collections. Capital expenditures were ~~$92.3~~$18.8 million in the first ~~nine~~three months of ~~2020~~2021 compared to ~~$121.2~~$32.9 million in the same period last year. The Company's 2021 plan includes estimated capital expenditures between $190 million to $220 million, all of which the Company expects to fund with net cash flow generated by operations.(1)

Net cash outflows from finance receivables for the first ~~nine months~~quarter of ~~2020~~2021 were ~~$302.6~~$69.9 million ~~lower~~higher compared to the same period last year due primarily to ~~lower~~higher retail finance receivable originations. ~~Other investing activities were $15.1 million unfavorable~~The Company funds its finance receivables net lending activity through the issuance of debt, discussed in ~~the first nine months~~"Financing Activities" below.

Table of ~~2020 compared to the same period last year.~~Contents

Financing Activities

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

The Company paid dividends of $0.15 and $0.38 per share ~~repurchases were $7.9~~totaling $23.1 million inand $58.8 million during the first ~~nine~~three months of 2021 and 2020, ~~compared to $217.5 million in the same period last year.~~ respectively.

In the first quarter of 2020, the Company ~~temporarily~~ suspended ~~its~~ discretionary share ~~repurchase program;~~repurchases; as a result, there have been no discretionary share repurchases in 2021 or 2020. Share repurchases ~~during the first nine months of 2020 included $7.9 million or 0.3 million shares~~ of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock ~~units.~~units during the first three months of 2021 and 2020 were $5.6 million or 0.2 million shares and $7.1 million or 0.2 million shares, respectively. As of ~~September 27, 2020,~~March 28, 2021, there were 18.2 million shares remaining on board-approved share repurchase authorizations. ~~The Company paid dividends of $0.42 and $1.125 per share totaling $65.0 million and $179.4 million during the first nine months of 2020 and 2019, respectively.~~

Financing cash flows related to debt and deposit activity resulted in net cash ~~inflows~~outflows of ~~$2.0 billion~~$985.1 million in the first ~~nine~~three months of ~~2020~~2021 compared to net cash ~~outflows~~inflows of ~~$209.0~~$721.4 million in the first ~~nine~~three months of ~~2019.~~2020. The Company’s total outstanding debt and deposits consisted of the following (in thousands):


		September 27, 2020		September 29, 2019			March 28, 2021		March 29, 2020
Outstanding debt:						Outstanding debt:
Global credit facility borrowings						Global credit facility borrowings	$	15,462	$	—
Unsecured commercial paper						Unsecured commercial paper	749,801		1,335,664

Unsecured commercial paper		$	1,077,763	$	1,013,137
364-day credit facility borrowings		150,000		—
Asset-backed Canadian commercial paper conduit facility	Asset-backed Canadian commercial paper conduit facility	127,500		128,368		Asset-backed Canadian commercial paper conduit facility	102,543		155,243
Asset-backed U.S. commercial paper conduit facilities	Asset-backed U.S. commercial paper conduit facilities	467,338		552,757		Asset-backed U.S. commercial paper conduit facilities	350,648		600,000
Asset-backed securitization debt, net	Asset-backed securitization debt, net	2,096,355		872,871		Asset-backed securitization debt, net	2,099,258		1,156,845
Medium-term notes, net	Medium-term notes, net	4,845,961		4,089,591		Medium-term notes, net	3,803,736		4,148,984
Senior notes, net	Senior notes, net	743,806		743,127		Senior notes, net	744,149		743,466
		$	9,508,723	$	7,399,851		$	7,865,597	$	8,140,202

Deposits, net						Deposits, net	$	152,653	$	—

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

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

Credit Facilities – In April 2020, the Company entered into a $707.5 million five-year credit facility to replace the $765.0 million five-year credit facility that was due to mature in April 2021. The new five-year credit facility matures in April 2025. At March 28, 2021, ~~and~~the Company had borrowings of $15.5 million outstanding under this facility, which the Company repaid in full on April 7, 2021. The Company also amended ~~the~~its $780.0 million five-year credit facility in April 2020 to $707.5 million with no change to the maturity date of April 2023. ~~The new five-year credit facility matures in April 2025.~~ Additionally, the~~The~~ Company ~~also had~~has a ~~$195.0~~$350.0 million 364-day credit facility which ~~was due to mature~~matures in May ~~2020. In April 2020, the Company extended the maturity date of this credit facility to August 2020; however, this facility was terminated on May 18, 2020. At~~

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the time of termination, there were no outstanding borrowings under this 364-day credit facility. On June 1, 2020, the Company entered into a new $350.0 million 364-day credit facility, and on June 4, 2020, the Company borrowed $150.0 million under this facility.2021. The five-year credit facilities (together, the Global Credit Facilities), as well as the $350.0 million 364-day credit facility, bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities and the $350.0 million 364-day credit facility also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.

Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to ~~$1.42~~$1.40 billion as of ~~September 27, 2020~~March 28, 2021 supported by the Global Credit Facilities, as discussed above. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured

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commercial paper or through other means, such as borrowing under the Global Credit Facilities or the $350.0 million 364-day credit facility, borrowing under its asset-backed U.S. commercial paper conduit ~~facilities~~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 27, 2020~~March 28, 2021 (in thousands):


Principal Amount	Principal Amount	Rate	Issue Date	Maturity Date	Principal Amount	Rate	Issue Date	Maturity Date

$600,000		2.85%	January 2016	January 2021
$450,000		LIBOR + 0.94%	November 2018	March 2021
$350,000	$350,000	3.55%	May 2018	May 2021	$350,000	3.55%	May 2018	May 2021
$550,000	$550,000	4.05%	February 2019	February 2022	$550,000	4.05%	February 2019	February 2022
$400,000	$400,000	2.55%	June 2017	June 2022	$400,000	2.55%	June 2017	June 2022
$350,000	$350,000	3.35%	February 2018	February 2023	$350,000	3.35%	February 2018	February 2023
$760,890(a)		4.94%	May 2020	May 2023
$702,360(b)		3.14%	November 2019	November 2024
$762,996(a)					$762,996(a)	4.94%	May 2020	May 2023
$704,304(b)					$704,304(b)	3.14%	November 2019	November 2024
$700,000	$700,000	3.35%	June 2020	June 2025	$700,000	3.35%	June 2020	June 2025

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

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

The ~~fixed-rate~~ U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the ~~fixed-rate~~ foreign currency-denominated medium-term notes provide for annual ~~interest payments, and the floating-rate medium-term notes provide for quarterly~~ 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 ~~$17.3~~$13.6 million and ~~$10.4~~$11.0 million at ~~September 27,~~March 28, 2021 and March 29, 2020, ~~and September 29, 2019,~~ respectively. ~~There were no medium-term note maturities during~~During the ~~third~~first quarter of ~~2020. During the second quarter~~2021, $600.0 million of ~~2020,~~2.85% medium-term notes and $450.0 million of ~~floating rate and $350.0 million of 2.4%~~floating-rate medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2020, $600.0 million of 2.15% medium-term notes matured, and the principal and accrued interest were paid in full. During the third quarter of 2019, $600.0 million of 2.40% notes matured, and the principal and accrued interest were paid in full. There were no medium-term note maturities during the second quarter of 2019. During the first quarter of 2019, $600.0 million of 2.25% and $150.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full.

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

On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – The Company has a revolving facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase from the Company eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this facility provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$220.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding

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principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 4 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of ~~September 27, 2020,~~March 28, 2021, the Canadian Conduit has an expiration date of June 25, 2021.

~~Quarterly~~There were no finance receivable transfers under the Canadian Conduit Facility during the first quarter of 2021. During the first quarter of 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit ~~and the respective~~for proceeds ~~were as follows (in thousands):~~of $61.6 million.

2020 2019
Transfers Proceeds Transfers Proceeds
First quarter $ 77,900 $ 61,600 $ — $ —
Second quarter — — 28,200 23,400
Third quarter — — — —
$ 77,900 $ 61,600 $ 28,200 $ 23,400

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On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – ~~The~~Until November 25, 2020, the Company ~~has~~had two separate agreements with third-party bank-sponsored asset-backed U.S. commercial paper conduits, a $300.0 million revolving facility agreement and a $600.0 million revolving facility agreement (together, the Former U.S. Conduit Facilities). On November 25, 2020, the Company amended each revolving facility agreement by consolidating the two agreements into one $900.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper ~~conduits under which it~~conduits. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party bank-sponsored asset-backed U.S. commercial paper conduits. In ~~May 2019,~~addition to the ~~Company amended its $300.0~~$900.0 million ~~revolving facility~~aggregate commitment, the agreement ~~to allow~~allows for ~~incremental~~additional borrowings, at the ~~lender's~~lender’s discretion, of up to ~~an additional~~ $300.0 ~~million in excess of~~million. Availability under the ~~$300.0 million commitment. In November 2019, the Company renewed its existing $600.0 million and the amended $300.0~~$900.0 million revolving facility ~~agreements with third-party bank-sponsored asset-backed U.S. commercial paper conduits. Availability under the revolving facilities (together, the~~(the U.S. Conduit ~~Facilities)~~Facility) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.

~~Quarterly~~There were no finance receivable transfers under the U.S. Conduit Facility during the first quarter of 2021. During the first quarter of 2020, the Company transferred $195.3 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $163.6 million of debt under the Former U.S. Conduit ~~Facilities and the respective proceeds were as follows (in thousands):~~

2020 2019
Transfers Proceeds Transfers Proceeds
First quarter $ 195,300 $ 163,600 $ — $ —
Second quarter — — — —
Third quarter — — 174,400 154,600
$ 195,300 $ 163,600 $ 174,400 $ 154,600
Facilities.

The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, the terms of the interest are based on LIBOR. In each of these cases, a program fee is assessed based on the outstanding principal. The U.S. Conduit ~~Facilities~~Facility also ~~provide~~provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment ~~for the $300.0 million agreement~~ does not include any unused portion of the $300.0 million ~~incremental~~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 ~~Facilities,~~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 54 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of ~~September 27, 2020,~~March 28, 2021, the U.S. Conduit ~~Facilities have~~Facility has an expiration date of November ~~25, 2020.~~19, 2021.

Asset-Backed Securitization VIEs – For all of its asset-backed securitization transactions, the Company transfers U.S. retail motorcycle finance receivables to separate VIEs, which in turn issue secured notes with various maturities and interest rates to investors. All of the notes held by the VIEs are secured by future collections of the purchased U.S. retail motorcycle finance receivables. The U.S. retail motorcycle finance receivables included in the asset-backed securitization transactions are not available to pay other obligations or claims of the Company's creditors until the associated debt and other obligations are satisfied. Restricted cash balances held by the VIEs are used only to support the securitizations.

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

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collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from ~~2021~~2022 to 2028.

2020 2019
Transfers Proceeds Proceeds, net Transfers Proceeds Proceeds, net
First quarter $ 580,200 $ 525,000 $ 522,700 $ — $ — $ —
Second quarter 1,840,500 1,550,200 1,541,800 1,120,000 1,025,000 1,021,300
Third quarter — — — — — —
$ 2,420,700 $ 2,075,200 $ 2,064,500 $ 1,120,000 $ 1,025,000 $ 1,021,300
of secured notes through an on-balance sheet asset-backed securitization transaction. During the first quarter of 2020, the Company transferred $580.2 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $525.0 million, or $522.7 million net of discount and issuance costs, of secured notes through an on-balance sheet asset-backed securitization transaction.

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

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

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

•Assume or incur certain liens;

•Participate in certain mergers or consolidations; and

•Purchase or hold margin stock.

Under the current financial covenants of the Global Credit Facilities, the ratio of HDFS’ consolidated debt, excluding secured debt, to HDFS' consolidated allowance for credit losses on finance receivables plus HDFS’ consolidated shareholders' equity, excluding accumulated other comprehensive loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. ~~As of the end of the third quarter of 2020, the actual ratio was 4.6 to 1.0.~~ In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of HDFS and its subsidiaries, and the Company's consolidated shareholders’ equity excludes 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 27, 2020,~~March 28, 2021, HDFS and the Company remained in compliance with all of the then existing ~~covenants and expects to remain in compliance for the foreseeable future.~~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~~pandemic; and (ii) the ~~Company's~~Company’s ability to: ~~(a) create and~~(A) execute its business plans and strategies, including ~~developing~~ The Hardwire,, successfully ~~executing~~execute its remodeled approach to supply and inventory management, and ~~strengthening~~strengthen its existing business while allowing for desirable growth; ~~(b)~~(B) mitigate the impact of the revocation of the Binding Origin Information (BOI) decisions that allowed the Company to supply its European Union (EU) market with certain of its motorcycles produced at its Thailand operations at a reduced tariff rate and favorably resolve risks and uncertainties related to the revocation of the BOI decisions including, among other: (1) uncertainties regarding the quantity and mix of motorcycles that the Company imports into the EU; (2) uncertainties regarding the import prices of motorcycles; (3) whether the Company will be granted temporary relief from the effect of the revocation of the BOI decisions; (4) whether the Company will be successful in appealing the revocation of the BOI decisions; (5) uncertainties regarding the size and duration of the EU tariffs; and (6) whether and to what extent the Company determines to attempt to pass on the impact of the revocation to dealers and its success in doing so; (C) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and ~~interests, including successfully implementing and executing plans to exit international markets where volumes and profitability do not support continued investment, in line with~~ ~~The Rewire~~ ~~actions, and successfully transitioning to a distributor model in seventeen markets; (c)~~interests; (D) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; ~~(d)~~(E) successfully carry out its global manufacturing and assembly operations; ~~(e)~~(F) 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; (f)~~returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Touring, large Cruiser and Trike, and growing its complementary businesses; (G) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; ~~(g)~~(H) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing; ~~(h)~~(I) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters; ~~(i)~~(J) manage the impact that prices for and supply of used motorcycles may have on its

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business, including on retail sales of new motorcycles; ~~(j)~~(K) realize expectations concerning market demand for electric models, which will depend in part on the building of necessary infrastructure; ~~(k)~~(L) successfully manage and reduce costs throughout the business; ~~(l) balance production volumes for its new motorcycles with consumer demand; (m)~~(M) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment; ~~(n)~~(N) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; ~~(o)~~(O) develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; ~~(p)~~(P) develop and maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (Q) manage and predict the impact that new or adjusted tariffs may have on the ~~Company's~~Company’s ability to sell products internationally, and the cost of raw materials and components; ~~(q)~~(R) successfully ~~determine, implement on a timely basis, and~~ maintain a manner in which to sell motorcycles in ~~the European Union,~~ China and the ~~Company's ASEAN~~Company’s Association of Southeast Asian Nations (ASEAN) countries that does not subject its motorcycles to incremental tariffs; ~~(r)~~(S) manage its Thailand corporate and manufacturing operation in a manner that allows the Company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets; ~~(s)~~(T) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; ~~(t)~~(U) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; ~~(u)~~(V) prevent a cybersecurity breach involving consumer, employee, dealer, supplier,

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or Company data and respond to evolving regulatory requirements regarding data security; ~~(v)~~(W) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio; ~~(w)~~(X) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the Company's business; ~~(x)~~(Y) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; ~~(y)~~(Z) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; ~~(z)~~(AA) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; ~~(aa)~~(BB) manage its exposure to product liability claims and commercial or contractual disputes; ~~(bb)~~(CC) continue to manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness; ~~and (cc)~~(DD) accurately predict the margins of its Motorcycles and Related Products segment in light of, among other things, tariffs, the cost associated with product development initiatives and the ~~Company's~~Company’s complex global supply ~~chain.~~chain; and (EE) successfully develop and launch the pre-owned motorcycle program, Harley-Davidson Certified.

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, or other factors. Other factors are described in Item 1A. Risk Factors and risk factors that the Company has disclosed in documents previously filed with the Securities and Exchange Commission. Many of these risk factors are impacted by the current changing capital, credit and retail markets and the Company's ability to manage through inconsistent economic conditions.

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

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

Refer to Item 1A. Risk Factors of this report and Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 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 109 of the Notes to Consolidated financial statements.

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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 ~~Company’s earnings~~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, Thai baht, Indian rupee, Singapore dollar and Pound sterling. The Company utilizes foreign currency contracts to mitigate the effect of certain currencies' fluctuations on ~~earnings.~~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. ~~At September 27, 2020 and~~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, ~~2019, the notional U.S. dollar value of outstanding foreign currency contracts was $637.9 million and $654.5 million, respectively.~~ 2020.

The Company ~~estimates that a uniform 10% weakening~~purchases commodities for the use in the ~~value~~production of ~~the U.S. dollar relative to the currencies underlying these contracts would~~motorcycles. As a result, ~~in a decrease in the fair value of the contracts of approximately $99.0 million and $65.5 million as of September 27, 2020 and December 31, 2019, respectively.~~

~~The Company's earnings~~Motorcycles segment operating results are affected by changes in ~~the prices of commodities used in the production of motorcycles.~~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, ~~2019.~~2020.

~~HDFS’ earnings are affected by changes in interest rates. HDFS’~~

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Financial Services Segment

The Company has interest rate sensitive financial instruments ~~include finance~~including financial receivables, debt and interest rate derivative financial instruments. ~~HDFS~~As a result, Financial Services operating income is affected by changes in interest rates. The Company utilizes interest rate ~~swaps and~~ caps to reduce the impact of fluctuations in interest rates on its ~~debt.~~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, ~~2019.~~2020.

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

The Company has foreign denominated medium-term notes. As a result, Financial Services operating income is affected by fluctuations in the value of the U.S. dollar relative to foreign currencies and interest rates. At March 28, 2021, this exposure related to ~~financing in currencies other than~~ the ~~functional currency. HDFS~~Euro. The Company utilizes cross-currency swaps to mitigate the effect of the foreign currency exchange rate ~~fluctuations. As of September 27, 2020~~ and ~~December 31, 2019, HDFS had cross-currency swaps outstanding with a notional value of $1.37 billion and $660.8 million, respectively. HDFS estimates that a 10% adverse change in~~interest rate fluctuations related to foreign denominated debt. There have been no material changes to the ~~underlying~~ foreign currency exchange rate ~~would result in a decrease~~and interest rate market risk information included in the ~~fair value of~~Company's Annual Report on Form 10-K for the ~~swap agreement of approximately $90.0 million and $4.6 million as of September 27, 2020 and~~year ended December 31, ~~2019, respectively.~~2020.

Refer to the Company's Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for further information concerning the Company's market risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls

There were no changes in the Company's internal control over financial reporting during the quarter ended ~~September 27, 2020~~March 28, 2021 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information required under this Item 1 of Part II is contained in Item 1 of Part I of this Quarterly Report on Form 10-Q in Note 1716 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, ~~2019,~~2020, which have not materially changed except as set forth below.

~~The COVID-19 pandemic has adversely impacted~~•Trade policies and changes in trade policies, including the ~~Company's~~imposition of tariffs, their enforcement and downstream consequences, may continue to have a material adverse impact on our business, results of operations and ~~may~~outlook. Tariffs and/or other developments with respect to trade policies, trade agreements and government regulations could have a material adverse impact on the Company's ~~future~~ business, ~~results of operations,~~ financial condition and ~~liquidity~~.

~~During~~results of operations. To date, the ~~first quarter of 2020,~~European Union (EU) has placed a 25% incremental tariff (31% total tariff) on motorcycles imported into the outbreak of a novel strain of coronavirus (COVID-19) spread throughout the world and was subsequently recognized as a pandemic in March 2020. The COVID-19 pandemic has severely restricted the level of economic activity inEU from the U.S. and ~~around~~that is scheduled to increase to a 50% incremental tariff (56% total tariff) effective June 1, 2021. Shipments of motorcycles to the ~~world. The COVID-19 pandemic has led~~European Union are a significant portion of the Company’s total motorcycles sales. Beginning in 2019, the Company obtained regulatory approvals, reflected in five Binding Origin Information (BOI) rulings, that allowed it to supply ~~chain destabilization, facility closures, workforce disruption, and volatility~~its EU markets with certain of its motorcycles produced at its Thailand facilities at tariff rates of 6%. In April 2021, the Company received notification from the Economic Ministry of Belgium that, following a request from the European Union, the Company would be subject to the revocation of the BOI rulings, effective April 19, 2021. Following the revocation, non-electric motorcycles Harley-Davidson imports into the European Union, regardless of origin, will be subject to a total tariff rate of 31% from April 19, 2021 to May 31, 2021. This rate is expected to increase to 56% effective June 1, 2021. This ruling will effectively prohibit the Company from functioning competitively in the ~~economy,~~European Union. The Company is appealing the revocation of the BOIs. It has also sought temporary extended reliance on the 6% tariff rate, for motorcycles produced in Thailand and ~~its~~ordered prior to April 19, 2021. There is no assurance that the appeal will be successful or that the Company will receive the extended reliance. The full impact ~~is not yet known. These impacts may continue to expand in scope, type and severity.~~

~~The Company’s operations and demand for its products have been adversely impacted as a result~~ of the ~~COVID-19 pandemic. The~~revocation is subject to uncertainties that include the following, among other factors: (i) uncertainties regarding the quantity and mix of motorcycles that the Company ~~acted quickly~~imports into the EU; (ii) uncertainties regarding the import prices of motorcycles; (iii) whether the Company will be granted extended reliance on the 6% tariff rate for motorcycles ordered prior to April 19, 2021; (iv) whether the Company will be successful in appealing the revocation of the BOI rulings; (v) uncertainties regarding the size and in alignment with government efforts to protect the safety and health of its employees and the Harley-Davidson community. The Company implemented travel restrictions, enhanced sanitation practices, cancelled events and closed facilities including temporarily suspending global manufacturing. While the Company's global manufacturing has resumed and the impacts on demand, facility closures and other restrictions resulting from the pandemic are expected to be temporary, the duration of the ~~pandemic~~EU tariffs; and (vi) whether and to what extent the Company determines to attempt to pass on the impact of the revocation to dealers and its ~~financial impact~~success in doing so.

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

Without limitation, (i) tariffs currently in place, (ii) the imposition by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition by foreign countries of tariffs on U.S. products, including tariffs imposed in response to U.S. tariffs, could materially increase: (a) the cost of Harley-Davidson products that the Company is offering for sale in relevant countries, (b) the cost of certain products that the Company sources from foreign manufacturers and (c) the prices of certain raw materials that the Company utilizes. The Company may not be able to pass such increased costs on to distributors, independent dealers or their customers, and the Company may not be able to secure sources of certain products and materials that are ~~unknown at this time. To the extent these impacts continue, they are likely~~not subject to tariffs on a timely basis. Such developments could have ana material adverse ~~effect~~impact on the Company's ~~future~~ business, ~~results of operations,~~ financial condition and ~~liquidity.~~

It is likely that the COVID-19 pandemic will continue to have the following adverse impacts, each of which could be material: (i) disruption of the Company’s supply chain; (ii) disruption of the Company's manufacturing and distribution capabilities; (iii) limitation of the ability of the Company’s global independent dealers to operate including their ability to purchase and sell the Company’s products and meet their loan obligations to the Company; (iv) delay or elimination of retail customer purchases, resulting in decreased demand for the Company’s products; (v) reduction of the Company’s retail credit customers' ability to meet their loan obligations on a timely basis or at all; (vi) disruption of global capital markets impacting the Company’s access to capital, cost of capital, and overall liquidity levels; (vii) delay of the Company’s new product development efforts; and/or (viii) other unpredictable impacts. The overall impact to the Company's future business, results of ~~operations, financial condition and liquidity will depend on the duration and severity of the COVID-19 pandemic.~~operations.

The ~~impacts that the~~ Company ~~listed above~~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 ~~impacts~~forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements.

Table of ~~the COVID-19 pandemic are likely to also have the effect of heightening many of the Company’s other risk factors.~~Contents

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

~~Detail related to the~~The Company's share repurchases, which consisted of ~~its common stock based on the date of trade during the quarter ended September 27, 2020 is as follows:~~

2020 Fiscal Month
Total Number of
Shares Purchased(a)
Average Price
Paid per Share Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
June 29 to August 2 7,541 $ 28 7,541 18,246,721
August 3 to August 30 20,069 $ 26 20,069 18,246,721
August 31 to September 27 — $ — — 18,246,721
27,610 $ — 27,610

~~(a)Includes~~ shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares, were as follows during the quarter ended March 28, 2021:

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

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

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

The Harley-Davidson, Inc. 2020 Incentive Stock Plan and predecessor stock plans permit participants to satisfy all or a portion of the statutory federal, state, and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares otherwise issuable under the award, (b) tender back shares received in connection with such award, or (c) deliver other previously owned shares, in each case having a value equal to the amount to be withheld. During the ~~third~~first quarter of ~~2020,~~2021, the Company acquired ~~27,610~~157,856 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock ~~units.~~

~~Item 5. Other Information~~

~~Item 5.02~~

~~On August 14, 2020, the Company~~units and Michelle Kumbier, formerly the Company’s Chief Operating Officer and Senior Vice President, entered into a Settlement & General Release Agreement relating to her departure from the Company. Under the agreement, Ms. Kumbier released all claims against the Company pursuant to a standard release agreement and agreed to restrictions on her ability to provide services to competitive businesses and to solicit any employee of the Company. In return, the Company paid Ms. Kumbier $660,000 (which was equivalent to one year’s salary), less applicable taxes and withholdings. Ms. Kumbier did not receive benefits under the Company’s Executive Severance Policy.performance share units.

Item 6. Exhibits

Refer to the exhibit index immediately following this page.

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Harley-Davidson, Inc.

Exhibit Index to Form 10-Q


Exhibit No.						Description
3.1						Restated Articles of Incorporation of Harley-Davidson, Inc. as amended through May 28, 2020
3.2						Harley-Davidson By-Laws, as amended through May 28, 2020 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K dated May 28, 2020 (File No. 1-9183))
10.1*						~~Form~~Amended and Restated Harley-Davidson, Inc. Director Stock Plan as amended and restated effective May 10, 2018 (incorporated herein by reference to Appendix A to the Company's definitive proxy statement on Schedule 14A for the Company's Annual Meeting of ~~Transition Agreement between the Registrant and each of Messrs. Zeitz, Krause, Niketh, and Root and Ms. Giuffre~~
10.2*						~~Settlement and General Release Agreement between the Registrant and Ms. Kumbier dated August 14, 2020~~Shareholders held May 10, 2018 filed on March 29, 2018 (File No. 1-9183))
31.1						Chief Executive Officer Certification pursuant to Rule 13a-14(a)
31.2						Chief Financial Officer Certification pursuant to Rule 13a-14(a)
32.1						Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101

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

7154

Table of Contents

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 5, 2020~~May 6, 2021			/s/ Gina Goetter
			Gina Goetter
			Chief Financial Officer
			(Principal financial officer)


Date: ~~November 5, 2020~~May 6, 2021			/s/ Mark R. Kornetzke
			Mark R. Kornetzke
			Chief Accounting Officer
			(Principal accounting officer)

7255


	December 31, 2019		Effect of Adoption		January 1, 2020
ASSETS
Finance receivables(a)	$	7,572,947	$	0	$	7,572,947
Allowance for credit losses on finance receivables(a)	$	(198,581)	$	(100,604)	$	(299,185)
Deferred income taxes	$	101,204	$	22,484	$	123,688

LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued liabilities	$	582,288	$	109	$	582,397
Retained earnings	$	2,193,997	$	(78,229)	$	2,115,768


	Amount Incurred
	Three months ended September 27, 2020		Nine months ended September 27, 2020

Motorcycles and Related Products	$	43.6	$	84.6
Financial Services	0.3		1.3
	$	43.9	$	85.9


	Three months ended September 29, 2019
	Manufacturing Optimization Plan								Reorganization Plan
	Employee Termination Benefits		Accelerated Depreciation		Other		Total		Employee Termination Benefits		Total
Balance, beginning of period	$	9,661	$	0	$	23	$	9,684	$	144	$	9,828
Restructuring (benefit) expense	(1)		719		6,850		7,568		61		7,629
Utilized – cash	(6,617)		0		(6,535)		(13,152)		(205)		(13,357)
Utilized – non cash	(2)		(719)		(336)		(1,057)		0		(1,057)
Foreign currency changes	(26)		0		0		(26)		0		(26)
Balance, end of period	$	3,015	$	0	$	2	$	3,017	$	0	$	3,017

	Nine months ended September 29, 2019
	Manufacturing Optimization Plan								Reorganization Plan
	Employee Termination Benefits		Accelerated Depreciation		Other		Total		Employee Termination Benefits		Total
Balance, beginning of period	$	24,958	$	0	$	79	$	25,037	$	3,461	$	28,498
Restructuring expense (benefit)	16		14,684		17,316		32,016		(334)		31,682
Utilized – cash	(21,951)		0		(16,357)		(38,308)		(3,101)		(41,409)
Utilized – non cash	(2)		(14,684)		(1,032)		(15,718)		0		(15,718)
Foreign currency changes	(6)		0		(4)		(10)		(26)		(36)
Balance, end of period	$	3,015	$	0	$	2	$	3,017	$	0	$	3,017


	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Wholesale:
No related allowance recorded	$	0	$	0	$	—	$	0	$	0
Related allowance recorded	4,994		4,601		2,100		4,976		0
	$	4,994	$	4,601	$	2,100	$	4,976	$	0


	Operating Leases
2020	$	5,090
2021	18,024
2022	12,808
2023	6,369
2024	4,443
Thereafter	4,927
Future lease payments	51,661
Present value discount	(2,732)
Lease liabilities	$	48,929


	2020						2019
	Transfers		Proceeds		Proceeds, net		Transfers		Proceeds		Proceeds, net
First quarter	$	580,200	$	525,000	$	522,700	$	0	$	0	$	0
Second quarter	1,840,500		1,550,200		$	1,541,800	1,120,000		1,025,000		1,021,300


Third quarter	0		0		0		0		0		0
	$	2,420,700	$	2,075,200	$	2,064,500	$	1,120,000	$	1,025,000	$	1,021,300


	2020		2021-2022		2023-2024		Thereafter		Total
Debt:
Principal payments on debt	$	1,270,429	$	3,965,831	$	2,855,849	$	1,450,000	$	9,542,109
Interest payments on debt	62,395		398,843		198,584		319,945		979,767
	$	1,332,824	$	4,364,674	$	3,054,433	$	1,769,945	$	10,521,876


2020 Fiscal Month	Total Number of Shares Purchased(a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
June 29 to August 2	7,541	$	28	7,541	18,246,721
August 3 to August 30	20,069	$	26	20,069	18,246,721
August 31 to September 27	—	$	—	—	18,246,721
	27,610	$	—	27,610