UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28,September 26, 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 AvenueMilwaukeeWisconsin53208
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (414) 342-4680
None
(Former name, former address and former fiscal year, if changed since last report)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock Par Value $.01 PER SHAREHOGNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No  
The registrant had outstanding 153,665,546153,876,904 shares of common stock as of April 30,October 29, 2021.



HARLEY-DAVIDSON, INC.
Form 10-Q
For The Quarter Ended March 28,September 26, 2021
Part I
Item 1.
Item 2.
Item 3.
Item 4.
Part II
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.



Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three months ended
March 28,
2021
March 29,
2020
Revenue:
Motorcycles and Related Products$1,232,107 $1,099,788 
Financial Services190,400 198,456 
1,422,507 1,298,244 
Costs and expenses:
Motorcycles and Related Products cost of goods sold811,622 780,868 
Financial Services interest expense55,707 52,473 
Financial Services provision for credit losses(22,474)79,419 
Selling, administrative and engineering expense231,844 277,971 
Restructuring benefit(366)
1,076,333 1,190,731 
Operating income346,174 107,513 
Other income, net277 155 
Investment income (loss)1,402 (5,347)
Interest expense7,708 7,755 
Income before provision for income taxes340,145 94,566 
Provision for income taxes81,001 24,871 
Net income$259,144 $69,695 
Earnings per share:
Basic$1.69 $0.46 
Diluted$1.68 $0.45 
Cash dividends per share$0.15 $0.38 
 Three months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Revenue:
Motorcycles and Related Products$1,160,618 $964,029 $3,724,225 $2,733,091 
Financial Services204,692 201,655 595,650 596,064 
1,365,310 1,165,684 4,319,875 3,329,155 
Costs and expenses:
Motorcycles and Related Products cost of goods sold850,193 676,796 2,586,264 2,019,310 
Financial Services interest expense44,770 67,533 149,098 182,193 
Financial Services provision for credit losses11,208 7,835 4,935 178,433 
Selling, administrative and engineering expense254,312 231,721 747,665 734,057 
Restructuring expense615 43,915 1,167 85,864 
1,161,098 1,027,800 3,489,129 3,199,857 
Operating income204,212 137,884 830,746 129,298 
Other income, net858 155 1,825 466 
Investment income198 2,672 4,331 3,082 
Interest expense7,779 7,783 23,209 23,307 
Income before provision for income taxes197,489 132,928 813,693 109,539 
Provision for income taxes34,516 12,710 185,236 11,843 
Net income$162,973 $120,218 $628,457 $97,696 
Earnings per share:
Basic$1.06 $0.78 $4.09 $0.64 
Diluted$1.05 $0.78 $4.06 $0.64 
Cash dividends per share$0.15 $0.02 $0.45 $0.42 
The accompanying notes are integral to the consolidated financial statements.

3

Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 Three months ended
March 28,
2021
March 29,
2020
Net income$259,144 $69,695 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(17,338)(34,455)
Derivative financial instruments17,530 (19,845)
Pension and postretirement benefit plans13,588 11,959 
13,780 (42,341)
Comprehensive income$272,924 $27,354 
 Three months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Net income$162,973 $120,218 $628,457 $97,696 
Other comprehensive income, net of tax:
Foreign currency translation adjustments(17,836)12,737 (33,759)(275)
Derivative financial instruments4,270 (2,101)21,298 (28,255)
Pension and postretirement benefit plans13,588 11,959 40,763 35,876 
22 22,595 28,302 7,346 
Comprehensive income$162,995 $142,813 $656,759 $105,042 
The accompanying notes are integral to the consolidated financial statements.


4

Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)(Unaudited)
March 28,
2021
December 31,
2020
March 29,
2020
ASSETS
Current assets:
Cash and cash equivalents$2,320,645 $3,257,203 $1,465,061 
Accounts receivable, net216,569 143,082 299,148 
Finance receivables, net of allowance of $64,139, $72,632, and $63,8811,798,194 1,509,539 2,358,989 
Inventories, net470,997 523,497 610,924 
Restricted cash185,374 131,642 99,903 
Other current assets195,356 280,470 142,357 
5,187,135 5,845,433 4,976,382 
Finance receivables, net of allowance of $282,094, $318,304, and $271,6154,958,583 4,933,469 4,933,418 
Property, plant and equipment, net718,968 743,784 826,845 
Pension and postretirement assets105,910 95,711 64,802 
Goodwill65,157 65,976 64,063 
Deferred income taxes135,387 158,538 127,856 
Lease assets44,765 45,203 56,496 
Other long-term assets123,083 122,487 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 liabilities570,440 557,214 584,535 
Short-term deposits, net93,887 79,965 
Short-term debt765,263 1,014,274 1,335,664 
Current portion of long-term debt, net1,622,243 2,039,597 2,326,460 
3,454,597 3,981,954 4,580,070 
Long-term deposits, net58,766 
Long-term debt, net5,478,091 5,932,933 4,478,078 
Lease liabilities30,061 30,115 40,053 
Pension and postretirement liabilities103,854 114,206 128,054 
Deferred income taxes8,682 8,607 6,219 
Other long-term liabilities228,551 220,001 215,490 
Commitments and contingencies (Note 16)000
Shareholders’ equity:
Common stock1,690 1,685 1,834 
Additional paid-in-capital1,517,129 1,507,706 1,495,141 
Retained earnings1,520,862 1,284,823 2,126,646 
Accumulated other comprehensive loss(469,637)(483,417)(579,290)
Treasury stock, at cost(593,658)(588,012)(1,352,348)
1,976,386 1,722,785 1,691,983 
$11,338,988 $12,010,601 $11,139,947 
(Unaudited)(Unaudited)
September 26,
2021
December 31,
2020
September 27,
2020
ASSETS
Current assets:
Cash and cash equivalents$2,061,303 $3,257,203 $3,560,950 
Accounts receivable, net282,627 143,082 232,845 
Finance receivables, net of allowance of $62,406, $72,632, and $74,1111,540,822 1,509,539 1,701,478 
Inventories, net475,314 523,497 322,375 
Restricted cash153,873 131,642 160,155 
Other current assets194,481 280,470 178,931 
4,708,420 5,845,433 6,156,734 
Finance receivables, net of allowance of $293,428, $318,304, and $334,5915,322,436 4,933,469 5,142,014 
Property, plant and equipment, net671,836 743,784 785,165 
Pension and postretirement assets132,958 95,711 82,378 
Goodwill63,841 65,976 64,884 
Deferred income taxes128,059 158,538 137,960 
Lease assets47,507 45,203 47,599 
Other long-term assets124,747 122,487 115,541 
$11,199,804 $12,010,601 $12,532,275 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$382,216 $290,904 $289,103 
Accrued liabilities599,852 557,214 561,282 
Short-term deposits, net92,626 79,965 29,999 
Short-term debt749,620 1,014,274 1,227,763 
Current portion of long-term debt, net1,605,798 2,039,597 2,109,284 
3,430,112 3,981,954 4,217,431 
Long-term deposits, net197,644 — — 
Long-term debt, net4,876,292 5,932,933 6,171,676 
Lease liabilities26,017 30,115 31,225 
Pension and postretirement liabilities103,144 114,206 126,232 
Deferred income taxes8,585 8,607 6,219 
Other long-term liabilities224,116 220,001 209,594 
Commitments and contingencies (Note 16)000
Shareholders’ equity:
Common stock1,694 1,685 1,835 
Additional paid-in-capital1,540,235 1,507,706 1,501,410 
Retained earnings1,843,964 1,284,823 2,148,462 
Accumulated other comprehensive loss(455,115)(483,417)(529,603)
Treasury stock, at cost(596,884)(588,012)(1,352,206)
2,333,894 1,722,785 1,769,898 
$11,199,804 $12,010,601 $12,532,275 
5

Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands)
(Unaudited)(Unaudited)
March 28,
2021
December 31,
2020
March 29,
2020
Balances held by consolidated variable interest entities (Note 12):
Finance receivables, net - current$567,887 $530,882 $381,904 
Other assets$4,027 $3,753 $2,262 
Finance receivables, net - non-current$2,113,344 $1,889,472 $1,435,832 
Restricted cash - current and non-current$196,946 $142,892 $99,235 
Current portion of long-term debt, net$692,903 $608,987 $437,488 
Long-term debt, net$1,757,003 $1,585,174 $1,319,357 
(Unaudited)(Unaudited)
September 26,
2021
December 31,
2020
September 27,
2020
Balances held by consolidated variable interest entities (Note 12):
Finance receivables, net - current$531,942 $530,882 $576,750 
Other assets$2,754 $3,753 $3,129 
Finance receivables, net - non-current$1,961,367 $1,889,472 $2,177,875 
Restricted cash - current and non-current$167,865 $142,892 $170,925 
Current portion of long-term debt, net$629,600 $608,987 $677,099 
Long-term debt, net$1,565,022 $1,585,174 $1,886,594 
The accompanying notes are integral to the consolidated financial statements.
6

Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three months ended
March 28,
2021
March 29,
2020
Net cash provided (used) by operating activities (Note 7)$162,781 $(8,582)
Cash flows from investing activities:
Capital expenditures(18,813)(32,928)
Origination of finance receivables(909,138)(780,061)
Collections on finance receivables900,485 841,261 
Other investing activities733 16 
Net cash (used) provided by investing activities(26,733)28,288 
Cash flows from financing activities:
Repayments of medium-term notes(1,050,000)(600,000)
Proceeds from securitization debt597,411 522,694 
Repayments of securitization debt(291,346)(130,918)
Borrowings of asset-backed commercial paper225,187 
Repayments of asset-backed commercial paper(66,894)(67,809)
Net (decrease) increase in unsecured commercial paper(262,517)772,208 
Net increase in credit facilities15,629 
Net increase in deposits72,664 
Dividends paid(23,105)(58,817)
Repurchase of common stock(5,646)(7,071)
Issuance of common stock under share-based plans1,085 34 
Net cash (used) provided by financing activities(1,012,719)655,508 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(5,163)(5,732)
Net (decrease) increase in cash, cash equivalents and restricted cash$(881,834)$669,482 
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$3,409,168 $905,366 
Net (decrease) increase in cash, cash equivalents and restricted cash(881,834)669,482 
Cash, cash equivalents and restricted cash, end of period$2,527,334 $1,574,848 
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents$2,320,645 $1,465,061 
Restricted cash185,374 99,903 
Restricted cash included in Other long-term assets21,315 9,884 
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows$2,527,334 $1,574,848 
 Nine months ended
September 26,
2021
September 27,
2020
Net cash provided by operating activities (Note 7)$925,551 $1,135,068 
Cash flows from investing activities:
Capital expenditures(61,476)(92,295)
Origination of finance receivables(3,444,953)(2,873,259)
Collections on finance receivables2,968,397 2,730,166 
Other investing activities2,485 334 
Net cash used by investing activities(535,547)(235,054)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes— 1,396,602 
Repayments of medium-term notes(1,400,000)(1,400,000)
Proceeds from securitization debt1,169,910 2,064,450 
Repayments of securitization debt(1,013,820)(735,885)
Borrowings of asset-backed commercial paper27,406 225,187 
Repayments of asset-backed commercial paper(206,671)(236,846)
Net (decrease) increase in unsecured commercial paper(261,978)509,978 
Net increase in credit facilities— 150,000 
Net increase in deposits210,144 29,992 
Dividends paid(69,316)(65,002)
Repurchase of common stock(11,545)(7,895)
Issuance of common stock under share-based plans4,324 96 
Net cash (used) provided by financing activities(1,551,546)1,930,677 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,050)6,071 
Net (decrease) increase in cash, cash equivalents and restricted cash$(1,172,592)$2,836,762 
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$3,409,168 $905,366 
Net (decrease) increase in cash, cash equivalents and restricted cash(1,172,592)2,836,762 
Cash, cash equivalents and restricted cash, end of period$2,236,576 $3,742,128 
Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents$2,061,303 $3,560,950 
Restricted cash153,873 160,155 
Restricted cash included in Other long-term assets21,400 21,023 
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows$2,236,576 $3,742,128 
The accompanying notes are integral to the consolidated financial statements.


7

Table of Contents
HARLEY-DAVIDSON, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share amounts)
(Unaudited)
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
 Issued
Shares
Balance
Balance, December 31, 2020168,503,526 $1,685 $1,507,706 $1,284,823 $(483,417)$(588,012)$1,722,785 
Net income— — — 259,144 — — 259,144 
Other comprehensive income, net of tax (Note 17)— — — — 13,780 — 13,780 
Dividends ($0.15 per share)— — — (23,105)— — (23,105)
Repurchase of common stock— — — — — (5,646)(5,646)
Share-based compensation483,326 9,423 — — — 9,428 
Balance, March 28, 2021168,986,852 $1,690 $1,517,129 $1,520,862 $(469,637)$(593,658)$1,976,386 
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Issued
Shares
Balance
Balance, December 31, 2019182,816,536 $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 compensation585,053 4,137 — — 604 4,747 
Cumulative effect of change in accounting— — — (78,229)— — (78,229)
Balance, March 29, 2020183,401,589 $1,834 $1,495,141 $2,126,646 $(579,290)$(1,352,348)$1,691,983 
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
 Issued
Shares
Balance
Balance, December 31, 2020168,503,526 $1,685 $1,507,706 $1,284,823 $(483,417)$(588,012)$1,722,785 
Net income— — — 259,144 — — 259,144 
Other comprehensive income, net of tax (Note 17)— — — — 13,780 — 13,780 
Dividends ($0.15 per share)— — — (23,105)— — (23,105)
Repurchase of common stock— — — — — (5,646)(5,646)
Share-based compensation483,326 9,423 — — — 9,428 
Balance, March 28, 2021168,986,852 1,690 1,517,129 1,520,862 (469,637)(593,658)1,976,386 
Net income— — — 206,340 — — 206,340 
Other comprehensive income, net of tax (Note 17)— — — — 14,500 — 14,500 
Dividends ($0.15 per share)— — — (23,104)— — (23,104)
Repurchase of common stock— — — — — (5,265)(5,265)
Share-based compensation322,015 14,327 — — 1,085 15,415 
Balance, June 27, 2021169,308,867 1,693 1,531,456 1,704,098 (455,137)(597,838)2,184,272 
Net income— — — 162,973 — — 162,973 
Other comprehensive income, net of tax (Note 17)— — — — 22 — 22 
Dividends ($0.15 per share)— — — (23,107)— — (23,107)
Repurchase of common stock— — — — — (634)(634)
Share-based compensation49,831 8,779 — — 1,588 10,368 
Balance, September 26, 2021169,358,698 $1,694 $1,540,235 $1,843,964 $(455,115)$(596,884)$2,333,894 
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Issued
Shares
Balance
Balance, December 31, 2019182,816,536 $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 compensation585,053 4,137 — — 604 4,747 
Cumulative effect of change in accounting— — — (78,229)— — (78,229)
Balance, March 29, 2020183,401,589 1,834 1,495,141 2,126,646 (579,290)(1,352,348)1,691,983 
Net loss— — — (92,217)— — (92,217)
Other comprehensive income, net of tax (Note 17)— — — — 27,092 — 27,092 
Dividends ($0.02 per share)— — — (3,100)— — (3,100)
Repurchase of common stock— — — — — (85)(85)
Share-based compensation9,615 — (882)— — 914 32 
Balance, June 28, 2020183,411,204 1,834 1,494,259 2,031,329 (552,198)(1,351,519)1,623,705 
Net income— — — 120,218 — — 120,218 
Other comprehensive income, net of tax (Note 17)— — — — 22,595 — 22,595 
Dividends ($0.02 per share)— — — (3,085)— — (3,085)
Repurchase of common stock— — — — — (739)(739)
Share-based compensation82,329 7,151 — — 52 7,204 
Balance, September 27, 2020183,493,533 $1,835 $1,501,410 $2,148,462 $(529,603)$(1,352,206)$1,769,898 
The accompanying notes are integral to the consolidated financial statements.
8

Table of Contents
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 March 28,September 26, 2021 and March 29,September 27, 2020, the Consolidated statements of operations for the three and nine month periods then ended, the Consolidated statements of comprehensive income for the three and nine month periods then ended, the Consolidated statements of cash flows for the threenine month periods then ended, and the Consolidated statements of shareholders' equity for each of the three month periods then ended.within the nine month periods ended September 26, 2021 and September 27, 2020.
Certain information and disclosures normally included in complete financial statements have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and U.S. generally accepted accounting principles (U.S. GAAP) for interim financial reporting. The consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company's management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
During the first quarter of 2020, the outbreak of a novel strain of coronavirus (COVID-19) spread throughout the world, and it was recognized as a pandemic in March 2020. The COVID-19 pandemic has restricted the level of economic activity in the U.S. and around the world and the full extent of its impact is not yet known. Certain estimates used in the preparation of financial results for the period ending March 28,September 26, 2021 could be impacted in future periods as a result of the COVID-19 pandemic.
2. New Accounting Standards
Accounting Standards Recently Adopted
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 Company adopted ASU 2019-12 on January 1, 2021 on a prospective basis. The adoption of ASU 2019-12 did not have a material impact on the 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
March 28,
2021
March 29,
2020
Motorcycles and Related Products Revenue:
Motorcycles$1,016,334 $899,365 
Parts & Accessories149,859 134,685 
General Merchandise50,323 49,160 
Licensing5,512 8,029 
Other10,079 8,549 
1,232,107 1,099,788 
Financial Services Revenue:
Interest income159,814 170,001 
Other30,586 28,455 
190,400 198,456 
$1,422,507 $1,298,244 
Three months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Motorcycles and Related Products Revenue:
Motorcycles$885,626 $684,344 $2,931,669 $2,030,448 
Parts & Accessories204,506 209,808 577,035 513,201 
General Merchandise49,424 49,356 155,378 136,321 
Licensing8,481 8,894 22,865 21,826 
Other12,581 11,627 37,278 31,295 
1,160,618 964,029 3,724,225 2,733,091 
Financial Services Revenue:
Interest income174,103 174,464 501,645 512,726 
Other30,589 27,191 94,005 83,338 
204,692 201,655 595,650 596,064 
$1,365,310 $1,165,684 $4,319,875 $3,329,155 
The Company maintains certain deferred revenue balances related to payments received at contract inception in advance of the Company’s performance under the contract and generally relates to the sale of Harley Owners Group® memberships and extended service plan contracts. Deferred revenue is recognized as revenue as the Company performs under the contract. Deferred revenue, included in Accrued liabilities and Other long-term liabilities on the Consolidated balance sheets, was as follows (in thousands):
March 28,
2021
March 29,
2020
September 26,
2021
September 27,
2020
Balance, beginning of periodBalance, beginning of period$36,614 $29,745 Balance, beginning of period$36,614 $29,745 
Balance, end of periodBalance, end of period$36,266 $29,434 Balance, end of period$38,682 $31,209 
Previously deferred revenue recognized as revenue in the three months ended March 28,September 26, 2021 and March 29,September 27, 2020 was $6.2$6.1 million and $6.9$6.3 million, respectively, and $17.9 million and $19.6 million in the nine months ended September 26, 2021 and September 27, 2020, respectively. The Company expects to recognize approximately $14.9$15.0 million of the remaining unearned revenue over the next 12 months and $21.4$23.7 million thereafter.
4. Restructuring Activities
The Company's restructuring activities are included in Restructuring benefitexpense on the Consolidated statements of operations.
In 2020, the Company initiated restructuring activities including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global independent dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. The workforce reduction resulted in the termination of approximately 500 employees. In addition, the India action resulted in the termination of approximately 70 employees.
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Since the inception of thesethe restructuring activities in 2020 through the threenine months ended March 28,September 26, 2021, the Company has incurred cumulative restructuring expenses of $129.6$131.2 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 Motorcyclesexpense by segment and expense of $0.2 millionin the Financial Services segment. as follows (in thousands):
Three months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Motorcycles and Related Products$517 $43,581 $731 $84,586 
Financial Services98 334 436 1,278 
$615 $43,915 $1,167 $85,864 
The Company expects total estimated restructuring expenses of approximately $150$135 million, including approximately $139$123 million and $11$12 million expected to be in incurred in the Motorcycles and Financial Services segments, respectively. Total expected restructuring expenses include approximately $30 million related to employee termination benefits, $90$75 million related to contract termination and other costs and $30 million related to non-current asset adjustments, including accelerated depreciation and other adjustments to the carrying value of non-current assets. The Company expects to incur the remaining estimated restructuring expenses of approximately $20$5 million in 2021.
Changes in accrued restructuring expenses, which are included in Accrued liabilities on the Consolidated balance sheets, were as follows (in thousands). There were no restructuring activities during the three months ended March 29, 2020.:
Three months ended September 26, 2021
Employee Termination BenefitsContract Terminations
& Other
Non-Current Asset AdjustmentsTotal
Balance, beginning of period$1,246 $2,084 $— $3,330 
Restructuring (benefit) expense(165)807 (27)615 
Utilized cash
(397)(1,197)— (1,594)
Utilized non cash
— — 27 27 
Foreign currency changes(7)(21)— (28)
Balance, end of period$677 $1,673 

$— $2,350 
Three months ended September 27, 2020
Employee Termination BenefitsContract Terminations
& Other
Non-Current Asset AdjustmentsTotal
Balance, beginning of period$25,298 $14,270 $— $39,568 
Restructuring expense4,493 23,422 16,000 43,915 
Utilized cash
(11,940)(5,899)— (17,839)
Utilized non cash
— — (16,000)(16,000)
Foreign currency changes166 (54)— 112 
Balance, end of period$18,017 $31,739 

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

$— $2,350 
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Three months ended March 28, 2021Nine months ended September 27, 2020
Employee Termination BenefitsContract Terminations
& Other
Non-Current Asset AdjustmentsTotalEmployee Termination BenefitsContract Terminations
& Other
Non-Current Asset AdjustmentsTotal
Balance, beginning of periodBalance, beginning of period$7,724 $16,196 $$23,920 Balance, beginning of period$— $— $— $— 
Restructuring (benefit) expense(944)1,106 (528)(366)
Restructuring expenseRestructuring expense29,814 37,692 18,358 85,864 
Utilized cash
Utilized cash
(3,661)(12,781)(16,442)
Utilized cash
(11,940)(5,899)— (17,839)
Utilized non cash
Utilized non cash
528 528 
Utilized non cash
— — (18,358)(18,358)
Foreign currency changesForeign currency changes(112)(54)(166)Foreign currency changes143 (54)— 89 
Balance, end of periodBalance, end of period$3,007 $4,467 

$$7,474 Balance, end of period$18,017 $31,739 

$— $49,756 
5. Income Taxes
The Company’s effective income tax rate for the threenine months ended March 28,September 26, 2021 was 23.8%22.8% compared to 26.3%10.8% for the threenine months ended March 29,September 27, 2020. The decrease in the first quarter 2021 effective income tax rate from 2020 was due to the increase in Income before provision for income taxes, resulting in discrete income tax adjustments having a reduced impact on the effective income tax rate for the quarter. The effective income tax rate for the threenine months ended March 28, 2021September 27, 2020 was determined based onimpacted by discrete income tax expenses recorded during the period, including adjustments related to the reassessment of the realizability of certain deferred tax assets and favorable settlements with taxing authorities, which reduced the Company's current projectionsincome tax expense for full-year 2021 financial results.the period.
6. Earnings Per Share
The computation of basic and diluted earnings per share was as follows (in thousands, except per share amounts):
 Three months ended
March 28,
2021
March 29,
2020
Net income$259,144 $69,695 
Basic weighted-average shares outstanding153,478 153,004 
Effect of dilutive securities employee stock compensation plan
1,012 740 
Diluted weighted-average shares outstanding154,490 153,744 
Net earnings per share:
Basic$1.69 $0.46 
Diluted$1.68 $0.45 
 Three months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Net income$162,973 $120,218 $628,457 $97,696 
Basic weighted-average shares outstanding153,863 153,252 153,700 153,153 
Effect of dilutive securities employee stock compensation plan
1,254 663 1,203 637 
Diluted weighted-average shares outstanding155,117 153,915 154,903 153,790 
Net earnings per share:
Basic$1.06 $0.78 $4.09 $0.64 
Diluted$1.05 $0.78 $4.06 $0.64 
Shares of common stock related to share-based compensation that were not included in the effect of dilutive securities because the effect would have been anti-dilutive include 0.60.5 million and 1.71.3 million shares for the three months ended March 28,September 26, 2021 and March 29,September 27, 2020, respectively, and 0.5 million and 1.6 million shares for the nine months ended September 26, 2021 and September 27, 2020, respectively.
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7. Additional Balance Sheet and Cash Flow Information
Investments in Marketable Securities – The Company’s investments in marketable securities consisted of the following (in thousands):
March 28,
2021
December 31,
2020
March 29,
2020
Mutual funds$50,239 $52,061 $44,144 
September 26,
2021
December 31,
2020
September 27,
2020
Mutual funds$48,766 $52,061 $48,845 
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.
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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):
March 28,
2021
December 31,
2020
March 29,
2020
September 26,
2021
December 31,
2020
September 27,
2020
Raw materials and work in processRaw materials and work in process$251,199 $211,979 $245,384 Raw materials and work in process$279,699 $211,979 $152,740 
Motorcycle finished goodsMotorcycle finished goods185,590 281,132 272,648 Motorcycle finished goods178,315 281,132 125,930 
Parts & Accessories and General MerchandiseParts & Accessories and General Merchandise88,291 84,469 149,318 Parts & Accessories and General Merchandise86,977 84,469 100,131 
Inventory at lower of FIFO cost or net realizable valueInventory at lower of FIFO cost or net realizable value525,080 577,580 667,350 Inventory at lower of FIFO cost or net realizable value544,991 577,580 378,801 
Excess of FIFO over LIFO costExcess of FIFO over LIFO cost(54,083)(54,083)(56,426)Excess of FIFO over LIFO cost(69,677)(54,083)(56,426)
$470,997 $523,497 $610,924 $475,314 $523,497 $322,375 
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$290.3 million, $80.0 million and $80.0$30.0 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of March 28,September 26, 2021, and December 31, 2020, and September 27, 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,September 26, 2021 were as follows (in thousands):
2021$80,000 
202214,000 
20237,000 
202422,000 
2025
Thereafter30,000 
Unamortized fees(347)
$152,653 
2021$47,920 
202245,000 
202365,000 
202458,500 
2025— 
Thereafter74,717 
Unamortized fees(867)
$290,270 
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Operating Cash Flow – The reconciliation of Net income to Net cash provided (used) by operating activities was as follows (in thousands):
 Three months ended
March 28,
2021
March 29,
2020
Cash flows from operating activities:
Net income$259,144 $69,695 
Adjustments to reconcile Net income to Net cash provided (used) by operating activities:
Depreciation and amortization40,221 47,427 
Amortization of deferred loan origination costs19,200 16,739 
Amortization of financing origination fees3,614 2,999 
Provision for long-term employee benefits7,090 7,852 
Employee benefit plan contributions and payments(9,885)(1,608)
Stock compensation expense8,968 3,896 
Net change in wholesale finance receivables related to sales(308,532)(208,183)
Provision for credit losses(22,474)79,419 
Deferred income taxes13,192 (3,803)
Other, net1,171 3,579 
Changes in current assets and liabilities:
Accounts receivable, net(79,012)(47,272)
Finance receivables accrued interest and other
8,947 4,007 
Inventories, net45,086 (23,943)
Accounts payable and accrued liabilities153,597 10,562 
Derivative financial instruments(3,309)2,812 
Other25,763 27,240 
(96,363)(78,277)
Net cash provided (used) by operating activities$162,781 $(8,582)

 Nine months ended
September 26,
2021
September 27,
2020
Cash flows from operating activities:
Net income$628,457 $97,696 
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization122,483 140,057 
Amortization of deferred loan origination costs63,265 52,374 
Amortization of financing origination fees10,426 10,628 
Provision for long-term employee benefits19,640 23,557 
Employee benefit plan contributions and payments(14,677)(5,456)
Stock compensation expense34,032 12,076 
Net change in wholesale finance receivables related to sales(22,031)330,793 
Provision for credit losses4,935 178,433 
Deferred income taxes10,626 (18,978)
Other, net2,094 (10,863)
Changes in current assets and liabilities:
Accounts receivable, net(148,670)29,630 
Finance receivables accrued interest and other
11,088 5,097 
Inventories, net31,874 273,668 
Accounts payable and accrued liabilities168,306 (16,922)
Other current assets3,703 33,278 
297,094 1,037,372 
Net cash provided by operating activities$925,551 $1,135,068 
8. Finance Receivables
The Company provides retail financial services to customers of its independent dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to independent dealer sales of motorcycles to retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.
The Company offers wholesale financing to its independent dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles and related parts and accessories to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.
Finance receivables, net were as follows (in thousands):
March 28,
2021
December 31,
2020
March 29,
2020
September 26,
2021
December 31,
2020
September 27,
2020
Retail finance receivablesRetail finance receivables$6,310,982 $6,344,195 $6,269,247 Retail finance receivables$6,727,956 $6,344,195 $6,585,298 
Wholesale finance receivablesWholesale finance receivables792,028 489,749 1,358,656 Wholesale finance receivables491,136 489,749 666,896 
7,103,010 6,833,944 7,627,903 7,219,092 6,833,944 7,252,194 
Allowance for credit lossesAllowance for credit losses(346,233)(390,936)(335,496)Allowance for credit losses(355,834)(390,936)(408,702)
$6,756,777 $6,443,008 $7,292,407 $6,863,258 $6,443,008 $6,843,492 
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On January 1, 2020, the Company adopted ASU No. 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires an entity to recognize expected lifetime losses on finance receivables upon origination. Under ASU 2016-13, 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.
The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.
The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past loan loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.
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 March 28,September 26, 2021. During the firstthird quarter of 2021, the U.S. economy and the Company’s outlook on economic conditions improved from the fourthsecond quarter of 2020;2021; however, there is uncertainty surrounding the pace of economic recovery remains uncertain as demonstrated by unemployment levels abovethat remain higher than those experienced prior to the COVID-19 pandemic, muted consumer confidence and continuing COVID-19 pandemic-related challenges across the U.S., among other factors. As such, at the end of the firstthird quarter of 2021, the Company’s economic outlook on economic conditions included continued slow economic improvement; however, given the uncertainty surrounding the pace of economic recovery, the Company also included some adverse economic conditionsimprovement in its economic scenario weighting.
Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and others, as appropriate.
Due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and the Company's management’s expectations surrounding the economic forecasts. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.
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Changes in the allowance for credit losses on finance receivables by portfolio were as follows (in thousands):
 Three months ended March 28, 2021
 RetailWholesaleTotal
Balance, beginning of period$371,738 $19,198 $390,936 
Provision for credit losses(22,449)(25)(22,474)
Charge-offs(34,589)(34,589)
Recoveries12,360 12,360 
Balance, end of period$327,060 $19,173 $346,233 
 Three months ended March 29, 2020
 RetailWholesaleTotal
Balance, beginning of period$188,501 $10,080 $198,581 
Cumulative effect of change in accounting(a)
95,558 5,046 100,604 
Provision for credit losses70,417 9,002 79,419 
Charge-offs(55,215)(55,215)
Recoveries12,107 12,107 
Balance, end of period$311,368 $24,128 $335,496 
 Three months ended September 26, 2021Nine months ended September 26, 2021
 RetailWholesaleTotalRetailWholesaleTotal
Balance, beginning of period$342,490 $16,321 $358,811 $371,738 $19,198 $390,936 
Provision for credit losses13,861 (2,653)11,208 10,465 (5,530)4,935 
Charge-offs(24,670)— (24,670)(76,366)— (76,366)
Recoveries10,335 150 10,485 36,179 150 36,329 
Balance, end of period$342,016 $13,818 $355,834 $342,016 $13,818 $355,834 
 Three months ended September 27, 2020Nine months ended September 27, 2020
 RetailWholesaleTotalRetailWholesaleTotal
Balance, beginning of period$389,758 $21,257 $411,015 $188,501 $10,080 $198,581 
Cumulative effect of change in accounting(a)
— — — 95,558 5,046 100,604 
Provision for credit losses8,024 (189)7,835 172,491 5,942 178,433 
Charge-offs(20,378)(2,442)(22,820)(105,452)(2,442)(107,894)
Recoveries12,672 — 12,672 38,978 — 38,978 
Balance, end of period$390,076 $18,626 $408,702 $390,076 $18,626 $408,702 
(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the allowance for loan loss through Retained earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolios at date of adoption.
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 two2 portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.
The amortized cost of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator was as follows (in thousands):
March 28, 2021
202120202019201820172016 & PriorTotal
U.S. Retail:
Super prime$260,359 $725,383 $502,847 $301,839 $134,213 $74,086 $1,998,727 
Prime349,662 1,026,080 706,940 445,201 249,327 183,217 2,960,427 
Sub-prime130,389 395,495 263,203 156,368 96,998 100,827 1,143,280 
740,410 2,146,958 1,472,990 903,408 480,538 358,130 6,102,434 
Canadian Retail:
Super prime13,938 48,309 42,993 24,549 11,116 4,831 145,736 
Prime4,245 17,350 13,055 9,263 5,808 4,178 53,899 
Sub-prime601 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 

September 26, 2021
202120202019201820172016 & PriorTotal
U.S. Retail:
Super prime$896,163 $551,078 $367,490 $206,333 $83,674 $38,494 $2,143,232 
Prime1,228,335 805,349 538,440 323,554 171,308 107,715 3,174,701 
Sub-prime428,238 312,163 207,139 119,730 72,026 64,890 1,204,186 
2,552,736 1,668,590 1,113,069 649,617 327,008 211,099 6,522,119 
Canadian Retail:
Super prime50,110 36,596 31,173 16,701 6,265 2,239 143,084 
Prime16,166 13,904 10,336 7,026 4,228 2,350 54,010 
Sub-prime2,345 2,436 1,694 1,090 704 474 8,743 
68,621 52,936 43,203 24,817 11,197 5,063 205,837 
$2,621,357 $1,721,526 $1,156,272 $674,434 $338,205 $216,162 $6,727,956 
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December 31, 2020
202020192018201720162015 & PriorTotal
U.S. Retail:
Super prime$822,631 $575,977 $355,529 $165,436 $71,360 $29,181 $2,020,114 
Prime1,133,637 794,058 508,713 293,358 156,688 77,046 2,963,500 
Sub-prime435,875 295,403 177,598 111,163 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 prime53,465 48,692 28,581 13,818 5,018 2,011 151,585 
Prime18,568 14,257 10,269 6,727 3,198 2,025 55,044 
Sub-prime3,172 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, 2020September 27, 2020
202020192018201720162015 & PriorTotal202020192018201720162015 & PriorTotal
U.S. Retail:U.S. Retail:U.S. Retail:
Super primeSuper prime$204,937 $825,176 $539,296 $275,621 $140,284 $62,924 $2,048,238 Super prime$730,539 $649,174 $408,201 $196,050 $90,179 $39,749 $2,113,892 
PrimePrime265,365 1,065,132 717,234 441,284 262,421 155,338 2,906,774 Prime993,429 877,714 570,851 336,134 187,067 101,403 3,066,598 
Sub-primeSub-prime108,068 394,291 239,571 155,391 108,531 98,124 1,103,976 Sub-prime387,766 326,537 196,001 124,312 82,975 64,537 1,182,128 
578,370 2,284,599 1,496,101 872,296 511,236 316,386 6,058,988 2,111,734 1,853,425 1,175,053 656,496 360,221 205,689 6,362,618 
Canadian Retail:Canadian Retail:Canadian Retail:
Super primeSuper prime12,819 61,889 39,516 22,186 10,565 4,989 151,964 Super prime48,974 51,939 31,351 16,013 6,526 2,723 157,526 
PrimePrime3,968 16,479 12,389 8,441 4,549 3,929 49,755 Prime17,053 14,681 10,630 7,285 3,555 2,489 55,693 
Sub-primeSub-prime768 2,827 1,919 1,348 921 757 8,540 Sub-prime2,790 2,630 1,706 1,171 685 479 9,461 
17,555 81,195 53,824 31,975 16,035 9,675 210,259 68,817 69,250 43,687 24,469 10,766 5,691 222,680 
$595,925 $2,365,794 $1,549,925 $904,271 $527,271 $326,061 $6,269,247 $2,180,551 $1,922,675 $1,218,740 $680,965 $370,987 $211,380 $6,585,298 
The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated on a quarterly basis.
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The amortized cost of wholesale financial receivables, by vintage and credit quality indicator, was as follows (in thousands):
September 26, 2021
202120202019201820172016 & PriorTotal
Non-Performing$— $— $— $— $— $— $— 
Doubtful— — — — — — — 
Substandard— — — — — — — 
Special Mention— — — — — — — 
Medium Risk— — — — — — — 
Low Risk432,088 19,082 22,821 11,218 4,222 1,705 491,136 
$432,088 $19,082 $22,821 $11,218 $4,222 $1,705 $491,136 
March 28, 2021December 31, 2020
202120202019201820172016 & PriorTotal202020192018201720162015 & PriorTotal
Non-PerformingNon-Performing$$$$$$$Non-Performing$— $— $— $— $— $— $— 
DoubtfulDoubtfulDoubtful— — — — — — — 
SubstandardSubstandardSubstandard— — — — — — — 
Special MentionSpecial Mention567 530 262 17 1,376 Special Mention658 365 31 — — — 1,054 
Medium RiskMedium Risk728 417 1,145 Medium Risk1,925 242 — — — — 2,167 
Low RiskLow Risk600,144 122,970 44,614 12,568 6,392 2,819 789,507 Low Risk388,568 71,441 13,412 7,887 2,297 2,923 486,528 
$600,711 $124,228 $45,293 $12,585 $6,392 $2,819 $792,028 $391,151 $72,048 $13,443 $7,887 $2,297 $2,923 $489,749 

December 31, 2020
202020192018201720162015 & PriorTotal
Non-Performing$$$$$$$
Doubtful
Substandard
Special Mention658 365 31 1,054 
Medium Risk1,925 242 2,167 
Low Risk388,568 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, 2020September 27, 2020
202020192018201720162015 & PriorTotal202020192018201720162015 & PriorTotal
Non-PerformingNon-Performing$$2,376 $1,774 $107 $25 $43 $4,325 Non-Performing$— $— $— $— $— $— $— 
DoubtfulDoubtful478 4,169 529 51 726 5,953 Doubtful— — 14 — — — 14 
SubstandardSubstandard5,375 6,374 391 131 12,271 Substandard277 238 — — — — 515 
Special MentionSpecial Mention5,239 8,001 977 1,268 15,491 Special Mention2,316 1,213 160 — — 1,139 4,828 
Medium RiskMedium Risk8,307 10,996 1,091 23 826 21,243 Medium Risk1,283 448 33 — — — 1,764 
Low RiskLow Risk658,137 574,401 47,101 10,997 6,323 2,414 1,299,373 Low Risk505,328 118,466 18,602 8,551 5,525 3,303 659,775 
$677,536 $606,317 $51,863 $11,315 $6,348 $5,277 $1,358,656 $509,204 $120,365 $18,809 $8,551 $5,525 $4,442 $666,896 
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 $5.2$3.1 million and $6.4 million of accrued interest against interest income during the three months ended March 28,September 26, 2021 and March 29,September 27, 2020, and $11.6 million and $14.5 million during the nine months ended September 26, 2021 and September 27, 2020, respectively. All retail finance receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses (ASC Topic 326) to exclude accrued interest from its allowance for credit losses. Accordingly, as of March 28,September 26, 2021, December 31, 2020 and March 29,September 27, 2020, all retail finance receivables were accounted for as interest-earning receivables.
Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against interest income. As the Company
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follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio.
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There were no charged-off accounts during the three and nine months ended March 28, 2021 and March 29, 2020.September 26, 2021. As such, the Company did not reverse any accrued interest in those periods. The Company reversed $0.4 million of accrued interest related to the charge-off of Non-Performing dealer loans during the three and nine months ended September 27, 2020. There were no dealers on non-accrual status at March 28,September 26, 2021, and December 31, 2020. At March 29, 2020, $4.3 million of wholesale finance receivables outstanding on non-accrual status, and of this, $2.6 million were over 90 days or more past due.September 27, 2020.
Additional information related to the wholesale finance receivables on non-accrual status at March 29, 2020 includes (in thousands):
Amortized Cost, Beginning of PeriodAmortized Cost, End of PeriodInterest Income Recognized
No related allowance recorded$$$
Related allowance recorded4,994 4,325 
$4,994 $4,325 $
The aging analysis of finance receivables was as follows (in thousands):
 March 28, 2021
Current31-60 Days
Past Due
61-90 Days
Past Due
Greater than
90 Days
Past Due
Total
Past Due
Total
Retail finance receivables$6,196,345 $69,032 $23,420 $22,185 $114,637 $6,310,982 
Wholesale finance receivables791,826 128 22 52 202 792,028 
$6,988,171 $69,160 $23,442 $22,237 $114,839 $7,103,010 
 December 31, 2020
Current31-60 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 receivables489,556 166 23 193 489,749 
$6,653,925 $106,984 $39,956 $33,079 $180,019 $6,833,944 
 March 29, 2020
Current31-60 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 receivables1,352,084 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 
 September 26, 2021
Current31-60 Days
Past Due
61-90 Days
Past Due
Greater than
90 Days
Past Due
Total
Past Due
Total
Retail finance receivables$6,561,412 $101,157 $35,273 $30,114 $166,544 $6,727,956 
Wholesale finance receivables490,974 46 92 24 162 491,136 
$7,052,386 $101,203 $35,365 $30,138 $166,706 $7,219,092 
 December 31, 2020
Current31-60 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 receivables489,556 166 23 193 489,749 
$6,653,925 $106,984 $39,956 $33,079 $180,019 $6,833,944 
 September 27, 2020
Current31-60 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 receivables666,335 244 314 561 666,896 
$7,100,977 $96,487 $31,470 $23,260 $151,217 $7,252,194 
Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize economic loss, the Company may modify certain finance receivables in troubled debt restructurings. Total finance receivables in troubled debt restructurings were not significant as of March 28,September 26, 2021, December 31, 2020 and March 29,September 27, 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 2020 and intoStarting in the firstsecond quarter of 2021,2020, the Company offeredgranted 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 quarterhalf of 2021, the volume of payment extensions granted for eligible retail loans declined from the levels experienced during 2020 as a result of the COVID-19 pandemic, but extensions did not return to pre-COVID-19 pandemic levels until the end of the second quarter and intoof 2021. The Company discontinued extensions specific to the COVID-19 pandemic at the beginning of the third quarter of 2020 but had not yet returned2021; however, it continues to pre-COVID-19 pandemic levels. The Company continues to grant standard payment extensions to customers in accordance with its policies.
9. Derivative Financial Instruments and Hedging Activities
The Company is exposed to risks from fluctuations in foreign currency exchange rates, interest rates and commodity prices. To reduce its exposure to such risks, the Company selectively uses derivative financial instruments. All derivative transactions are authorized and executed pursuant to regularly reviewed policies and procedures which prohibit the use of financial instruments for speculative trading purposes.
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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.
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.
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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
 March 28, 2021December 31, 2020March 29, 2020
Notional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued Liabilities
Foreign currency contracts$402,814 $6,356 $6,071 $533,925 $11 $21,927 $414,753 $12,108 $575 
Commodity contracts668 20 671 52 482 74 
Cross-currency swaps1,367,460 73,449 1,367,460 138,622 660,780 41,283 
Interest rate swaps450,000 3,086 900,000 11,398 
$1,770,942 $79,808 $6,091 $2,352,056 $138,633 $25,065 $1,976,015 $12,108 $53,330 
Derivative Financial Instruments
Not Designated as Hedging Instruments
March 28, 2021December 31, 2020March 29, 2020
Notional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued Liabilities
Foreign currency contracts$214,337 $670 $595 $245,494 $737 $435 $182,642 $2,573 $2,194 
Commodity contracts8,172 1,193 40 6,806 849 21 7,769 1,452 
Interest rate caps844,673 170 978,058 47 326,976 
$1,067,182 $2,033 $635 $1,230,358 $1,633 $456 $517,387 $2,575 $3,646 
Derivative Financial Instruments
Designated as Cash Flow Hedging Instruments
 September 26, 2021December 31, 2020September 27, 2020
Notional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued Liabilities
Foreign currency contracts$406,220 $10,174 $502 $533,925 $11 $21,927 $352,933 $2,334 $6,132 
Commodity contracts1,000 458 — 671 — 52 801 95 — 
Cross-currency swaps1,367,460 47,989 — 1,367,460 138,622 — 1,367,460 57,787 292 
Interest rate swaps— — — 450,000 — 3,086 450,000 — 6,184 
$1,774,680 $58,621 $502 $2,352,056 $138,633 $25,065 $2,171,194 $60,216 $12,608 
Derivative Financial Instruments
Not Designated as Hedging Instruments
September 26, 2021December 31, 2020September 27, 2020
Notional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued LiabilitiesNotional
Value
Other Current AssetsAccrued Liabilities
Foreign currency contracts$135,381 $375 $162 $245,494 $737 $435 $284,991 $342 $574 
Commodity contracts9,920 739 30 6,806 849 21 6,854 231 215 
Interest rate caps608,222 112 — 978,058 47 — 1,124,260 60 — 
$753,523 $1,226 $192 $1,230,358 $1,633 $456 $1,416,105 $633 $789 
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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
 Three months endedNine months endedThree months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Foreign currency contracts$8,653 $(6,587)$20,829 $6,250 $(3,504)$3,027 $(16,051)$11,732 
Commodity contracts390 131 546 (26)65 (12)36 (201)
Cross-currency swaps(40,741)63,182 (90,633)49,168 (33,600)59,625 (77,775)83,634 
Treasury rate lock contracts— — — — (127)(124)(375)(370)
Interest rate swaps— (994)397 (7,503)— (3,931)(2,689)(10,500)
$(31,698)$55,732 $(68,861)$47,889 $(37,166)$58,585 $(96,854)$84,295 
 Gain/(Loss)
Recognized in OCI
Gain/(Loss)
Reclassified from AOCL into Income
 Three months endedThree months ended
March 28,
2021
March 29,
2020
March 28,
2021
March 29,
2020
Foreign currency contracts$14,037 $16,899 $(4,953)$3,400 
Commodity contracts(129)(32)(135)
Cross-currency swaps(65,174)(49,609)(65,788)(12,906)
Treasury rate lock contracts(124)(124)
Interest rate swaps397 (5,333)(2,689)(3,116)
$(50,737)$(38,172)$(73,586)$(12,881)
The location and amount of gains and losses recognized in income related to derivative financial instruments designated as cash flow hedges were as follows (in thousands):
 Motorcycles
cost of goods sold
Selling, administrative &
engineering expense
Interest expenseFinancial Services interest expense
Three months ended September 26, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$850,193 $254,312 $7,779 $44,770 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$(3,504)$— $— $— 
Commodity contracts$65 $— $— $— 
Cross-currency swaps$— $(33,600)$— $— 
Treasury rate lock contracts$— $— $(91)$(36)
Three months ended September 27, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$676,796 $231,721 $7,783 $67,533 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$3,027 $— $— $— 
Commodity contracts$(12)$— $— $— 
Cross-currency swaps$— $59,625 $— $— 
Treasury rate lock contracts$— $— $(91)$(33)
Interest rate swaps$— $— $— $(3,931)
 Motorcycles
cost of goods sold
Selling, administrative &
engineering expense
Interest expenseFinancial Services interest expense
Three months ended March 28, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$811,622 $231,844 $7,708 $55,707 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$(4,953)$— $— $— 
Commodity contracts$(32)$— $— $— 
Cross-currency swaps$— $(65,788)$— $— 
Treasury rate lock contracts$— $— $(91)$(33)
Interest rate swap$— $— $— $(2,689)
Three months ended March 29, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$780,868 $277,971 $7,755 $52,473 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$3,400 $— $— $— 
Commodity contracts$(135)$— $— $— 
Cross-currency swaps$— $(12,906)$— $— 
Treasury rate lock contracts$— $— $(91)$(33)
Interest rate swaps$— $— $— $(3,116)
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 Motorcycles
cost of goods sold
Selling, administrative &
engineering expense
Interest expenseFinancial Services interest expense
Nine months ended September 26, 2021
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$2,586,264 $747,665 $23,209 $149,098 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$(16,051)$— $— $— 
Commodity contracts$36 $— $— $— 
Cross-currency swaps$— $(77,775)$— $— 
Treasury rate lock contracts$— $— $(272)$(103)
Interest rate swaps$— $— $— $(2,689)
Nine months ended September 27, 2020
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded$2,019,310 $734,057 $23,307 $182,193 
Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts$11,732 $— $— $— 
Commodity contracts$(201)$— $— $— 
Cross-currency swaps$— $83,634 $— $— 
Treasury rate lock contracts$— $— $(272)$(98)
Interest rate swaps$— $— $— $(10,500)
The amount of net lossgain included in Accumulated other comprehensive loss (AOCL) at March 28,September 26, 2021, estimated to be reclassified into income over the next 12 months was $17.1$9.4 million.
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The amount of gains and losses recognized in income related to derivative financial instruments not designated as hedging instruments were as follows (in thousands). Gains and losses on foreign currency contracts and commodity contracts were recorded in Motorcycles cost of goods sold and the interest rate caps were recorded in Financial Services interest expense.
Amount of Gain/(Loss)
Recognized in Income
Amount of Gain/(Loss)
Recognized in Income
Three months ended Three months endedNine months ended
March 28,
2021
March 29,
2020
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Foreign currency contractsForeign currency contracts$(3,629)$2,194 Foreign currency contracts$2,152 $(3,569)$(3,396)$(1,897)
Commodity contractsCommodity contracts703 (1,551)Commodity contracts102 134 1,528 (859)
Interest rate capsInterest rate caps123 Interest rate caps(39)92 65 519 
$(2,803)$643 $2,215 $(3,343)$(1,803)$(2,237)
The Company is exposed to credit loss risk in the event of non-performance by counterparties to its derivative financial instruments. Although no assurances can be given, the Company does not expect any of the counterparties to its derivative financial instruments to fail to meet their obligations. To manage credit loss risk, the Company evaluates counterparties based on credit ratings and, on a quarterly basis, evaluates each hedge’s net position relative to the counterparty’s ability to cover their position.
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10. Leases
The Company determines if an arrangement is or contains a lease at contract inception. Right-of-use (ROU) assets related to the Company's leases are recorded in Lease assets and lease liabilities are recorded in Accrued liabilities and Lease liabilities on the Consolidated balance sheets
ROU assets represent the Company’s right to use an underlying asset over the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The ROU asset also includes prepaid lease payments and initial direct costs and is reduced for lease incentives paid by the lessor. The discount rate used to determine the present value is generally the Company's incremental borrowing rate because the implicit rate in the lease is not readily determinable. The lease term used to calculate the ROU asset and lease liabilities includes periods covered by options to extend or terminate when the Company is reasonably certain the lease term will include these optional periods.
In accordance with ASC Topic 842, Leases (ASC Topic 842), the Company elected the short-term lease practical expedient that allows entities to recognize lease payments on a straight-line basis over the lease term for leases with a term of 12 months or less. The Company has also elected the practical expedient under ASC Topic 842 allowing entities to not separate non-lease components from lease components, but instead account for such components as a single lease component for all leases except leases involving assets 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 116 years, some of which include options to extend the lease term for periods generally not greater than 5 years and some of which include options to terminate the leases within 1 year. Certain leases also include options to purchase the leased asset. The Company's leases do not contain any material residual value guarantees or material restrictive covenants.
Operating lease expense for the three months ended March 28,September 26, 2021 and March 29,September 27, 2020 was $8.2$6.1 million and $7.3$7.1 million, respectively, and $18.7 million and $20.9 million for the nine months ended September 26, 2021 and September 27, 2020, respectively. This includes variable lease costs related to leases involving assets operated by a third party of approximately $3.1$0.9 million and $1.9$2.1 million for the three months ended March 28,September 26, 2021 and March 29,September 27, 2020, respectively, and $3.4 million and $5.2 million for the nine months ended September 26, 2021 and September 27, 2020, respectively. Other variable and short-term lease costs were not material.
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Balance sheet information related to the Company's leases was as follows (in thousands):
September 26,
2021
December 31,
2020
September 27,
2020
Lease assets$47,507 $45,203 $47,599 
Accrued liabilities$18,468 $17,081 $17,704 
Lease liabilities26,017 30,115 31,225 
$44,485 $47,196 $48,929 
March 28,
2021
December 31,
2020
March 29,
2020
Lease assets$44,765 $45,203 $56,496 
Accrued liabilities$17,021 $17,081 $17,939 
Lease liabilities30,061 30,115 40,053 
$47,082 $47,196 $57,992 
Future maturities of the Company's operating lease liabilities as of March 28,September 26, 2021 were as follows (in thousands):
Operating Leases
2021$5,017 
202217,694 
20239,119 
20246,907 
20253,923 
Thereafter3,406 
Future lease payments46,066 
Present value discount(1,581)
Lease liabilities$44,485 
Operating Leases
2021$13,805 
202214,466 
20236,511 
20244,518 
20256,816 
Thereafter3,677 
Future lease payments49,793 
Present value discount(2,711)
Lease liabilities$47,082 
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Other lease information surrounding the Company's operating leases was as follows (dollars in thousands):
Three months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Cash outflows for amounts included in the measurement of lease liabilities$4,756 $5,274 $20,479 $15,893 
ROU assets obtained in exchange for lease obligations, net of modifications$11,189 $(1,327)$17,390 $327 
Three months ended
March 28,
2021
March 29,
2020
Cash outflows for amounts included in the measurement of lease liabilities$4,947 $5,378 
ROU assets obtained in exchange for lease obligations, net of modifications$5,305 $557 

March 28,
2021
December 31,
2020
March 29,
2020
Weighted-average remaining lease term (in years)3.813.784.20
Weighted-average discount rate2.9 %3.1 %3.3 %

September 26,
2021
December 31,
2020
September 27,
2020
Weighted-average remaining lease term (in years)3.363.783.92
Weighted-average discount rate2.4 %3.1 %3.1 %
11. Debt
Debt with a contractual term less than 12 months is generally classified as short-term and consisted of the following (in thousands):
March 28,
2021
December 31,
2020
March 29,
2020
Unsecured commercial paper$749,801 $1,014,274 $1,335,664 
Global credit facility borrowings15,462 
$765,263 $1,014,274 $1,335,664 
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September 26,
2021
December 31,
2020
September 27,
2020
Unsecured commercial paper$749,620 $1,014,274 $1,077,763 
364-day credit facility borrowings— — 150,000 
$749,620 $1,014,274 $1,227,763 
Debt with a contractual term greater than 12 months is generally classified as long-term and consisted of the following (in thousands): 
March 28,
2021
December 31,
2020
March 29,
2020
September 26,
2021
December 31,
2020
September 27,
2020
Secured debt:Secured debt:Secured debt:
Asset-backed Canadian commercial paper conduit facilityAsset-backed Canadian commercial paper conduit facility$102,543 $116,678 $155,243 Asset-backed Canadian commercial paper conduit facility$98,310 $116,678 $127,500 
Asset-backed U.S. commercial paper conduit facilitiesAsset-backed U.S. commercial paper conduit facilities350,648 402,205 600,000 Asset-backed U.S. commercial paper conduit facilities242,254 402,205 467,338 
Asset-backed securitization debtAsset-backed securitization debt2,109,046 1,800,393 1,161,047 Asset-backed securitization debt1,961,571 1,800,393 2,106,258 
Unamortized discounts and debt issuance costsUnamortized discounts and debt issuance costs(9,788)(8,437)(4,202)Unamortized discounts and debt issuance costs(9,203)(8,437)(9,903)
2,552,449 2,310,839 1,912,088 2,292,932 2,310,839 2,691,193 
Unsecured notes (at par value):Unsecured notes (at par value):Unsecured notes (at par value):
Medium-term notes:Medium-term notes:Medium-term notes:
Due in 2020, issued May 2018LIBOR + 0.50%450,000 
Due in 2020, issued March 20172.40 %350,000 
Due in 2021, issued January 2016Due in 2021, issued January 20162.85 %600,000 600,000 Due in 2021, issued January 20162.85 %— 600,000 600,000 
Due in 2021, issued November 2018Due in 2021, issued November 2018LIBOR + 0.94%450,000 450,000 Due in 2021, issued November 2018LIBOR + 0.94%— 450,000 450,000 
Due in 2021, issued May 2018Due in 2021, issued May 20183.55 %350,000 350,000 350,000 Due in 2021, issued May 20183.55 %— 350,000 350,000 
Due in 2022, issued February 2019Due in 2022, issued February 20194.05 %550,000 550,000 550,000 Due in 2022, issued February 20194.05 %550,000 550,000 550,000 
Due in 2022, issued June 2017Due in 2022, issued June 20172.55 %400,000 400,000 400,000 Due in 2022, issued June 20172.55 %400,000 400,000 400,000 
Due in 2023, issued February 2018Due in 2023, issued February 20183.35 %350,000 350,000 350,000 Due in 2023, issued February 20183.35 %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 
Due in 2023, issued May 2020(a)
4.94 %756,763 797,206 760,890 
Due in 2024, issued November 2019(b)
Due in 2024, issued November 2019(b)
3.14 %704,304 735,882 660,030 
Due in 2024, issued November 2019(b)
3.14 %698,550 735,882 702,360 
Due in 2025, issued June 2020Due in 2025, issued June 20203.35 %700,000 700,000 Due in 2025, issued June 20203.35 %700,000 700,000 700,000 
Unamortized discounts and debt issuance costsUnamortized discounts and debt issuance costs(13,564)(15,374)(11,046)Unamortized discounts and debt issuance costs(10,649)(15,374)(17,289)
3,803,736 4,917,714 4,148,984 3,444,664 4,917,714 4,845,961 
Senior notes:
Due in 2025, issued July 20153.50 %450,000 450,000 450,000 
Due in 2045, issued July 20154.625 %300,000 300,000 300,000 
Unamortized discounts and debt issuance costs(5,851)(6,023)(6,534)
744,149 743,977 743,466 
4,547,885 5,661,691 4,892,450 
Long-term debt7,100,334 7,972,530 6,804,538 
Current portion of long-term debt, net(1,622,243)(2,039,597)(2,326,460)
Long-term debt, net$5,478,091 $5,932,933 $4,478,078 
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September 26,
2021
December 31,
2020
September 27,
2020
Senior notes:
Due in 2025, issued July 20153.50 %450,000 450,000 450,000 
Due in 2045, issued July 20154.625 %300,000 300,000 300,000 
Unamortized discounts and debt issuance costs(5,506)(6,023)(6,194)
744,494 743,977 743,806 
4,189,158 5,661,691 5,589,767 
Long-term debt6,482,090 7,972,530 8,280,960 
Current portion of long-term debt, net(1,605,798)(2,039,597)(2,109,284)
Long-term debt, net$4,876,292 $5,932,933 $6,171,676 
(a)Euro denominated, €650.0 million par value remeasured to U.S. dollar at March 28,September 26, 2021, and December 31, 2020, and September 27, 2020, respectively
(b)Euro denominated, €600.0 million par value remeasured to U.S. dollar at March 28,September 26, 2021, December 31, 2020, and March 29,September 27, 2020, respectively

The Company's future principal payments on debt obligations as of March 28,September 26, 2021 were as follows (in thousands):
2021$970,079 
20221,615,337 
20231,752,575 
20241,150,272 
20251,384,747 
Thereafter384,058 
$7,257,068 
2021$1,670,913 
20221,685,613 
20231,829,349 
20241,120,828 
20251,287,560 
Thereafter300,537 
$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.
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The Company is not required, and does not currently intend, to provide any additional financial support to the on- or off-balance sheet VIEs associated with these transactions. Investors and creditors in these transactions only have recourse to the assets held by the VIEs.
The assets and liabilities related to the on-balance sheet asset-backed financings included in the Consolidated balance sheets were as follows (in thousands):
March 28, 2021
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations$2,448,681 $(126,053)$166,694 $2,852 $2,492,174 $2,099,258 
Asset-backed U.S. commercial paper conduit facility378,035 (19,432)30,252 1,175 390,030 350,648 
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility115,742 (5,388)9,743 206 120,303 102,543 
$2,942,458 $(150,873)$206,689 $4,233 $3,002,507 $2,552,449 
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September 26, 2021
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt, net
On-balance sheet assets and liabilities:On-balance sheet assets and liabilities:
Consolidated VIEs:Consolidated VIEs:
Asset-backed securitizationsAsset-backed securitizations$2,362,454 $(119,975)$148,177 $2,228 $2,392,884 $1,952,368 
Asset-backed U.S. commercial paper conduit facilityAsset-backed U.S. commercial paper conduit facility264,226 (13,396)19,688 526 271,044 242,254 
Unconsolidated VIEs:Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facilityAsset-backed Canadian commercial paper conduit facility112,374 (4,729)7,408 157 115,210 98,310 
$2,739,054 $(138,100)$175,273 $2,911 $2,779,138 $2,292,932 
December 31, 2020December 31, 2020
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debtFinance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt, net
On-balance sheet assets and liabilities:On-balance sheet assets and liabilities:On-balance sheet assets and liabilities:
Consolidated VIEs:Consolidated VIEs:Consolidated VIEs:
Asset-backed securitizationsAsset-backed securitizations$2,129,372 $(124,627)$116,268 $2,622 $2,123,635 $1,791,956 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 facilityAsset-backed U.S. commercial paper conduit facility441,402 (25,793)26,624 1,131 443,364 402,205 Asset-backed U.S. commercial paper conduit facility441,402 (25,793)26,624 1,131 443,364 402,205 
Unconsolidated VIEs:Unconsolidated VIEs:Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facilityAsset-backed Canadian commercial paper conduit facility133,976 (6,508)9,073 126 136,667 116,678 Asset-backed Canadian commercial paper conduit facility133,976 (6,508)9,073 126 136,667 116,678 
$2,704,750 $(156,928)$151,965 $3,879 $2,703,666 $2,310,839 $2,704,750 $(156,928)$151,965 $3,879 $2,703,666 $2,310,839 
March 29, 2020September 27, 2020
Finance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debtFinance receivablesAllowance for credit lossesRestricted cashOther assetsTotal assetsAsset-backed debt, net
On-balance sheet assets and liabilities:On-balance sheet assets and liabilities:On-balance sheet assets and liabilities:
Consolidated VIEs:Consolidated VIEs:Consolidated VIEs:
Asset-backed securitizationsAsset-backed securitizations$1,250,382 $(62,159)$61,945 $852 $1,251,020 $1,156,845 Asset-backed securitizations$2,422,841 $(143,775)$138,276 $1,923 $2,419,265 $2,096,355 
Asset-backed U.S. commercial paper conduit facilitiesAsset-backed U.S. commercial paper conduit facilities662,385 (32,872)37,290 1,410 668,213 600,000 Asset-backed U.S. commercial paper conduit facilities505,507 (29,948)32,649 1,206 509,414 467,338 
Unconsolidated VIEs:Unconsolidated VIEs:Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facilityAsset-backed Canadian commercial paper conduit facility182,353 (6,671)10,552 148 186,382 155,243 Asset-backed Canadian commercial paper conduit facility146,140 (6,878)10,253 142 149,657 127,500 
$2,095,120 $(101,702)$109,787 $2,410 $2,105,615 $1,912,088 $3,074,488 $(180,601)$181,178 $3,271 $3,078,336 $2,691,193 
On-Balance Sheet Asset-Backed Securitization VIEs – The Company transfers U.S. retail motorcycle finance receivables to SPEs which in turn issue secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. Each on-balance sheet asset-backed securitization SPE is a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the asset-backed securitization transactions and are not available to pay other obligations or claims of the Company’s creditors until the associated secured debt and other obligations are satisfied. Restricted cash balances held by the SPEs are used only to support the securitizations. There are no amortization schedules for the secured notes; however, the debt is reduced monthly as available collections on the related U.S. retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2022 to 2028.2029.
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The Company is the primary beneficiary of its on-balance sheet asset-backed securitization VIEs because it retains servicing rights and a residual interest in the VIEs in the form of a debt security. As the servicer, the Company is the variable interest holder with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a residual interest holder, the Company has the obligation to absorb losses and the right to receive benefits which could potentially be significant to the VIE.
During the first quarter of 2021, the Company transferred $663.1 millionQuarterly transfers of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $600.0 million, or $597.4 millionSPEs, the respective proceeds, and the respective proceeds, net of discountdiscounts and issuance costs of secured notes through an on-balance sheet asset-backed securitization transaction. During the first quarter of 2020, the Company transferred $580.2 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $525.0 million, or $522.7 million net of discount and issuance costs, of secured notes through an on-balance sheet asset-backed securitization transaction.were as follows (in millions):
20212020
TransfersProceedsProceeds, netTransfersProceedsProceeds, net
First quarter$663.1 $600.0 $597.4 $580.2 $525.0 $522.7 
Second quarter— — — 1,840.5 1,550.2 1,541.8 
Third quarter635.5 575.0 572.5 — — — 
$1,298.6 $1,175.0 $1,169.9 $2,420.7 $2,075.2 $2,064.5 
On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – Until November 25, 2020, the Company had two2 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 two2 agreements into one1 $900.0 million revolving facility agreement with third-party bank-sponsored asset-backed U.S. commercial paper conduits. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party bank-sponsored asset-backed U.S. commercial paper conduits. In addition to the $900.0 million aggregate commitment, the agreement allows for additional borrowings, at the lender’s
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discretion, of up to $300.0 million. Availability under the $900.0 million revolving facility (the U.S. Conduit Facility) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.
Under the U.S. Conduit Facility, the assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. If not funded by a conduit lender through the issuance of commercial paper, the terms of the interest are based on LIBOR. In each of these cases, a program fee is assessed based on the outstanding principal. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 4 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of March 28,September 26, 2021, the U.S. Conduit Facility has an expiration date of November 19, 2021.
The Company is the primary beneficiary of its U.S. Conduit Facility VIE because it retains servicing rights and a residual interest in the VIE in the form of a debt security. As the servicer, the Company is the variable interest holder with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a residual interest holder, the Company has the obligation to absorb losses and the right to receive benefits which could potentially be significant to the VIE.
There were 0no finance receivable transfers under the U.S. Conduit Facility during the first quarternine months ended September 26, 2021 or the second or third quarters of 2021.2020. During the first quarter of 2020, the Company transferred $195.3 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $163.6 million of debt under the Former U.S. Conduit Facilities.
On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – In June 2020,2021, the Company renewed and amended its revolving facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the renewal and amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase from the Company eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding
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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$220.0125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 45 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of March 28,September 26, 2021, the Canadian Conduit has an expiration date of June 25, 2021.27, 2022.
The Company is not the primary beneficiary of the Canadian bank-sponsored, multi-seller conduit VIE; therefore, the Company does not consolidate the VIE. However, the Company treats the conduit facility as a secured borrowing as it maintains effective control over the assets transferred to the VIE and, therefore, does not meet the requirements for sale accounting.
As the Company participates in and does not consolidate the Canadian bank-sponsored, multi-seller conduit VIE, the maximum exposure to loss associated with this VIE, which would only be incurred in the unlikely event that all the finance receivables and underlying collateral have no residual value, was $17.8$16.9 million at March 28,September 26, 2021. The maximum exposure is not an indication of the Company's expected loss exposure.
During the third quarter of 2021, the Company transferred $32.8 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $27.4 million. There were 0no finance receivable transfers under the Canadian Conduit Facility during the first quarterhalf of 2021.2021 or the second or third quarters of 2020. During the first quarter of 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $61.6 million.
Off-Balance Sheet Asset-Backed Securitization VIE – There were 0no off-balance sheet asset-backed securitization transactions during the first quarter ofnine months ended September 26, 2021 or September 27, 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.consolidated. 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 during the first quarter ofnine months ended September 27, 2020.
The unpaid principal balance
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Table of the off-balance sheet retail motorcycle finance receivables serviced by the Company were $27.4 million as of March 29, 2020 of which $0.7 million were 30 days or more delinquent. Credit losses, net of recoveries for the off-balance sheet retail motorcycle finance receivables as of March 29, 2020 were $0.01 million. There was no unpaid principal balance or credit losses, net of recoveries associated with the off-balance sheet retail motorcycle finance receivables as of December 31, 2020 and March 28, 2021.Contents
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):
March 28, 2021 September 26, 2021
BalanceLevel 1Level 2BalanceLevel 1Level 2
Assets:Assets:Assets:
Cash equivalentsCash equivalents$2,069,400 $1,919,400 $150,000 Cash equivalents$1,753,398 $1,503,400 $249,998 
Marketable securitiesMarketable securities50,239 50,239 Marketable securities48,766 48,766 — 
Derivative financial instrumentsDerivative financial instruments81,841 81,841 Derivative financial instruments59,847 — 59,847 
$2,201,480 $1,969,639 $231,841 $1,862,011 $1,552,166 $309,845 
Liabilities:Liabilities:Liabilities:
Derivative financial instrumentsDerivative financial instruments$6,726 $$6,726 Derivative financial instruments$694 $— $694 
December 31, 2020 December 31, 2020
BalanceLevel 1Level 2BalanceLevel 1Level 2
Assets:Assets:Assets:
Cash equivalentsCash equivalents$3,019,884 $2,819,884 $200,000 Cash equivalents$3,019,884 $2,819,884 $200,000 
Marketable securitiesMarketable securities52,061 52,061 Marketable securities52,061 52,061 — 
Derivative financial instrumentsDerivative financial instruments140,266 140,266 Derivative financial instruments140,266 — 140,266 
$3,212,211 $2,871,945 $340,266 $3,212,211 $2,871,945 $340,266 
Liabilities:Liabilities:Liabilities:
Derivative financial instrumentsDerivative financial instruments$25,521 $$25,521 Derivative financial instruments$25,521 $— $25,521 
March 29, 2020 September 27, 2020
BalanceLevel 1Level 2BalanceLevel 1Level 2
Assets:Assets:Assets:
Cash equivalentsCash equivalents$1,207,799 $1,144,800 $62,999 Cash equivalents$3,250,891 $3,150,891 $100,000 
Marketable securitiesMarketable securities44,144 44,144 Marketable securities48,845 48,845 — 
Derivative financial instrumentsDerivative financial instruments14,683 14,683 Derivative financial instruments60,849 — 60,849 
$1,266,626 $1,188,944 $77,682 $3,360,585 $3,199,736 $160,849 
Liabilities:Liabilities:Liabilities:
Derivative financial instrumentsDerivative financial instruments$56,976 $$56,976 Derivative financial instruments$13,397 $— $13,397 
Nonrecurring Fair Value Measurements – Repossessed inventory is recorded at the lower of cost or net realizable value through a nonrecurring fair value measurement. Repossessed inventory was $18.6$18.3 million, $17.7 million and $22.2$17.1 million at March 28,September 26, 2021, December 31, 2020 and March 29,September 27, 2020, respectively, for which the fair value adjustment was $2.4a decrease of $1.4 million, $4.2 million and $10.9$2.9 million, respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.
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Fair Value of Financial Instruments Measured at Cost – The carrying value of the Company's Cash and cash equivalents and Restricted cash approximates their fair values. The fair value and carrying value of the Company’s remaining financial instruments that are measured at cost or amortized cost were as follows (in thousands):
March 28, 2021December 31, 2020March 29, 2020 September 26, 2021December 31, 2020September 27, 2020
Fair ValueCarrying ValueFair ValueCarrying ValueFair ValueCarrying Value Fair ValueCarrying ValueFair ValueCarrying ValueFair ValueCarrying Value
Assets:Assets:Assets:
Finance receivables, netFinance receivables, net$6,930,531 $6,756,777 $6,586,348 $6,443,008 $7,391,948 $7,292,407 Finance receivables, net$7,117,828 $6,863,258 $6,586,348 $6,443,008 $6,954,661 $6,843,492 
Liabilities:Liabilities:Liabilities:
Deposits, netDeposits, net$152,715 $152,653 $79,965 $79,965 $$Deposits, net$292,284 $290,270 $79,965 $79,965 $29,999 $29,999 
Debt:Debt:Debt:
Unsecured commercial paperUnsecured commercial paper$749,801 $749,801 $1,014,274 $1,014,274 $1,335,664 $1,335,664 Unsecured commercial paper$749,620 $749,620 $1,014,274 $1,014,274 $1,077,763 $1,077,763 
Global credit facility borrowingsGlobal credit facility borrowings$15,462 $15,462 $$$$Global credit facility borrowings$— $— $— $— $150,000 $150,000 
Asset-backed U.S. commercial paper conduit facilitiesAsset-backed U.S. commercial paper conduit facilities$350,648 $350,648 $402,205 $402,205 $600,000 $600,000 Asset-backed U.S. commercial paper conduit facilities$242,254 $242,254 $402,205 $402,205 $467,338 $467,338 
Asset-backed Canadian commercial paper conduit facilityAsset-backed Canadian commercial paper conduit facility$102,543 $102,543 $116,678 $116,678 $155,243 $155,243 Asset-backed Canadian commercial paper conduit facility$98,310 $98,310 $116,678 $116,678 $127,500 $127,500 
Asset-backed securitization debtAsset-backed securitization debt$2,120,855 $2,099,258 $1,817,892 $1,791,956 $1,139,076 $1,156,845 Asset-backed securitization debt$1,967,893 $1,952,368 $1,817,892 $1,791,956 $2,123,715 $2,096,355 
Medium-term notesMedium-term notes$3,955,743 $3,803,736 $5,118,928 $4,917,714 $4,013,409 $4,148,984 Medium-term notes$3,583,411 $3,444,664 $5,118,928 $4,917,714 $4,895,006 $4,845,961 
Senior notesSenior notes$789,967 $744,149 $828,141 $743,977 $685,805 $743,466 Senior notes$798,518 $744,494 $828,141 $743,977 $798,411 $743,806 
Finance Receivables, net – The carrying value of retail and wholesale finance receivables is amortized cost less an allowance for credit losses. The fair value of retail finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects current credit, interest rate and prepayment risks associated with similar types of instruments. Fair value is determined based on Level 3 inputs. The amortized cost basis of wholesale finance receivables approximates fair value because they are generally either short-term or have interest rates that adjust with changes in market interest rates.
Deposits, net – The carrying value of deposits is amortized cost. The fair value of deposits is estimated based upon rates currently available for deposits with similar terms and maturities. Fair value is calculated using Level 3 inputs.
Debt – The carrying value of debt is generally amortized cost, net of 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 facilities are tied directly to market rates and fluctuate as market rates change. The fair values of the medium-term notes and senior notes are estimated based upon rates currently available for debt with similar terms and remaining maturities (Level 2 inputs). The fair value of the fixed-rate debt related to on-balance sheet asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities (Level 2 inputs). The fair value of the floating-rate debt related to on-balance sheet asset-backed securitization transactions is calculated using Level 2 inputs and approximates carrying value since the interest rates charged are tied directly to market rates and fluctuate as market rates change.
14. Product Warranty and Recall Campaigns
The Company currently provides a standard two-year limited warranty on all new motorcycles sold worldwide, except in Japan, where the Company currently provides a standard three-year limited warranty. The Company also provides a five-year unlimited warranty on the battery for electric motorcycles. In addition, the Company provides a one-year warranty for parts and accessories. The warranty coverage for the retail customer generally begins when the product is sold to a retail customer. The Company accrues for future warranty claims at the time of sale using an estimated cost based primarily on historical Company claim information.
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Additionally, the Company has from time to time initiated certain voluntary recall campaigns. The Company records estimated recall costs when the liability is both probable and estimable. This generally occurs when the Company's management approves and commits to a recall. The warranty and recall liability is included in Accrued liabilities and Other long-term liabilities on the Consolidated balance sheets. Changes in the Company’s warranty and recall liabilities were as follows (in thousands):
Three months ended Three months endedNine months ended
March 28,
2021
March 29,
2020
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Balance, beginning of periodBalance, beginning of period$69,208 $89,793 Balance, beginning of period$73,626 $83,513 $69,208 $89,793 
Warranties issued during the periodWarranties issued during the period11,672 11,025 Warranties issued during the period9,516 8,564 34,006 25,821 
Settlements made during the periodSettlements made during the period(8,585)(14,157)Settlements made during the period(10,860)(12,886)(29,823)(37,780)
Recalls and changes to pre-existing warranty liabilitiesRecalls and changes to pre-existing warranty liabilities132 (353)Recalls and changes to pre-existing warranty liabilities(569)239 (1,678)1,596 
Balance, end of periodBalance, end of period$72,427 $86,308 Balance, end of period$71,713 $79,430 $71,713 $79,430 
The liability for recall campaigns, included in the balance above, was $25.3$21.9 million, $24.7 million and $33.6$29.8 million at March 28,September 26, 2021, December 31, 2020 and March 29,September 27, 2020, respectively.
15. Employee Benefit Plans
The Company has a qualified pension plan and postretirement healthcare benefit plans. The plans cover certain eligible employees and retirees of the Motorcycles segment. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees. Service cost is allocated among Selling, administrative and engineering expense, Motorcycles cost of goods sold and Inventories, net. Amounts capitalized in inventory are not significant. Non-service cost components of net periodic benefit 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 Three months endedNine months ended
March 28,
2021
March 29,
2020
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Pension and SERPA Benefits:Pension and SERPA Benefits:Pension and SERPA Benefits:
Service costService cost$6,348 $6,806 Service cost$6,348 $6,806 $19,044 $20,418 
Interest costInterest cost15,470 19,112 Interest cost15,472 19,112 46,412 57,335 
Expected return on plan assetsExpected return on plan assets(32,720)(33,764)Expected return on plan assets(32,720)(33,764)(98,160)(101,292)
Amortization of unrecognized:Amortization of unrecognized:Amortization of unrecognized:
Prior service creditPrior service credit(312)(272)Prior service credit(312)(272)(936)(816)
Net lossNet loss18,386 16,372 Net loss18,386 16,372 55,158 49,116 
Settlement lossSettlement loss816 Settlement loss— — 816 — 
Net periodic benefit costNet periodic benefit cost$7,988 $8,254 Net periodic benefit cost$7,174 $8,254 $22,334 $24,761 
Postretirement Healthcare Benefits:Postretirement Healthcare Benefits:Postretirement Healthcare Benefits:
Service costService cost$1,288 $1,201 Service cost$1,288 $1,202 $3,864 $3,605 
Interest costInterest cost1,626 2,336 Interest cost1,626 2,336 4,878 7,008 
Expected return on plan assetsExpected return on plan assets(3,495)(3,467)Expected return on plan assets(3,495)(3,467)(10,485)(10,401)
Amortization of unrecognized:Amortization of unrecognized:Amortization of unrecognized:
Prior service creditPrior service credit(581)(595)Prior service credit(581)(595)(1,743)(1,785)
Net lossNet loss264 123 Net loss264 123 792 369 
Net periodic benefit costNet periodic benefit cost$(898)$(402)Net periodic benefit cost$(898)$(401)$(2,694)$(1,204)
There are no required or planned voluntary qualified pension plan contributions for 2021. The Company expects it will continue to make ongoing benefit payments under the SERPA and postretirement healthcare plans.
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16. Commitments and Contingencies
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.
York Environmental Matter – The Company is involved with government agencies and the U.S. Navy related to a matter involving the cleanup of soil and groundwater contamination at its York, Pennsylvania facility. The York facility was formerly used by the U.S. Navy and AMF prior to the purchase of the York facility by the Company from AMF in 1981. The Company has an agreement with the U.S. Navy which calls for the U.S. Navy and the Company to contribute amounts into a trust equal to 53% and 47%, respectively, of costs associated with environmental investigation and remediation activities at the York facility (Response Costs). A site wide remedial investigation/feasibility study and a proposed final remedy for the York facility have been completed and approved by the Pennsylvania Department of Environmental Protection and the United States Environmental Protection Agency (EPA). The associated cleanup plan documents were approved in February 2020 and the remaining cleanup activities are expected to begin later in 2021.2022. The Company has an accrual for its share of the estimated future Response Costs recorded in Other long-term liabilities on the Consolidated balance sheets. The Company believes the accrual recorded is adequate and this matter is not expected to have a material adverse effect on the Company's consolidated financial statements.
Product Liability Matters – The Company is involved in product liability suits related to the operation of its business. The Company accrues for claim exposures that are probable of occurrence and can be reasonably estimated. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and that product liability suits will not have a material adverse effect on the Company’s consolidated financial statements.
17. Accumulated Other Comprehensive Loss
Changes in Accumulated other comprehensive loss were as follows (in thousands):
Three months ended March 28, 2021Three months ended September 26, 2021
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotalForeign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of periodBalance, beginning of period$(7,589)$(46,116)$(429,712)$(483,417)Balance, beginning of period$(23,512)$(29,088)$(402,537)$(455,137)
Other comprehensive loss, before reclassificationsOther comprehensive loss, before reclassifications(17,074)(50,737)(67,811)Other comprehensive loss, before reclassifications(18,296)(31,698)— (49,994)
Income tax (expense) benefit(264)11,092 10,828 
Income tax benefitIncome tax benefit460 6,928 — 7,388 
(17,338)(39,645)(56,983)(17,836)(24,770)— (42,606)
Reclassifications:Reclassifications:Reclassifications:
Net loss on derivative financial instruments— 73,586 — 73,586 
Net losses on derivative financial instrumentsNet losses on derivative financial instruments— 37,166 — 37,166 
Prior service credits(a)
Prior service credits(a)
— — (893)(893)
Prior service credits(a)
— — (893)(893)
Actuarial losses(a)
Actuarial losses(a)
— — 18,650 18,650 
Actuarial losses(a)
— — 18,650 18,650 
Reclassifications before taxReclassifications before tax73,586 17,757 91,343 Reclassifications before tax— 37,166 17,757 54,923 
Income tax expenseIncome tax expense(16,411)(4,169)(20,580)Income tax expense— (8,126)(4,169)(12,295)
57,175 13,588 70,763 — 29,040 13,588 42,628 
Other comprehensive (loss) incomeOther comprehensive (loss) income(17,338)17,530 13,588 13,780 Other comprehensive (loss) income(17,836)4,270 13,588 22 
Balance, end of periodBalance, end of period$(24,927)$(28,586)$(416,124)$(469,637)Balance, end of period$(41,348)$(24,818)$(388,949)$(455,115)
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Three months ended March 29, 2020Three months ended September 27, 2020
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotalForeign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of periodBalance, beginning of period$(40,813)$(14,586)$(481,550)$(536,949)Balance, beginning of period$(53,825)$(40,740)$(457,633)$(552,198)
Other comprehensive loss, before reclassifications(35,821)(38,172)(73,993)
Income tax benefit1,366 8,267 9,633 
Other comprehensive income, before reclassificationsOther comprehensive income, before reclassifications13,331 55,732 — 69,063 
Income tax expenseIncome tax expense(594)(12,299)— (12,893)
(34,455)(29,905)(64,360)12,737 43,433 — 56,170 
Reclassifications:Reclassifications:Reclassifications:
Net loss on derivative financial instruments— 12,881 — 12,881 
Net gains on derivative financial instrumentsNet gains on derivative financial instruments— (58,585)— (58,585)
Prior service credits(a)
Prior service credits(a)
— — (867)(867)
Prior service credits(a)
— — (867)(867)
Actuarial losses(a)
Actuarial losses(a)
— — 16,495 16,495 
Actuarial losses(a)
— — 16,495 16,495 
Reclassifications before taxReclassifications before tax12,881 15,628 28,509 Reclassifications before tax— (58,585)15,628 (42,957)
Income tax expense(2,821)(3,669)(6,490)
Income tax benefit (expense)Income tax benefit (expense)— 13,051 (3,669)9,382 
10,060 11,959 22,019 — (45,534)11,959 (33,575)
Other comprehensive (loss) income(34,455)(19,845)11,959 (42,341)
Other comprehensive income (loss)Other comprehensive income (loss)12,737 (2,101)11,959 22,595 
Balance, end of periodBalance, end of period$(75,268)$(34,431)$(469,591)$(579,290)Balance, end of period$(41,088)$(42,841)$(445,674)$(529,603)
Nine months ended September 26, 2021
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(7,589)$(46,116)$(429,712)$(483,417)
Other comprehensive loss, before reclassifications(33,648)(68,861)— (102,509)
Income tax (expense) benefit(111)15,026 — 14,915 
(33,759)(53,835)— (87,594)
Reclassifications:
Net losses on derivative financial instruments— 96,854 — 96,854 
Prior service credits(a)
— — (2,679)(2,679)
Actuarial losses(a)
— — 55,950 55,950 
Reclassifications before tax— 96,854 53,271 150,125 
Income tax expense— (21,721)(12,508)(34,229)
— 75,133 40,763 115,896 
Other comprehensive (loss) income(33,759)21,298 40,763 28,302 
Balance, end of period$(41,348)$(24,818)$(388,949)$(455,115)
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Nine months ended September 27, 2020
Foreign currency translation adjustmentsDerivative financial instrumentsPension and postretirement benefit plansTotal
Balance, beginning of period$(40,813)$(14,586)$(481,550)$(536,949)
Other comprehensive (loss) income, before reclassifications(434)47,889 — 47,455 
Income tax benefit (expense)159 (10,718)— (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)— 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)
(a)Amounts reclassified are included in the computation of net periodic benefit cost, discussed further in Note 15
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.
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Select segment information is set forth below (in thousands):
 Three months ended
March 28,
2021
March 29,
2020
Motorcycles and Related Products:
Motorcycles revenue$1,232,107 $1,099,788 
Gross profit420,485 318,920 
Selling, administrative and engineering expense193,546 234,353 
Restructuring benefit(593)
Operating income227,532 84,567 
Financial Services:
Financial Services revenue190,400 198,456 
Financial Services expense71,531 175,510 
Restructuring expense227 
Operating income118,642 22,946 
Operating income$346,174 $107,513 
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 Three months endedNine months ended
September 26,
2021
September 27,
2020
September 26,
2021
September 27,
2020
Motorcycles and Related Products:
Motorcycles revenue$1,160,618 $964,029 $3,724,225 $2,733,091 
Gross profit310,425 287,233 1,137,961 713,781 
Selling, administrative and engineering expense212,243 196,912 626,211 618,912 
Restructuring expense517 43,581 731 84,586 
Operating income97,665 46,740 511,019 10,283 
Financial Services:
Financial Services revenue204,692 201,655 595,650 596,064 
Financial Services expense98,047 110,177 275,487 475,771 
Restructuring expense98 334 436 1,278 
Operating income106,547 91,144 319,727 119,015 
Operating income$204,212 $137,884 $830,746 $129,298 
Total assets for the Motorcycles and Financial Services segments were $2.4$3.0 billion and $8.9$8.2 billion, respectively, as of March 28,September 26, 2021, $2.5 billion and $9.5 billion, respectively, as of December 31, 2020, and $2.5$2.4 billion and $8.6$10.1 billion, respectively, as of March 29,September 27, 2020.
19. Supplemental Consolidating Data
The supplemental consolidating data is presented for informational purposes and is different than segment information due to the allocation of consolidating adjustments to the reportable segments. Supplemental consolidating data is as follows (in thousands):
 Three months ended March 28, 2021
HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$1,238,468 $$(6,361)$1,232,107 
Financial Services188,750 1,650 190,400 
1,238,468 188,750 (4,711)1,422,507 
Costs and expenses:
Motorcycles and Related Products cost of goods sold811,622 811,622 
Financial Services interest expense55,707 55,707 
Financial Services provision for credit losses(22,474)(22,474)
Selling, administrative and engineering expense196,359 40,275 (4,790)231,844 
Restructuring (benefit) expense(593)227 (366)
1,007,388 73,735 (4,790)1,076,333 
Operating income231,080 115,015 79 346,174 
Other income, net277 277 
Investment income1,402 1,402 
Interest expense7,708 7,708 
Income before income taxes225,051 115,015 79 340,145 
Provision for income taxes55,996 25,005 81,001 
Net income$169,055 $90,010 $79 $259,144 

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 March 28, 2021
 HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
ASSETS
Current assets:
Cash and cash equivalents$607,941 $1,712,704 $$2,320,645 
Accounts receivable, net603,273 (386,704)216,569 
Finance receivables, net1,798,194 1,798,194 
Inventories, net470,997 470,997 
Restricted cash185,374 185,374 
Other current assets81,559 113,797 195,356 
1,763,770 3,810,069 (386,704)5,187,135 
Finance receivables, net4,958,583 4,958,583 
Property, plant and equipment, net687,086 31,882 718,968 
Pension and postretirement assets105,910 105,910 
Goodwill65,157 65,157 
Deferred income taxes56,911 79,206 (730)135,387 
Lease assets36,559 8,206 44,765 
Other long-term assets184,876 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 liabilities443,529 125,768 1,143 570,440 
Short-term deposits, net93,887 93,887 
Short-term debt765,263 765,263 
Current portion of long-term debt, net1,622,243 1,622,243 
799,251 3,040,907 (385,561)3,454,597 
Long-term deposits, net58,766 58,766 
Long-term debt, net744,149 4,733,942 5,478,091 
Lease liabilities22,461 7,600 30,061 
Pension and postretirement liabilities103,854 103,854 
Deferred income taxes7,166 1,516 8,682 
Other long-term liabilities179,525 46,920 2,106 228,551 
Commitments and contingencies (Note 16)0000
Shareholders’ equity1,043,863 1,032,224 (99,701)1,976,386 
$2,900,269 $8,921,875 $(483,156)$11,338,988 
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 Three months ended March 28, 2021
HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
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 amortization37,778 2,443 40,221 
Amortization of deferred loan origination costs19,200 19,200 
Amortization of financing origination fees172 3,442 3,614 
Provision for long-term employee benefits7,090 7,090 
Employee benefit plan contributions and payments(9,885)(9,885)
Stock compensation expense8,174 794 8,968 
Net change in wholesale finance receivables related to sales(308,532)(308,532)
Provision for credit losses(22,474)(22,474)
Deferred income taxes3,811 9,812 (431)13,192 
Other, net476 775 (80)1,171 
Changes in current assets and liabilities:
Accounts receivable, net(388,688)309,676 (79,012)
Finance receivables accrued interest and other
8,947 8,947 
Inventories, net45,086 45,086 
Accounts payable and accrued liabilities104,486 354,507 (305,396)153,597 
Derivative financial instruments(3,219)(90)(3,309)
Other18,222 11,271 (3,730)25,763 
(176,497)388,627 (308,493)(96,363)
Net cash (used) provided by operating activities(7,442)478,637 (308,414)162,781 
Cash flows from investing activities:
Capital expenditures(18,427)(386)(18,813)
Origination of finance receivables(1,923,911)1,014,773 (909,138)
Collections on finance receivables1,606,844 (706,359)900,485 
Other investing activities733 733 
Net cash used by investing activities(17,694)(317,453)308,414 (26,733)
 Three months ended September 26, 2021
HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$1,167,432 $— $(6,814)$1,160,618 
Financial Services— 202,080 2,612 204,692 
1,167,432 202,080 (4,202)1,365,310 
Costs and expenses:
Motorcycles and Related Products cost of goods sold850,193 — — 850,193 
Financial Services interest expense— 44,770 — 44,770 
Financial Services provision for credit losses— 11,208 — 11,208 
Selling, administrative and engineering expense216,030 42,686 (4,404)254,312 
Restructuring expense517 98 — 615 
1,066,740 98,762 (4,404)1,161,098 
Operating income100,692 103,318 202 204,212 
Other income, net858 — — 858 
Investment income120,198 — (120,000)198 
Interest expense7,779 — — 7,779 
Income before income taxes213,969 103,318 (119,798)197,489 
Provision for income taxes7,408 27,108 — 34,516 
Net income$206,561 $76,210 $(119,798)$162,973 
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 Three months ended March 28, 2021
HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Cash flows from financing activities:
Repayments of medium-term notes(1,050,000)(1,050,000)
Proceeds from securitization debt597,411 597,411 
Repayments of securitization debt(291,346)(291,346)
Repayments of asset-backed commercial paper(66,894)(66,894)
Net decrease in unsecured commercial paper(262,517)(262,517)
Net increase in credit facilities15,629 15,629 
Net increase in deposits72,664 72,664 
Dividends paid(23,105)(23,105)
Repurchase of common stock(5,646)(5,646)
Issuance of common stock under share-based plans1,085 1,085 
Net cash used by financing activities(27,666)(985,053)(1,012,719)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(5,418)255 (5,163)
Net decrease in cash, cash equivalents and restricted cash$(58,220)$(823,614)$$(881,834)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$666,161 $2,743,007 $$3,409,168 
Net decrease in cash, cash equivalents and restricted cash(58,220)(823,614)(881,834)
Cash, cash equivalents and restricted cash, end of period$607,941 $1,919,393 $$2,527,334 
 Nine months ended September 26, 2021
HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Revenue:
Motorcycles and Related Products$3,742,869 $— $(18,644)$3,724,225 
Financial Services— 590,468 5,182 595,650 
3,742,869 590,468 (13,462)4,319,875 
Costs and expenses:
Motorcycles and Related Products cost of goods sold2,586,264 — — 2,586,264 
Financial Services interest expense— 149,098 — 149,098 
Financial Services provision for credit losses— 4,935 — 4,935 
Selling, administrative and engineering expense635,902 125,053 (13,290)747,665 
Restructuring expense731 436 — 1,167 
3,222,897 279,522 (13,290)3,489,129 
Operating income519,972 310,946 (172)830,746 
Other income, net1,825 — — 1,825 
Investment income244,331 — (240,000)4,331 
Interest expense23,209 — 023,209 
Income before income taxes742,919 310,946 (240,172)813,693 
Provision for income taxes112,974 72,262 — 185,236 
Net income$629,945 $238,684 $(240,172)$628,457 

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 September 26, 2021
 HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
ASSETS
Current assets:
Cash and cash equivalents$1,115,014 $946,289 $— $2,061,303 
Accounts receivable, net590,806 — (308,179)282,627 
Finance receivables, net— 1,540,822 — 1,540,822 
Inventories, net475,314 — — 475,314 
Restricted cash— 153,873 — 153,873 
Other current assets114,221 94,868 (14,608)194,481 
2,295,355 2,735,852 (322,787)4,708,420 
Finance receivables, net— 5,322,436 — 5,322,436 
Property, plant and equipment, net642,253 29,583 — 671,836 
Pension and postretirement assets132,958 — — 132,958 
Goodwill63,841 — — 63,841 
Deferred income taxes43,097 86,011 (1,049)128,059 
Lease assets40,163 7,344 — 47,507 
Other long-term assets191,126 37,370 (103,749)124,747 
$3,408,793 $8,218,596 $(427,585)$11,199,804 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$361,057 $329,338 $(308,179)$382,216 
Accrued liabilities489,988 123,642 (13,778)599,852 
Short-term deposits, net— 92,626 — 92,626 
Short-term debt— 749,620 — 749,620 
Current portion of long-term debt, net— 1,605,798 — 1,605,798 
851,045 2,901,024 (321,957)3,430,112 
Long-term deposits, net— 197,644 — 197,644 
Long-term debt, net744,494 4,131,798 — 4,876,292 
Lease liabilities19,457 6,560 — 26,017 
Pension and postretirement liabilities103,144 — — 103,144 
Deferred income taxes7,166 1,419 — 8,585 
Other long-term liabilities173,178 48,586 2,352 224,116 
Commitments and contingencies (Note 16)0000
Shareholders’ equity1,510,309 931,565 (107,980)2,333,894 
$3,408,793 $8,218,596 $(427,585)$11,199,804 
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 Nine months ended September 26, 2021
HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Cash flows from operating activities:
Net income$629,945 $238,684 $(240,172)$628,457 
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization115,779 6,704 — 122,483 
Amortization of deferred loan origination costs— 63,265 — 63,265 
Amortization of financing origination fees517 9,909 — 10,426 
Provision for long-term employee benefits19,640 — — 19,640 
Employee benefit plan contributions and payments(14,677)— — (14,677)
Stock compensation expense31,089 2,943 — 34,032 
Net change in wholesale finance receivables related to sales— — (22,031)(22,031)
Provision for credit losses— 4,935 — 4,935 
Deferred income taxes4,710 6,028 (112)10,626 
Other, net3,320 (1,397)171 2,094 
Changes in current assets and liabilities:
Accounts receivable, net(379,821)— 231,151 (148,670)
Finance receivables accrued interest and other
— 11,088 — 11,088 
Inventories, net31,874 — — 31,874 
Accounts payable and accrued liabilities162,088 247,740 (241,522)168,306 
Other current assets(11,127)3,952 10,878 3,703 
(36,608)355,167 (21,465)297,094 
Net cash provided by operating activities593,337 593,851 (261,637)925,551 
Cash flows from investing activities:
Capital expenditures(59,128)(2,348)— (61,476)
Origination of finance receivables— (6,157,658)2,712,705 (3,444,953)
Collections on finance receivables— 5,659,465 (2,691,068)2,968,397 
Other investing activities2,485 — — 2,485 
Net cash used by investing activities(56,643)(500,541)21,637 (535,547)
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 Nine months ended September 26, 2021
HDMC EntitiesHDFS EntitiesConsolidating AdjustmentsConsolidated
Cash flows from financing activities:
Repayments of medium-term notes— (1,400,000)— (1,400,000)
Proceeds from securitization debt— 1,169,910 — 1,169,910 
Repayments of securitization debt— (1,013,820)— (1,013,820)
Borrowings of asset-backed commercial paper— 27,406 — 27,406 
Repayments of asset-backed commercial paper— (206,671)— (206,671)
Net decrease in unsecured commercial paper— (261,978)— (261,978)
Net increase in deposits— 210,144 — 210,144 
Dividends paid(69,316)(240,000)240,000 (69,316)
Repurchase of common stock(11,545)— — (11,545)
Issuance of common stock under share-based plans4,324 — — 4,324 
Net cash used by financing activities(76,537)(1,715,009)240,000 (1,551,546)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,304)254 — (11,050)
Net increase (decrease) in cash, cash equivalents and restricted cash$448,853 $(1,621,445)$— $(1,172,592)
Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period$666,161 $2,743,007 $— $3,409,168 
Net increase (decrease) in cash, cash equivalents and restricted cash448,853 (1,621,445)— (1,172,592)
Cash, cash equivalents and restricted cash, end of period$1,115,014 $1,121,562 $— $2,236,576 
20. Subsequent Event
In AprilOn October 30, 2021, the Company received notification from the Economic Ministry of Belgium that, following a request from the European Union (EU), the Company would be subjectU.S. and EU announced an agreement related to the revocationSection 232 tariffs on steel and aluminum that were implemented in 2018 by the U.S. and the subsequent rebalancing tariff measures taken by the EU. This agreement will remove the additional tariffs imposed by the EU beginning in 2018 on the Company’s motorcycles imported into the EU, reducing the total EU tariff rate on the Company’s motorcycles from 31% to 6%, effective January 1, 2022. The EU tariff rate will remain at 31% through the end of Binding Origin Information (BOI) rulings, effective April 19, 2021. Beginning in 2019,2021 rather than increasing to 56% on December 1, 2021, as previously scheduled. The lower 6% tariff rate will apply to all motorcycles imported by 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 competitivelybeginning 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.2022.
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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 Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). Unless the context otherwise requires, all references to the “Company” include Harley-Davidson, Inc. and all its subsidiaries. The Company operates in two segments: Motorcycles and Related Products (Motorcycles) and Financial Services. During 2020, the Company executed a set of actions, referred to as The Rewire. The Rewire was a critical overhaul of the Company's business to set the Company on a new course and provide a solid foundation to execute its 2021-2025 strategic plan, The Hardwire. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for more information on The Rewire and The Hardwire.
The “% Change” figures included in the Results of Operations sectionsections were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented. Certain “% Change” deemed not meaningful (NM) have been excluded.
(1) Note Regarding Forward-Looking Statements
The Company intends that certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” “may,” “will,” “estimates,” “targets,” “intend”“intends,” “forecasts,” “sees,” 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, 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 “Guidance” sections in this Item 2 are only made as of April 19, 2021 and the remaining forward-looking statements in this report are made as of the date of the filing of this report (May 6,(November 4, 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 $259.1$163.0 million, or $1.68$1.05 per diluted share, in the firstthird quarter of 2021, compared to $69.7$120.2 million, or $0.45$0.78 per diluted share, in the firstthird quarter of 2020. In the third quarter of 2021, Motorcycles segment operating income was $97.7 million, up $50.9 million over the third quarter of 2020. The Motorcycles segment reportedincrease in operating income of $227.5 million for the first quarter of 2021 which was up $143.0 million over the first quarter of 2020. Operating income from the Motorcycles segment for the firstthird quarter of 2021 was favorably impacteddriven by a 3.5%an 11.5% increase in wholesale motorcycle shipments, favorableimproved product mix and lower sales incentives and reduced selling, administrative and engineering expenses.restructuring expenses compared to the same quarter last year. Operating income from the Financial Services segment in the firstthird quarter of 2021 was $118.6$106.5 million, up 417.0%$15.4 million compared to the year-ago quarter due primarily to a lower provision for credit losses.interest expense.
Worldwide independent dealer retailRetail sales of new Harley-Davidson motorcycles in the firstthird quarter of 2021 were up 9.4%down 5.6% compared to the firstthird quarter of 2020 led by a 30.6% increase2020. Retail sales in the U.S., partiallythird quarter of 2021 increased 1.9% in North America compared to the year ago quarter, which was more than offset by declines in Europe/Middle East/Africa (EMEA) and Latinthe Company's markets outside of North 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 2020. Refer to "Restructuring Plan Costs and Savings" for additional discussion.
Additional EUEuropean Union Tariffs(1)
Beginning in 2019, the Company operated under Binding Origin Information (BOI) rulings that allowed it to supply its European Union (EU) markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. In April 2021, the Company received notification from the Economic Ministry of Belgium that, following a request from the EU, the Company would be subject to the revocation of Binding Origin Information (BOI)the 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 ratesAs a result of 6%. Following the revocation, all non-electric motorcycles that Harley-Davidson importsimported into the EU, regardless of origin, will bewere subject to a total tariff rate of 31% fromon April 19, 2021 through May 31, 2021. This rate is expectedthat was scheduled to increase to 56% effective June 1, 2021. However, in May 2021, the EU made a decision to delay the increase initially scheduled for June 2021 to December 2021, while tariff negotiations took place between the U.S. and the EU. On October 30, 2021, the U.S. and EU announced an agreement related to the Section 232 tariffs on steel and aluminum that were implemented in 2018 by the U.S. and the subsequent rebalancing tariff measures taken by the EU. This rulingagreement will effectively prohibitremove the additional tariffs imposed by the EU on the Company's motorcycles beginning in 2018, reducing the total EU tariff rate on the Company’s motorcycles from 31% to 6%, effective January 1, 2022. The EU tariff rate will remain at 31% through the end of 2021 rather than increasing to 56% on December 1, 2021 as
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previously scheduled. The lower 6% tariff rate will apply to all motorcycles imported by the Company from functioning competitivelyinto the EU, regardless of origin, beginning in 2022.
Based on the EU. Theagreement, the Company now estimates the impact of the additional EU tariffs in 2021 if unmitigated, to be approximately $135$61 million, andincluding approximately $44 million recognized in the first nine months of 2021. The current estimate is lower than the previous estimate of $80 million reflecting a tariff rate of 31% for the remainder of 2021 as well as the Company's most recent EU volume estimates. In addition, as a result of this agreement, the Company now expects that there will be no impact from additional EU tariffs in 2022. The Company had previously estimated the impact of additional EU tariffs to be approximately $200 million to $225 million on annual basis in future years. Theafter 2021 assuming a total EU tariff rate of 56%.
To date, the Company is appealingcontinues to pursue its appeals of the revocation of the BOIs. It has also soughtBOIs and the denial of its application for temporary extended reliance on the 6% tariff rate for(for motorcycles produced in Thailand and ordered prior to April 19, 2021. There2021), although there is no assurance that the appealthese appeals will continue or be successful or that the Company will receive the extended reliance.successful.
COVID-19 Pandemic & Supply Chain
The Company continues to manage through the impacts of the COVID-19 pandemic keeping safety and community well-being a priority. The full impact of the COVID-19 pandemic on future results depends on future developments, such as the ultimate duration and scope of the pandemic, the success of vaccination programs, the consequences of vaccine requirements, and its impact on the Company's customers, independent dealers, distributors, and suppliers. Future impacts and disruptions could have an adverse effect on production, supply chains, distribution, and demand for the Company's products.
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Supply Chain and Distribution The global supply chain challenges, which the Company believes are primarily linked to the COVID-19 pandemic, continue to impact the Company and the industry. During the first quarternine months of 2021, the Company experienced some disruption and increased costcosts related to the adverse impacts of the COVID-19 pandemic on its global supply chain. To date,chain challenges. As a result of these challenges, the Company has been successfulexperienced cost increases for logistics, raw materials and purchased components, as well as increased manufacturing conversion costs. In the third quarter of 2021, the Company's supply chain cost impact was consistent with what it experienced in mitigating these disruptionsthe second quarter of 2021; however, it did experience increased supplier volatility which impacted production levels for the third quarter. In addition, the Company continued to avoid material adverse impacts onexperience longer shipping times into its abilityinternational markets during the third quarter. The Company expects continued cost pressure in the fourth quarter of 2021 at the same levels experienced in the third quarter.(1) In response to producethe supply chain challenges, the Company has imposed pricing surcharges in the U.S., worked to optimize production schedules to prioritize more profitable models and supply product.markets and enacted tighter operating expense cost controls. The Company expects the global supply chain disruptionschallenges to continue through the remainder of 2021,well into 2022 and the Company will continue to actively work to mitigate these impacts onthe impact to its business.(1)
LiquidityThe Company continues to closely monitor its liquidity in light of the COVID-19 pandemic. At the end of the firstthird quarter of 2021, the Company had $4.0$3.4 billion of available liquidity through cash, cash equivalents and availability under its credit and conduit facilities. The Company continues to closely monitor its liquidity in light of the COVID-19 pandemic; however, during 2021 the Company has gradually reduced its cash and cash equivalents from the elevated December 2020 levels. Liquidity is discussed in more detail under Liquidity and Capital Resources.
Supporting Dealers and RidersCustomersThe 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 byStarting in the COVID-19 pandemic by offeringsecond quarter of 2020, the Company granted an increased amount of short-term adjustments to payment due dates. These temporary extensions do not affect the associated interest rate or loan term. The volume of paymentdate extensions on eligible retail loans hasto help retail customers get through financial difficulties associated with the COVID-19 pandemic. During the first half of 2021, the volume of extensions declined from the levels experienced during 2020 returning to pre-COVID-19 pandemic levels by the end of the second quarter and intoof 2021. The Company discontinued extensions specific to the COVID-19 pandemic at the beginning of the third quarter of 2020 but has not yet returned2021; however, it continues to pre-COVID-19 pandemic levels.grant standard payment extensions to customers in accordance with its policies.
Safety – The Company continues to proactively manage through the COVID-19 pandemic and has implemented robust protocols to keep workers safe in its manufacturing facilities. Most non-production workers continue to work remotely in light of the COVID-19 pandemic.
Guidance(1)
The Company provided the following expectations for the remainder of 2021.
The Company continues to expect 2021 Motorcycles segment revenue growth of 30% to 35% over 2020.
The Company continues to expect 2021 Motorcycles segment operating margin of 6% to 8%. This guidance assumes $61 million of cost related to the additional EU tariffs discussed above under "Additional European Union Tariffs."
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The Company expects to ship approximately 22,000 to 29,000 motorcycles at wholesale in the fourth quarter of 2021. Consistent with the prior year, during the fourth quarter of 2021, the Company will shift motorcycle production to begin producing next year's model year product. The model year changeover will limit the amount of wholesale shipments during the fourth quarter as model year 2022 motorcycles produced will remain in company-owned inventory ahead of the new model year launch in early 2022. The Company expects the financial impact of the model year changeover in the fourth quarter of 2021 to be very similar to the impact of the changeover experienced in the fourth quarter of 2020. This includes an increase in operating expense and capital expenditures in the fourth quarter as compared to the first three quarters of the year to support the product launch. Finally, the Company expects lower restructuring expense in the fourth quarter of 2021 as compared to the fourth quarter of 2020.
The Company expects Financial Services segment operating income growth in 2021 over 2020 of 95% to 105%, up from the previous range of 75% to 85%. The improved outlook takes into account the favorable credit loss experience through the first nine months of 2021, as well as the outlook for the remainder of the year.
The Company now expects capital expenditures of $135 million to $150 million in 2021, down from its previous estimate of $190 to $220 million. The decrease is driven by stronger capital management across projects, as well as changes in the timing of expenditures for key initiatives.
Restructuring Plan Costs and Savings(1)
During 2020, the Company initiated certain restructuring activities as part of The Rewire including a workforce reduction, the termination of certain current and future products, facility changes, optimizing its global independent dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India. These actions included restructuring expenses related to employee termination costs, contract termination costs and non-current asset adjustments. The workforce reduction resulted in the elimination of approximately 700 positions globally, including the termination of approximately 500 employees. In addition, the India action resulted in the termination of approximately 70 employees. The Company incurred approximately $130 million of restructuring expense in connection with these actions during 2020. The Company expects to incur total restructuring expenses for these actions of approximately $150$135 million, including approximately $20$5 million in 2021. The Company continues to expect annual ongoing gross savings resulting from these restructuring activities of approximately $115 million. Refer to Note 4 of the Notes to Consolidated financial statements for additional information regarding the Company's restructuring activities.
Results of Operations for the Three Months Ended March 28,September 26, 2021
Compared to the Three Months Ended March 29,September 27, 2020
Consolidated Results
 Three months ended 
(in thousands, except earnings per share)September 26,
2021
September 27,
2020
Increase
(Decrease)
Operating income from Motorcycles and Related Products$97,665 $46,740 $50,925 
Operating income from Financial Services106,547 91,144 15,403 
Operating income204,212 137,884 66,328 
Other income, net858 155 703 
Investment income198 2,672 (2,474)
Interest expense7,779 7,783 (4)
Income before income taxes197,489 132,928 64,561 
Provision for income taxes34,516 12,710 21,806 
Net income$162,973 $120,218 $42,755 
Diluted earnings per share$1.05 $0.78 $0.27 
 Three months ended  
(in thousands, except earnings per share)March 28,
2021
March 29,
2020
Increase (Decrease)%
 Change
Operating income from Motorcycles and Related Products$227,532 $84,567 $142,965 169.1 %
Operating income from Financial Services118,642 22,946 95,696 417.0 
Operating income346,174 107,513 238,661 222.0 
Other income, net277 155 122 78.7 
Investment income (loss)1,402 (5,347)6,749 (126.2)
Interest expense7,708 7,755 (47)(0.6)
Income before income taxes340,145 94,566 245,579 259.7 
Provision for income taxes81,001 24,871 56,130 225.7 
Net income$259,144 $69,695 $189,449 271.8 %
Diluted earnings per share$1.68 $0.45 $1.23 273.3 %
DuringThe Company reported operating income of $204.2 million in the firstthird quarter of 2021 compared to $137.9 million in the same period last year. Motorcycles segment operating income was $97.7 million in the third quarter of 2021, an improvement of $50.9 million, compared to the third quarter of 2020. Operating income from the Financial Services segment increased $238.7$15.4 million, or 222.0%16.9%, compared to the third quarter of 2020. Refer to the Motorcycles and Related Products Segment and Financial Services Segment sections for a more detailed discussion of the factors affecting operating income.
Investment income decreased $2.5 million in the third quarter of 2021 as compared to 2020 driven by lower income from investments in marketable securities and cash equivalents.
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The effective income tax rate for the third quarter of 2021 was 17.5% compared to 9.6% for the third quarter of 2020. The increase in the effective tax rate is primarily attributable to higher discrete tax adjustments recorded in the third quarter of 2020, including favorable settlements with taxing authorities.
Diluted earnings per share was $1.05 in the third quarter of 2021, up 34.6% from the same period last year. Diluted weighted average shares outstanding increased from 153.9 million in the third quarter of 2020 to 155.1 million in the third quarter of 2021.
Harley-Davidson Motorcycle Retail Sales(a)
Retail unit sales of new Harley-Davidson motorcycles were as follows:
 Three months ended  
September 30,
2021
September 30,
2020
Increase
(Decrease)
%
Change
United States31,699 31,304 395 1.3 %
Canada2,158 1,915 243 12.7 
North America33,857 33,219 638 1.9 
Europe/Middle East/Africa (EMEA)9,389 11,184 (1,795)(16.0)
Asia Pacific6,484 7,631 (1,147)(15.0)
Latin America1,048 1,768 (720)(40.7)
50,778 53,802 (3,024)(5.6)%
(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its dealers supply concerning new retail sales, and the Company does not regularly verify the information that its dealers supply. This information is subject to revision.
Worldwide retail sales of new Harley-Davidson motorcycles were down 5.6% during the third quarter of 2021 compared to the same period last year with growth in North America more than offset by declines in markets outside of North America. Retail sales in the third quarter of 2021 were impacted by strategic decisions made as part of The Rewire, as well as longer global shipping times which continued to impact international markets.
Retail sales in North America were up during the third quarter of 2021, driven by strong performancedemand for the Company's Grand American Touring motorcycles, as well as the successful launch of the Company's new Pan America™ motorcycles. Outside of North America, retail sales were impacted by actions taken under The Rewire to streamline the product portfolio to reduce complexity and direct resources toward the Company's core stronghold products. This includes the Company's decision to discontinue selling Street motorcycles globally and legacy Sportster motorcycles in EMEA and certain countries within the Asia Pacific and Latin American markets. Latin America retail sales were also impacted during the third quarter of 2021 by the reduction of independent dealers and pricing actions executed as part of The Rewire in 2020 to restore profitability in those markets.
At the end of the third quarter of 2021, worldwide retail inventory of new Harley-Davidson motorcycles was down approximately 35%, or approximately 13,000 motorcycles, compared to the third quarter of 2020 and relatively flat to the second quarter of 2021. Retail inventory levels at the end of the third quarter of 2021 have been impacted by stronger demand in North America, as well as global supply chain challenges which impacted the Company's ability to produce at planned levels and resulted in longer shipping times. While retail inventory levels are lower than the Company's original plan, it has seen improvement in desirability as measured by stronger pricing across both new and used motorcycles and improved dealer profitability.
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Motorcycles and Related Products Segment
Motorcycle Unit Shipments
Wholesale Harley-Davidson motorcycle unit shipments were as follows:
 Three months ended  
September 26, 2021September 27, 2020UnitUnit
UnitsMix %UnitsMix %Increase% Change
U.S. motorcycle shipments27,919 58.2 %25,284 58.8 %2,635 10.4 %
Worldwide motorcycle shipments:
Grand American Touring motorcycles(a)
21,988 45.9 %17,230 40.1 %4,758 27.6 %
Cruiser motorcycles(b)
16,531 34.5 %14,775 34.4 %1,756 11.9 
Adventure Touring motorcycles4,507 9.4 %— — %4,507 100.0 
Sportster® / Street motorcycles4,915 10.2 %10,978 25.5 %(6,063)(55.2)
47,941 100.0 %42,983 100.0 %4,958 11.5 %
(a)Includes CVOTM and Trike
(b)Includes Softail® and LiveWire®
The Company shipped 47,941 Harley-Davidson motorcycles worldwide during the third quarter of 2021, which was 11.5% higher than the third quarter of 2020. The mix of Grand American Touring and Cruiser motorcycles shipped during the quarter increased compared to the same period last year, while the mix of Sportster/Street motorcycles declined given the Company's decision to discontinue the Street motorcycle globally and legacy Sportster models in certain markets. In addition, motorcycle unit shipments during the quarter benefited from shipments of the Company's new Pan America™ models, its first Adventure Touring motorcycles which were launched in the second quarter of 2021. During the third quarter of 2021, the Company also began shipping its new Sportster S model.
Segment Results
Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):
 Three months ended  
September 26, 2021September 27, 2020Increase
(Decrease)
%
Change
Revenue:
Motorcycles$885,626 $684,344 $201,282 29.4 %
Parts & Accessories204,506 209,808 (5,302)(2.5)
General Merchandise49,424 49,356 68 0.1 
Licensing8,481 8,894 (413)(4.6)
Other12,581 11,627 954 8.2 
1,160,618 964,029 196,589 20.4 
Cost of goods sold850,193 676,796 173,397 25.6 
Gross profit310,425 287,233 23,192 8.1 
Operating expenses:
Selling & administrative expense172,411 149,780 22,631 15.1 
Engineering expense39,832 47,132 (7,300)(15.5)
Restructuring expense517 43,581 (43,064)(98.8)
212,760 240,493 (27,733)(11.5)
Operating income$97,665 $46,740 $50,925 109.0 %
Operating margin8.4 %4.8 %3.6 pts.
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The estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the third quarter of 2020 to the third quarter of 2021 were as follows (in millions):
Net
Revenue
Cost of
Goods Sold
Gross
Profit
Three months ended September 27, 2020$964.0 $676.8 $287.2 
Volume86.6 54.3 32.3 
Price and sales incentives, net of related costs14.7 (0.7)15.4 
Foreign currency exchange rates and hedging9.4 1.8 7.6 
Shipment mix85.9 41.9 44.0 
Raw material prices— 24.6 (24.6)
Manufacturing and other costs— 51.5 (51.5)
196.6 173.4 23.2 
Three months ended September 26, 2021$1,160.6 $850.2 $310.4 
Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the third quarter of 2020 to the third quarter of 2021 were as follows:
The increase in volume was due to higher wholesale motorcycle shipments.
Revenue and gross profit benefited from higher prices and lower sales incentives including price increases implemented in the U.S. in the third quarter of 2021 to help offset increased cost related to supply chain challenges.
Revenue and gross profit were favorably impacted by stronger foreign currency exchange rates relative to the U.S. dollar, partially offset by unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements recorded in cost of goods sold.
Changes in the shipment mix between motorcycle families had a favorable impact on revenue and gross profit in the third quarter of 2021 due to a higher mix of Grand American Touring and Cruiser models.
Raw material cost increases were driven by higher prices primarily due to supply chain challenges.
Manufacturing and other costs were higher driven by increased supply chain costs and additional EU tariff costs. The impact of additional EU tariffs was $25.6 million in 2021 compared to $1.8 million in 2020. These cost increases were partially offset by a lower fixed cost per unit given increased production volumes compared to the prior year.
Operating expenses were lower in the third quarter of 2021 compared to the same period last year due to lower restructuring expenses partially offset by higher selling and administrative expenses. Selling and administrative expenses were higher given increased spending on The Hardwire initiatives and the absence of last year's cost saving efforts undertaken to preserve cash at the onset of the COVID-19 pandemic. Refer to Note 4 of the Notes to Consolidated financial statements for additional information regarding restructuring expenses.
Financial Services Segment
Segment Results
Condensed statements of operations for the Financial Services segments.segment were as follows (in thousands):
 Three months ended  
 September 26, 2021September 27, 2020(Decrease)
Increase
%
Change
Revenue:
Interest income$174,103 $174,464 $(361)(0.2)%
Other income30,589 27,191 3,398 12.5 
204,692 201,655 3,037 1.5 
Expenses:
Interest expense44,770 67,533 (22,763)(33.7)
Provision for credit losses11,208 7,835 3,373 43.1 
Operating expense42,069 34,809 7,260 20.9 
Restructuring expense98 334 (236)(70.7)
98,145 110,511 (12,366)(11.2)
Operating income$106,547 $91,144 $15,403 16.9 %
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Interest income was lower for the third quarter of 2021, compared to the same period last year, primarily due to lower average outstanding finance receivables. Other income increased in the third quarter of 2021 driven by higher licensing and insurance income. Interest expense decreased due to lower average outstanding debt and a lower cost of funds.
The provision for credit losses increased $3.4 million compared to the third quarter of 2020 primarily driven by higher credit losses. Although the provision for credit losses and actual retail credit losses were unfavorable during the third quarter of 2021, both remain significantly favorable through the first nine months of 2021. Refer to the Results of Operations for the Nine Months Ended September 26, 2021 Compared to the Nine Months Ended September 27, 2020 for a discussion of the 2021 year-to-date provision for credit losses.
Operating expenses increased $7.3 million compared to the third quarter of 2020 due in part to higher employee-related costs and sales and marketing expenses.
Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
 Three months ended
September 26,
2021
September 27,
2020
Balance, beginning of period$358,811 $411,015 
Provision for credit losses11,208 7,835 
Charge-offs, net of recoveries(14,185)(10,148)
Balance, end of period$355,834 $408,702 
Results of Operations for the Nine Months Ended September 26, 2021
Compared to the Nine Months Ended September 27, 2020
Consolidated Results
 Nine months ended 
(in thousands, except earnings per share)September 26,
2021
September 27,
2020
Increase (Decrease)
Operating income from Motorcycles and Related Products$511,019 $10,283 $500,736 
Operating income from Financial Services319,727 119,015 200,712 
Operating income830,746 129,298 701,448 
Other income, net1,825 466 1,359 
Investment income4,331 3,082 1,249 
Interest expense23,209 23,307 (98)
Income before income taxes813,693 109,539 704,154 
Provision for income taxes185,236 11,843 173,393 
Net income$628,457 $97,696 $530,761 
Diluted earnings per share$4.06 $0.64 $3.42 
The Company reported operating income of $830.7 million in the first nine months of 2021 compared to $129.3 million in the same period last year. Motorcycles segment operating income was $511.0 million in the first nine months of 2021, an improvement of $500.7 million compared to the same period last year. Operating income from the Financial Services segment increased $200.7 million compared to the first nine months of 2020. Refer to the Motorcycles and Related Products Segment and Financial Services Segment discussions for a more detailed analysis of the factors affecting operating income.
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Investment income increased $6.7$1.2 million in 2021 as compared to 2020, driven by higher income from investments in cash equivalents and marketable securities.
The Company's effective income tax rate for the first quarternine months of 2021 was 23.8%22.8% compared to 26.3%10.8% for the same period in 2020. The decrease in the 2021 effective income tax rate as compared to 2020 was due to the increase in Income before provision for income taxes, resulting in discrete income tax adjustments having a reduced impact on the effective income tax rate for the quarter.nine months ended September 27, 2020 was impacted by discrete income tax expenses recorded during the period, including favorable settlements with taxing authorities.
Diluted earnings per share was $1.68$4.06 in the first quarternine months of 2021, up 273.3% from a diluted earnings per share of $0.45$0.64 for the same period last year. Diluted weighted average shares outstanding increased from 153.7153.8 million in the first threenine months of 2020 to 154.5154.9 million in the first threenine months of 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:
 Three months ended  
March 31,
2021
March 31,
2020
Increase
(Decrease)
% Change
United States30,983 23,732 7,251 30.6 %
Canada1,799 1,466 333 22.7 
North America32,782 25,198 7,584 30.1 
Europe/Middle East/Africa (EMEA)4,943 7,730 (2,787)(36.1)
Asia Pacific5,793 5,752 41 0.7 
Latin America717 1,759 (1,042)(59.2)
44,235 40,439 3,796 9.4 %
 Nine months ended  
September 30,
2021
September 30,
2020
Increase
(Decrease)
% Change
United States107,421 86,376 21,045 24.4 %
Canada7,403 5,668 1,735 30.6 
North America114,824 92,044 22,780 24.7 
EMEA24,580 29,878 (5,298)(17.7)
Asia Pacific18,263 20,271 (2,008)(9.9)
Latin America2,620 4,760 (2,140)(45.0)
160,287 146,953 13,334 9.1 %
(a)Data source for retail sales figures shown above is new sales warranty and registration information provided by independent Harley-Davidson dealers and compiled by the Company. The Company must rely on information that its independent dealers supply concerning new retail sales, and the Company does not regularly verify the information that its independent dealers supply. This information is subject to revision.
Worldwide retail sales of new Harley-Davidson motorcycles were up 9.4%9.1% during the first quarternine months of 2021 compared to the same period last year when resultsretail sales were first impacted by the initial effectsonset of the COVID-19 pandemic. Retail sales have improved over the prior year, but have been impacted by strategic decisions made as part of The Rewire, as well as longer global shipping times which impacted retail sales in international markets.
The increase in retail sales during the first nine months of 2021 was led by the U.S.North American market which was positively impacted by increased demand for the Company's Grand American Touring and large Cruiser motorcycles. In addition, the increase in retail sales also reflects the Company's decision to shift inits new model year launch timing to the first quarter, which resulted in a shift of the model year 2021 launch from August 2020 to the first quarter of 2021. Finally, retail sales in 2021 and strong demand foralso benefited from the Company's introduction of Pan America™, its new model yearAdventure Touring and Large Cruiser motorcycles.
Retail sales in EMEA declined comparedoutside of North America were impacted by actions taken under The Rewire to streamline the same quarter last year dueproduct portfolio to reduce complexity and direct resources toward the Company's core stronghold products. This includes the Company's decision not to continuediscontinue selling Street ormotorcycles and legacy Sportster motorcycles in Europe, shipping delays, as well as continued COVID-19 pandemic lockdowns.EMEA and certain countries with the Asia Pacific and Latin American markets. Latin America retail sales were adverselyalso impacted during the first quarternine months 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, worldwidemarket. In addition, international retail inventory 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 tosales were adversely impacted by global supply chain challenges resulting in longer shipping times and inventory management which was implementedCOVID-19 pandemic closures 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 the Company worked to build inventory ahead of the riding season. The Company expects retail inventory at the end of the second and third quarters of 2021 to be lower than average historical levels. The Company believes its approach to inventory management is continuing to improve profitability and strengthen retail pricing, with 2021 first quarter retail motorcycle transaction pricing in the U.S. up for all families, most of which are at or near Manufacturer's Suggested Retail Prices.certain markets.
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Motorcycle Registration Data and Market Share – 601+cc(a)
Industry retail registration data for new motorcycles and the Company's market share was as follows:
 Three months ended  
March 31,
2021
March 31,
2020
Increase
(Decrease)
% Change
Industry new motorcycle registrations:
United States(b)
63,412 47,232 16,180 34.3 %
Europe(c)
100,341 95,504 4,837 5.1 %
Harley-Davidson market share data:
United States(b)
48.3 %48.9 %(0.6)pts.
Europe(c)
3.9 %7.6 %(3.7)pts.
 Nine months ended  
September 30,
2021
September 30,
2020
Increase
(Decrease)
% Change
Industry new motorcycle registrations:
United States(b)
238,705 201,820 36,885 18.3 %
Europe(c)
374,387 350,705 23,682 6.8 %
Harley-Davidson market share data:
United States(b)
44.7 %42.0 %2.7 pts.
Europe(c)
5.6 %7.7 %(2.1)pts.
(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt (kW) peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.
(b)United States industry data is derived from information provided by Motorcycle Industry Council. This third-party data is subject to revision and update.
(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Industry data is derived from information provided by Management Services Helwig Schmitt GmbH. This third-party data is subject to revision and update.
Motorcycles and Related Products Segment
Motorcycle Unit Shipments
Wholesale Harley-Davidson motorcycle unit shipments were as follows:
 Three months ended  
March 28, 2021March 29, 2020UnitUnit
UnitsMix %UnitsMix %Increase (Decrease)% Change
U.S. motorcycle shipments40,153 73.3 %33,024 62.3 %7,129 21.6 %
Worldwide motorcycle shipments:
Touring motorcycle units27,316 49.8 %21,597 40.8 %5,719 26.5 %
Cruiser motorcycle units(a)
20,468 37.3 %20,131 38.0 %337 1.7 
Sportster® / Street motorcycle units7,026 12.9 %11,245 21.2 %(4,219)(37.5)
54,810 100.0 %52,973 100.0 %1,837 3.5 %
 Nine months ended  
September 26, 2021September 27, 2020UnitUnit
UnitsMix %UnitsMix %Increase (Decrease)% Change
U.S. motorcycle shipments104,190 65.4 %69,359 55.8 %34,831 50.2 %
Worldwide motorcycle shipments:
Grand American Touring motorcycles(a)
79,485 49.9 %52,656 42.4 %26,829 51.0 %
Cruiser motorcycles(b)
52,117 32.7 %42,660 34.3 %9,457 22.2 
Adventure Touring motorcycles8,555 5.4 %— — %8,555 100.0 
Sportster® / Street motorcycles19,262 12.0 %29,009 23.3 %(9,747)(33.6)
159,419 100.0 %124,325 100.0 %35,094 28.2 %
(a)Includes Softail®, CVOTM, and LiveWireTrike
(b)TMIncludes Softail® and LiveWire®
The Company shipped 54,810159,419 Harley-Davidson motorcycles worldwide during the first quarternine months of 2021, which was 3.5%28.2% higher than the same period in 2020 reflecting the positive impact of the changeshift in new model year launch timing from August 2020 to the first quarter of 2021. In addition, wholesale shipments in the first quarter of 2020last year were adversely impacted by the temporary suspension of the Company's global manufacturing operations during the second quarter in March 2020 resulting fromresponse to the COVID-19 pandemic. The
During the first nine months of 2021, the mix of Grand American Touring and Cruiser motorcycles shipped during the first quarter of 2021 increased as a percent of total shipments while the mix of Sportster/Street motorcycles decreased compared to the same period last year. In addition, motorcycle unit shipments during 2021 include the Company's new Pan America™ models, its first Adventure Touring motorcycles which were launched in the second quarter of 2021.
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Segment Results
Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):
 Nine months ended  
September 26, 2021September 27, 2020Increase
(Decrease)
%
Change
Revenue:
Motorcycles$2,931,669 $2,030,448 $901,221 44.4 %
Parts & Accessories577,035 513,201 63,834 12.4 
General Merchandise155,378 136,321 19,057 14.0 
Licensing22,865 21,826 1,039 4.8 
Other37,278 31,295 5,983 19.1 
3,724,225 2,733,091 991,134 36.3 
Cost of goods sold2,586,264 2,019,310 566,954 28.1 
Gross profit1,137,961 713,781 424,180 59.4 
Operating expenses:
Selling & administrative expense506,245 477,286 28,959 6.1 
Engineering expense119,966 141,626 (21,660)(15.3)
Restructuring expense731 84,586 (83,855)(99.1)
626,942 703,498 (76,556)(10.9)%
Operating income$511,019 $10,283 $500,736 
Operating margin13.7 %0.4 %13.3 pts.
 Three months ended  
March 28, 2021March 29, 2020Increase
(Decrease)
%
Change
Revenue:
Motorcycles$1,016,334 $899,365 $116,969 13.0 %
Parts & Accessories149,859 134,685 15,174 11.3 
General Merchandise50,323 49,160 1,163 2.4 
Licensing5,512 8,029 (2,517)(31.3)
Other10,079 8,549 1,530 17.9 
1,232,107 1,099,788 132,319 12.0 
Cost of goods sold811,622 780,868 30,754 3.9 
Gross profit420,485 318,920 101,565 31.8 
Operating expenses:
Selling & administrative expense152,689 185,577 (32,888)(17.7)
Engineering expense40,857 48,776 (7,919)(16.2)
Restructuring benefit(593)— (593)NM
192,953 234,353 (41,400)(17.7)
Operating income$227,532 $84,567 $142,965 169.1 %
Operating margin18.5 %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 threenine months of 2020 to the first threenine months of 2021 were as follows (in millions):
Net
Revenue
Cost of
Goods Sold
Gross
Profit
Three months ended March 29, 2020$1,100 $781 $319 
Volume35 25 10 
Price and sales incentives, net of related costs13 (4)17 
Foreign currency exchange rates and hedging19 11 
Shipment mix65 57 
Raw material prices— (1)
Manufacturing and other costs— (11)11 
132 30 102 
Three months ended March 28, 2021$1,232 $811 $421 
Net
Revenue
Cost of
Goods Sold
Gross
Profit
Nine months ended September 27, 2020$2,733.1 $2,019.3 $713.8 
Volume662.3 459.7 202.6 
Price and sales incentives, net of related costs31.8 (7.0)38.8 
Foreign currency exchange rates and hedging62.0 29.3 32.7 
Shipment mix235.0 65.6 169.4 
Raw material prices— 45.7 (45.7)
Manufacturing and other costs— (26.4)26.4 
991.1 566.9 424.2 
Nine months ended September 26, 2021$3,724.2 $2,586.2 $1,138.0 
Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first threenine months of 2020 to the first threenine months of 2021 were as follows:
The increase in volume was due to higher wholesale motorcycle shipments and higher Parts & Accessories and General Merchandise sales.
During the first threenine months of 2021, revenue benefited from higher prices and lower sales incentives.
Revenue wasand gross profit were favorably impacted by stronger foreign currency exchange rates relative to the U.S. dollar. The favorable revenue benefit wasdollar partially offset by unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements recorded in cost of goods sold.
Changes in the shipment mix between motorcycle families had a favorable impact on revenue and gross profit during the first quarternine months of 2021 as the increased contribution fromdue primarily to a higher mix of Grand American Touring models more than offset the impact of unit declines of less profitable smalland Cruiser models.
Raw material cost increases were driven by higher prices primarily due to supply chain challenges.
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Manufacturing and other costs decreased primarily due to a lower fixed cost per unit given higher production volumes. Production volumes in 2020 were adversely impacted by the temporary suspension of global manufacturing operations during the second quarter of 2020 in response to the COVID-19 pandemic. The Company also benefited in 2021 from cost savings resulting from the Company's 2020 restructuring actions and lower tariff costs,actions. These favorable impacts to cost were partially offset by higher COVID-19 pandemic related supply chain costs and increased tariff costs.
42

Table The impact of Contentsadditional EU tariffs was $44.3 million in the first nine months of 2021 compared to $17.7 million in the first nine months of 2020.
Operating expenses were lower in the first quarternine months of 2021 compared to the same period in 2020 due primarily to lower restructuring costs as a result ofrelated to the Company's 2020 restructuring actionsactions. Selling, administrative and a shift inengineering expenses benefited from cost savings resulting from the timing of expenses, related to initiatives underCompany's 2020 restructuring actions; however, these benefits were offset by increased spending on The Hardwire initiatives and last year's cost saving efforts undertaken to subsequent quarters in 2021.preserve cash at the onset of the COVID-19 pandemic. Refer to Note 4 of the Notes to Consolidated financial statements for additional information regarding restructuring activities.
Financial Services Segment
Segment Results
Condensed statements of operations for the Financial Services segment were as follows (in thousands):
 Three months ended  
March 28, 2021March 29, 2020(Decrease)
Increase
%
Change
Revenue:
Interest income$159,814 $170,001 $(10,187)(6.0)%
Other income30,586 28,455 2,131 7.5 
190,400 198,456 (8,056)(4.1)
Expenses:
Interest expense55,707 52,473 3,234 6.2 
Provision for credit losses(22,474)79,419 (101,893)(128.3)
Operating expense38,298 43,618 (5,320)(12.2)
Restructuring expense227 — 227 NM
71,758 175,510 (103,752)(59.1)
Operating income$118,642 $22,946 $95,696 417.0 %
 Nine months ended  
September 26, 2021September 27, 2020(Decrease)
Increase
%
Change
Revenue:
Interest income$501,645 $512,726 $(11,081)(2.2)%
Other income94,005 83,338 10,667 12.8 
595,650 596,064 (414)(0.1)
Expenses:
Interest expense149,098 182,193 (33,095)(18.2)
Provision for credit losses4,935 178,433 (173,498)(97.2)
Operating expense121,454 115,145 6,309 5.5 
Restructuring expense436 1,278 (842)(65.9)
275,923 477,049 (201,126)(42.2)
Operating income$319,727 $119,015 $200,712 168.6 %
Interest income was unfavorable inlower for the first quarternine months of 2021, primarily due to lower average outstanding finance receivables, partially offset by a higher average yield. Other income increased due in part to higher insurance and licensing income. Interest expense increaseddecreased due to higherlower average outstanding debt partially offset byand a lower cost of funds.
The provision for credit losses decreased $101.9$173.5 million compared to the first quarternine months of 20212020 driven primarily by improvingimproved economic conditions during the first quarter of 2021 and favorable retail credit loss performance. The provision for credit losses was favorable ascompared to prior year a result of improvement in the U.S. economy and the Company’s outlook on future economic conditions. However, there is uncertainty surrounding the pace of economic recovery remains uncertain as demonstrated by unemployment levels above those experienced prior to the COVID-19 pandemic, muted consumer confidence 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. Atat the end of the firstthird quarter of 2021, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios included continued slow economic improvement; however, the pace of economic recovery remains uncertain. As a result, the Company included some adverse economic conditionsimprovement in its economic scenario weighting. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.
Annualized credit losses for the Company's retail motorcycle loans were 0.84% through the first nine months of 2021 compared to 1.40% through the first nine months of 2020. The favorable retail credit loss performance was due to elevated used motorcycle values at auction in the U.S. and continued lower than normal delinquency levels driven by benefits provided under the U.S. federal stimulus packages and COVID-19 retail payment extensions. Favorable used motorcycle values stemmed from an ongoing low number of motorcycles at auction. The 30-day delinquency rate for retail motorcycle loans at March 28,September 26, 2021 was 2.14%2.76% compared to 3.37%2.59% at March 29,September 27, 2020. The improvedcontinued low delinquency rate was primarilylevels were driven by the benefits provided byunder U.S. federal stimulus packages as well as continuedthe effects of COVID-19 pandemic-related extensions. Starting in the second quarter of 2020, the Company granted COVID-19 pandemic-related extensions granted to help customers get through financial difficulties associated with the pandemic. During the first quarternine months of 2021, the volume of payment extensions
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declined from the levels experienced during 2020 as a result of the COVID-19 pandemic, but extensions did not return to pre-COVID-19 pandemic levels until the end of the second quarter and intoof 2021. Extensions specific to the COVID-19 pandemic were discontinued by the Company at the beginning of the third quarter of 2020 but has not yet returned to pre-COVID-19 pandemic levels.2021. The Company continues to grant standard payment extensions to customers in accordance with its policies. AnnualizedWhile the Company expects the delinquency rate to normalize over time, given the influx of stimulus funding and improved economic conditions, the Company believes it is likely credit losses forwill continue to remain low through 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 supplyremainder of new and used motorcycles.2021.(1)
Operating expenses decreased $5.3increased $6.3 million compared to the first quarternine months of 2020 as the Company aggressively managedprimarily due to higher employee-related 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.sales and marketing expenses.
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Changes in thethe allowance for credit losses on finance receivables were as follows (in thousands):
 Three months ended
March 28,
2021
March 29,
2020
Balance, beginning of period$390,936 $198,581 
Cumulative effect of change in accounting(a)
— 100,604 
Provision for credit losses(22,474)79,419 
Charge-offs, net of recoveries(22,229)(43,108)
Balance, end of period$346,233 $335,496 
 Nine months ended
September 26,
2021
September 27,
2020
Balance, beginning of period$390,936 $198,581 
Cumulative effect of change in accounting(a)
— 100,604 
Provision for credit losses4,935 178,433 
Charge-offs, net of recoveries(40,037)(68,916)
Balance, end of period$355,834 $408,702 
(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the allowance for loan loss through Retained Earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolioportfolios at date of adoption.
Other Matters
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. Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.
Liquidity and Capital Resources(1)
The Company's response to the COVID-19 pandemic included actions implemented during 2020 to preserve cash and secure additional liquidity. The Company continues to monitor its liquidity in light of uncertainty related to the potential impacts of the COVID-19 pandemic. Based on the Company's current outlook, for both the near and longer terms, it expects Motorcycles segment operations to continue to be funded primarily through cash flows generated by operations and Financial Services segment operations to continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and deposits.(1)
The Company's cash allocation priorities are first to fund growth through The Hardwire initiatives, then to reward shareholders through dividends. In addition, givendividends, and finally the Company’s strong cash position, it will be evaluatingCompany may also choose to execute discretionary share repurchases in 2021 and may choose to repurchase shares.2022.
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The Company's strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to the COVID-19 pandemic, the Company increased its cash and cash equivalents during 2020. The Company's cash and cash equivalents remain elevatedhigher than pre-COVID-19 pandemic levels at the end of MarchSeptember 2021, but during the first quarternine months of 2021, the Company began to gradually reduce its cash and cash equivalents from December 2020 levels. The Company’s cash and cash equivalents and availability under its credit and conduit facilities at March 28,September 26, 2021 were as follows (in thousands):
Cash and cash equivalents$2,320,6452,061,303 
 Availability under credit and conduit facilities:
Credit facilities999,737665,380 
Asset-backed U.S. commercial paper conduit facility(a)
600,000657,746 
Asset-backed Canadian commercial paper conduit facility(a)
71,895 
$3,992,2773,384,429 
(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. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or withdraw the Company's ratings based on its assessment of the Company's current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings, as of March 28,September 26, 2021 were as follows:
 Short-TermLong-TermOutlook
Moody’sP3Baa3Stable
Standard & Poor’sA3BBB-Stable
FitchF2BBB+Negative
The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The Financial Services operations could be negatively affected by higher costs of funding and increased difficulty of raising, or potential unsuccessful efforts to raise, funding in the short-term and long-term capital markets.(1) These negative consequences could in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital, reduced funds available through its Financial Services operations to provide loans to independent dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.
Cash Flow Activity
The Company's cash flow activities were as follows (in thousands):
 Nine months ended
September 26, 2021September 27, 2020
Net cash provided by operating activities$925,551 $1,135,068 
Net cash used by investing activities(535,547)(235,054)
Net cash (used) provided by financing activities(1,551,546)1,930,677 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,050)6,071 
Net (decrease) increase in cash, cash equivalents and restricted cash$(1,172,592)$2,836,762 
 Three months ended
March 28, 2021March 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 
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Operating Activities
The increasedecrease in net cash from operating activities for the first threenine months of 2021 compared to the same period in 2020 reflects benefitswas driven by lower cash flow from improved net incomewholesale finance receivable activity. During the first nine months of 2020, operating cash inflow from wholesale finance receivable activity was significant resulting from a decrease in receivables outstanding in connection with the decline in wholesale shipments in the U.S. and favorable changesCanada. During the first nine months of 2021, cash flow from wholesale finance receivable activity resulted in working capital, including lower inventory. a modest reduction to operating cash flow as receivable levels remained relatively flat supported by increased wholesale shipments in the U.S. and Canada.
The Company continues to expect that it will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments relate to leases, retirement plan obligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in Note 10 of the Notes to Consolidated financial statements. There are no required qualified pension plan contributions in 2021. The Company’s expected future contributions and benefit payments related to its defined benefit retirement plans are discussed further in Note 15 of the Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The Company has a liability for unrecognized tax benefits of $51.4$52.5 million and related accrued interest and penalties of $26.1$27.3 million as of March 28,September 26, 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 $18.8$61.5 million in the first threenine months of 2021 compared to $32.9$92.3 million in the same period last year. The Company's 2021 plan includes estimated capital expenditures between $190$135 million to $220$150 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 quarternine months of 2021 were $69.9$333.5 million higher compared to the same period last year due primarily to higher retail finance receivable originations. The Company funds its finance receivables net lending activity through the issuance of debt, discussed in "Financing Activities" below.
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Financing Activities
The Company’s financing activities consist primarily of dividend payments, share repurchases, and debt activity.
The Company paid dividends of $0.15$0.45 and $0.38$0.42 per share totaling $23.1$69.3 million and $58.8$65.0 million during the first threenine months of 2021 and 2020, respectively.
In the first quarter of 2020, the Company suspended discretionary share repurchases; as a result, there have beenThere were no discretionary share repurchases in 2021 or 2020. Share repurchases of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units during the first threenine months of 2021 and 2020 were $5.6$11.5 million or 0.20.3 million shares and $7.1$7.9 million or 0.20.3 million shares, respectively. As of March 28,September 26, 2021, there were 18.2 million shares remaining on board-approved share repurchase authorizations.
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Financing cash flows related to debt and deposit activity resulted in net cash outflows of $985.1 million$1.5 billion in the first threenine months of 2021 compared to net cash inflows of $721.4 million$2.0 billion in the first threenine months of 2020. The Company’s total outstanding debt and deposits consisted of the following (in thousands):
March 28,
2021
March 29,
2020
Outstanding debt:
Global credit facility borrowings$15,462 $— 
Unsecured commercial paper749,801 1,335,664 
Asset-backed Canadian commercial paper conduit facility102,543 155,243 
Asset-backed U.S. commercial paper conduit facilities350,648 600,000 
Asset-backed securitization debt, net2,099,258 1,156,845 
Medium-term notes, net3,803,736 4,148,984 
Senior notes, net744,149 743,466 
$7,865,597 $8,140,202 
Deposits, net$152,653 $— 
September 26,
2021
September 27,
2020
Outstanding debt:
Unsecured commercial paper$749,620 $1,077,763 
364-day credit facility borrowings— 150,000 
Asset-backed Canadian commercial paper conduit facility98,310 127,500 
Asset-backed U.S. commercial paper conduit facilities242,254 467,338 
Asset-backed securitization debt, net1,952,368 2,096,355 
Medium-term notes, net3,444,664 4,845,961 
Senior notes, net744,494 743,806 
$7,231,710 $9,508,723 
Deposits, net$290,270 $29,999 
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$290.3 million and $30.0 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.September 26, 2021 and September 27, 2020, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.
Credit Facilities – 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,the end of the first quarter of 2021, the Company had borrowings of $15.5 million outstanding under this facility, which the Company repaid in full on April 7, 2021. The Company also amended 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. Additionally, the Company hashad a $350.0 million 364-day credit facility which maturesthat matured in May 2021. The five-year credit facilities (together, the Global Credit Facilities), as well as the $350.0 million 364-day credit facility, bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities and the $350.0 million 364-day credit facility also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.
Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.40$1.42 billion as of March 28,September 26, 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 facility or through the use of operating cash flow and cash on hand.(1)
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Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at March 28,September 26, 2021 (in thousands):
Principal AmountPrincipal AmountRateIssue DateMaturity DatePrincipal AmountRateIssue DateMaturity Date
$350,0003.55%May 2018May 2021
$550,000$550,0004.05%February 2019February 2022$550,0004.05%February 2019February 2022
$400,000$400,0002.55%June 2017June 2022$400,0002.55%June 2017June 2022
$350,000$350,0003.35%February 2018February 2023$350,0003.35%February 2018February 2023
$762,996(a)
4.94%May 2020May 2023
$704,304(b)
3.14%November 2019November 2024
$756,763(a)
$756,763(a)
4.94%May 2020May 2023
$698,550(b)
$698,550(b)
3.14%November 2019November 2024
$700,000$700,0003.35%June 2020June 2025$700,0003.35%June 2020June 2025
(a)Euro denominated, €650.0 million par value remeasured to U.S. dollar at March 28,September 26, 2021
(b)Euro denominated, €600.0 million par value remeasured to U.S. dollar at March 28,September 26, 2021
The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by $13.6$10.6 million and $11.0$17.3 million at March 28,September 26, 2021 and March 29,September 27, 2020, respectively. There were no medium-term note maturities during the third quarter of 2021 or 2020. During the second quarter of 2021, $350.0 million of 3.55% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2021, $600.0 million of 2.85% medium-term notes and $450.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full. During the second quarter of 2020, $450.0 million of floating-rate and $350.0 million of 2.4% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2020, $600.0 million of 2.15% medium-term notes matured, and the principal and accrued interest were paid in full.
Senior Notes – In July 2015, the Company issued $750.0 million of unsecured senior notes in an underwritten offering. The senior notes provide for semi-annual interest payments and principal due at maturity. $450.0 million of the senior notes mature in July 2025 and have an interest rate of 3.50%, and $300.0 million of the senior notes mature in July 2045 and have an interest rate of 4.625%. The Company used the proceeds from the debt to repurchase shares of its common stock in 2015.
On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit FacilityTheIn June 2021, the Company has a revolvingrenewed and amended its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase fromeligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the Companyrenewal and amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this facilitydebt 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$220.0125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 45 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of March 28,September 26, 2021, the Canadian Conduit has an expiration date of June 25, 2021.27, 2022.
During the third quarter of 2021, the Company transferred $32.8 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $27.4 million. There were no finance receivable transfers under the Canadian Conduit Facility during the first quarterhalf of 2021.2021 or the second or third quarters of 2020. During the first quarter of 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $61.6 million.
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On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – Until November 25, 2020, the Company 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 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 addition to the $900.0 million aggregate commitment, the agreement allows for additional borrowings, at the lender’s
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discretion, of up to $300.0 million. Availability under the $900.0 million revolving facility (the U.S. Conduit Facility) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.
There were no finance receivable transfers under the U.S. Conduit Facility during the first quarternine months ended September 26, 2021 or the second or third quarters of 2021.2020. 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.
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 Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 4 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of March 28,September 26, 2021, the U.S. Conduit Facility has an expiration date of November 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 collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2022 to 2028.2029.
During the first quarter of 2021, the Company transferred $663.1 millionQuarterly transfers of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $600.0 million, or $597.4 millionSPEs, the respective proceeds, and the respective proceeds, net of discountdiscounts and issuance costs of secured notes through an on-balance sheet asset-backed securitization transaction. During the first quarter of 2020, the Company transferred $580.2 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $525.0 million, or $522.7 million net of discount and issuance costs, of secured notes through an on-balance sheet asset-backed securitization transaction.were as follows (in millions):
20212020
TransfersProceedsProceeds, netTransfersProceedsProceeds, net
First quarter$663.1 $600.0 $597.4 $580.2 $525.0 $522.7 
Second quarter— — — 1,840.5 1,550.2 1,541.8 
Third quarter635.5 575.0 572.5 — — — 
$1,298.6 $1,175.0 $1,169.9 $2,420.7 $2,075.2 $2,064.5 
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.
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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. 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 March 28,September 26, 2021, HDFS and the Company remained in compliance with all of the then existing covenants.
Cautionary StatementsMotorcycles and Related Products Segment
Important factors that could affect future resultsMotorcycle Unit Shipments
Wholesale Harley-Davidson motorcycle unit shipments were as follows:
 Nine months ended  
September 26, 2021September 27, 2020UnitUnit
UnitsMix %UnitsMix %Increase (Decrease)% Change
U.S. motorcycle shipments104,190 65.4 %69,359 55.8 %34,831 50.2 %
Worldwide motorcycle shipments:
Grand American Touring motorcycles(a)
79,485 49.9 %52,656 42.4 %26,829 51.0 %
Cruiser motorcycles(b)
52,117 32.7 %42,660 34.3 %9,457 22.2 
Adventure Touring motorcycles8,555 5.4 %— — %8,555 100.0 
Sportster® / Street motorcycles19,262 12.0 %29,009 23.3 %(9,747)(33.6)
159,419 100.0 %124,325 100.0 %35,094 28.2 %
(a)Includes CVOTM and cause those results to differ materially from those expressedTrike
(b)Includes Softail® and LiveWire®
The Company shipped 159,419 Harley-Davidson motorcycles worldwide during the first nine months of 2021, which was 28.2% higher than the same period in 2020 reflecting the forward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and severity of the pandemic across the globe and the pace of recovery following the pandemic; and (ii) the Company’s ability to: (A) execute its business plans and strategies, including The Hardwire, successfully execute its remodeled approach to supply and inventory management, and strengthen its existing business while allowing for desirable growth; (B) mitigate thepositive 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; (D) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (E) successfully carry out its global manufacturing and assembly operations; (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, including successfully implementing and executing plans to strengthen and grow its leadership position in Touring, large Cruiser and Trike, and growing its complementary businesses; (G) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (H) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the manufacturing processes to avoid delaysshift in new model launches, recall campaigns, regulatory agency investigations,year launch timing from August 2020 to the first quarter of 2021. In addition, wholesale shipments last year were adversely impacted by the temporary suspension of the Company's global manufacturing operations during the second quarter in response to the COVID-19 pandemic.
During the first nine months of 2021, the mix of Grand American Touring and Cruiser motorcycles shipped 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; (I) manage supply chain issues, including quality issues and any unexpected interruptions or price increases caused by raw material shortages or natural disasters; (J) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (K) realize expectations concerning market demand for electric models, which will depend in part on the building of necessary infrastructure; (L) successfully manage and reduce costs throughout the business; (M) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment; (N) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; (O) develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (P) develop and maintain a productive relationship with Hero MotoCorp as a distributor and licenseepercent of total shipments while the Harley-Davidson brand namemix of Sportster/Street motorcycles decreased compared to the same period last year. In addition, motorcycle unit shipments during 2021 include the Company's new Pan America™ models, its first Adventure Touring motorcycles which were launched in India; (Q) manage and predict the second quarter of 2021.
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Segment Results
Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):
 Nine months ended  
September 26, 2021September 27, 2020Increase
(Decrease)
%
Change
Revenue:
Motorcycles$2,931,669 $2,030,448 $901,221 44.4 %
Parts & Accessories577,035 513,201 63,834 12.4 
General Merchandise155,378 136,321 19,057 14.0 
Licensing22,865 21,826 1,039 4.8 
Other37,278 31,295 5,983 19.1 
3,724,225 2,733,091 991,134 36.3 
Cost of goods sold2,586,264 2,019,310 566,954 28.1 
Gross profit1,137,961 713,781 424,180 59.4 
Operating expenses:
Selling & administrative expense506,245 477,286 28,959 6.1 
Engineering expense119,966 141,626 (21,660)(15.3)
Restructuring expense731 84,586 (83,855)(99.1)
626,942 703,498 (76,556)(10.9)%
Operating income$511,019 $10,283 $500,736 
Operating margin13.7 %0.4 %13.3 pts.
The estimated impact that new or adjusted tariffs may have onof significant factors affecting the Company’s ability to sell products internationally, and thecomparability of net revenue, cost of raw materialsgoods sold and components; (R) successfully maintain a mannergross profit from the first nine months of 2020 to the first nine months of 2021 were as follows (in millions):
Net
Revenue
Cost of
Goods Sold
Gross
Profit
Nine months ended September 27, 2020$2,733.1 $2,019.3 $713.8 
Volume662.3 459.7 202.6 
Price and sales incentives, net of related costs31.8 (7.0)38.8 
Foreign currency exchange rates and hedging62.0 29.3 32.7 
Shipment mix235.0 65.6 169.4 
Raw material prices— 45.7 (45.7)
Manufacturing and other costs— (26.4)26.4 
991.1 566.9 424.2 
Nine months ended September 26, 2021$3,724.2 $2,586.2 $1,138.0 
Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first nine months of 2020 to the first nine months of 2021 were as follows:
The increase in whichvolume was due to sell motorcycles in Chinahigher wholesale motorcycle shipments and higher Parts & Accessories and General Merchandise sales.
During the Company’s Associationfirst nine months of Southeast Asian Nations (ASEAN) countries that does not subject its motorcycles to incremental tariffs; (S) manage its Thailand corporate2021, revenue benefited from higher prices and manufacturing operation in a manner that allows the Company to avail itself of preferential free trade agreementslower sales incentives.
Revenue and duty rates, and sufficiently lower prices of its motorcycles in certain markets; (T) accurately estimate and adjust to fluctuations ingross profit were favorably impacted by stronger foreign currency exchange rates interest ratesrelative to the U.S. dollar partially offset by unfavorable net foreign currency losses associated with hedging and commodity prices; (U) retainbalance sheet remeasurements recorded in cost of goods sold.
Changes in the shipment mix between motorcycle families had a favorable impact on revenue and attract talented employees,gross profit during the first nine months of 2021 due primarily to a higher mix of Grand American Touring and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (V) prevent a cybersecurity breach involving consumer, employee, dealer, supplier,Cruiser models.
Raw material cost increases were driven by higher prices primarily due to supply chain challenges.
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orManufacturing and other costs decreased primarily due to a lower fixed cost per unit given higher production volumes. Production volumes in 2020 were adversely impacted by the temporary suspension of global manufacturing operations during the second quarter of 2020 in response to the COVID-19 pandemic. The Company dataalso benefited in 2021 from cost savings resulting from the Company's 2020 restructuring actions. These favorable impacts to cost were partially offset by higher supply chain costs and respond to evolving regulatory requirements regarding data security; (W) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio; (X) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate theincreased tariff costs. The impact of any such reform onadditional EU tariffs was $44.3 million in the first nine months of 2021 compared to $17.7 million in the first nine months of 2020.
Operating expenses were lower in the first nine months of 2021 compared to the same period in 2020 due primarily to lower restructuring costs related to the Company's business; (Y) manage through2020 restructuring actions. Selling, administrative and engineering expenses benefited from cost savings resulting from the effects inconsistentCompany's 2020 restructuring actions; however, these benefits were offset by increased spending on The Hardwire initiatives and unpredictable weather patterns may have onlast year's cost saving efforts undertaken to preserve cash at the onset of the COVID-19 pandemic. Refer to Note 4 of the Notes to Consolidated financial statements for additional information regarding restructuring activities.
Financial Services Segment
Segment Results
Condensed statements of operations for the Financial Services segment were as follows (in thousands):
 Nine months ended  
September 26, 2021September 27, 2020(Decrease)
Increase
%
Change
Revenue:
Interest income$501,645 $512,726 $(11,081)(2.2)%
Other income94,005 83,338 10,667 12.8 
595,650 596,064 (414)(0.1)
Expenses:
Interest expense149,098 182,193 (33,095)(18.2)
Provision for credit losses4,935 178,433 (173,498)(97.2)
Operating expense121,454 115,145 6,309 5.5 
Restructuring expense436 1,278 (842)(65.9)
275,923 477,049 (201,126)(42.2)
Operating income$319,727 $119,015 $200,712 168.6 %
Interest income was lower for the first nine months of 2021, primarily due to lower average outstanding finance receivables, partially offset by a higher average yield. Other income increased due in part to higher insurance and licensing income. Interest expense decreased due to lower average outstanding debt and a lower cost of funds.
The provision for credit losses decreased $173.5 million compared to the first nine months of 2020 driven primarily by improved economic conditions and favorable retail salescredit loss performance. The provision for credit losses was favorable compared to prior year a result of motorcycles; (Z) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (AA) manage changes and prepare for requirementsimprovement in legislative and regulatory environments for its products, services and operations; (BB) manage its exposure to product liability claims and commercial or contractual disputes; (CC) continue to manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness; (DD) accurately predict the margins of its Motorcycles and Related Products segment in light of, among other things, tariffs, the cost associated with product development initiativesU.S. economy and the Company’s complex global supply chain;outlook on future economic conditions. However, the pace of economic recovery remains uncertain as demonstrated by unemployment levels above those experienced prior to the COVID-19 pandemic, muted consumer confidence and (EE) successfully develop and launchcontinuing COVID-19 pandemic-related challenges across the pre-owned motorcycle program, Harley-Davidson Certified.
TheU.S., among other factors. As such, at the end of the third quarter of 2021, the Company's operations, demand for its products,outlook on economic conditions and its liquidity could be adversely impactedprobability weighting of its economic forecast scenarios included continued slow economic improvement in its economic scenario weighting. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.
Annualized credit losses for the Company's retail motorcycle loans were 0.84% through the first nine months of 2021 compared to 1.40% through the first nine months of 2020. The favorable retail credit loss performance was due to elevated used motorcycle values at auction in the U.S. and continued lower than normal delinquency levels driven by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, or other factors. Other factors are describedbenefits provided under the U.S. federal stimulus packages and COVID-19 retail payment extensions. Favorable used motorcycle values stemmed from an ongoing low number of motorcycles at auction. The 30-day delinquency rate for retail motorcycle loans at September 26, 2021 was 2.76% compared to 2.59% at September 27, 2020. The continued low delinquency levels were driven by benefits provided under U.S. federal stimulus packages as well as the effects of COVID-19 pandemic-related extensions. Starting in Item 1A. Risk Factors and risk factors thatthe second quarter of 2020, the Company has disclosed in documents previously filedgranted COVID-19 pandemic-related extensions to help customers get through financial difficulties associated with the Securities and Exchange Commission. Manypandemic. During the first nine months of these risk factors are impacted by2021, the current changing capital, credit and retail markets and the Company's ability to manage through inconsistent economic conditions.volume of extensions
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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 purchasedeclined 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 serviceslevels experienced during 2020 as a result of weather,the COVID-19 pandemic, but extensions did not return to pre-COVID-19 pandemic levels until the end of the second quarter of 2021. Extensions specific to the COVID-19 pandemic were discontinued by the Company at the beginning of the third quarter of 2021. The Company continues to grant standard payment extensions to customers in accordance with its policies. While the Company expects the delinquency rate to normalize over time, given the influx of stimulus funding and improved economic conditions, the impactCompany believes it is likely credit losses will continue to remain low through the remainder of 2021.(1)
Operating expenses increased $6.3 million compared to the first nine months of 2020 primarily due to higher employee-related costs and sales and marketing expenses.
Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
 Nine months ended
September 26,
2021
September 27,
2020
Balance, beginning of period$390,936 $198,581 
Cumulative effect of change in accounting(a)
— 100,604 
Provision for credit losses4,935 178,433 
Charge-offs, net of recoveries(40,037)(68,916)
Balance, end of period$355,834 $408,702 
(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the allowance for loan loss through Retained Earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolios at date of adoption.
Other Matters
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. Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.
Liquidity and Capital Resources(1)
Based on the Company's current outlook, for both the near and longer terms, it expects Motorcycles segment operations to continue to be funded primarily through cash flows generated by operations and Financial Services segment operations to continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and deposits.(1)
The Company's cash allocation priorities are first to fund growth through The Hardwire initiatives, then to reward shareholders through dividends, and finally the Company may also choose to execute discretionary share repurchases in 2021 and 2022.
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The Company's strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to the COVID-19 pandemic, the Company increased its cash and cash equivalents during 2020. The Company's cash and cash equivalents remain higher than pre-COVID-19 pandemic levels at the end of September 2021, but during the first nine months of 2021, the Company began to gradually reduce its cash and cash equivalents from December 2020 levels. The Company’s cash and cash equivalents and availability under its credit and conduit facilities at September 26, 2021 were as follows (in thousands):
Cash and cash equivalents$2,061,303 
 Availability under credit and conduit facilities:
Credit facilities665,380 
Asset-backed U.S. commercial paper conduit facility(a)
657,746 
$3,384,429 
(a)Includes facilities expiring in the next 12 months which the Company expects to renew prior to expiration.(1)
To access the debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or other factors.withdraw the Company's ratings based on its assessment of the Company's current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings, as of September 26, 2021 were as follows:
In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue.
Short-TermLong-TermOutlook
Moody’sP3Baa3Stable
Standard & Poor’sA3BBB-Stable
FitchF2BBB+Negative
The Company believesrecognizes that HDFS' retail credit losses may increase over time dueit must continue to changing consumer credit behaviormonitor and HDFS'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 increase prudently structured loan approvalsraise, 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 sub-prime borrowers,provide loans to independent dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.
Cash Flow Activity
The Company's cash flow activities were as wellfollows (in thousands):
 Nine months ended
September 26, 2021September 27, 2020
Net cash provided by operating activities$925,551 $1,135,068 
Net cash used by investing activities(535,547)(235,054)
Net cash (used) provided by financing activities(1,551,546)1,930,677 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,050)6,071 
Net (decrease) increase in cash, cash equivalents and restricted cash$(1,172,592)$2,836,762 
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Operating Activities
The decrease in net cash from operating activities for the first nine months of 2021 compared to the same period in 2020 was driven by lower cash flow from wholesale finance receivable activity. During the first nine months of 2020, operating cash inflow from wholesale finance receivable activity was significant resulting from a decrease in receivables outstanding in connection with the decline in wholesale shipments in the U.S. and Canada. During the first nine months of 2021, cash flow from wholesale finance receivable activity resulted in a modest reduction to operating cash flow as actionsreceivable levels remained relatively flat supported by increased wholesale shipments in the U.S. and Canada.
The Company continues to expect that the Company has takenit will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments relate to leases, retirement plan obligations and could take that impact motorcycle values.
Refer toincome taxes. The Company's long-term lease obligations and future payments are discussed further in Item 1A. Risk Factors of this report and Item 1A. Risk FactorsNote 10 of the Notes to Consolidated financial statements. There are no 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 Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The Company has a liability for unrecognized tax benefits of $52.5 million and related accrued interest and penalties of $27.3 million as of September 26, 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 $61.5 million in the first nine months of 2021 compared to $92.3 million in the same period last year. The Company's 2021 plan includes estimated capital expenditures between $135 million to $150 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 of 2021 were $333.5 million higher compared to the same period last year due primarily to higher retail finance receivable originations. The Company funds its finance receivables net lending activity through the issuance of debt, discussed in "Financing Activities" below.
Financing Activities
The Company’s financing activities consist primarily of dividend payments, share repurchases, and debt activity.
The Company paid dividends of $0.45 and $0.42 per share totaling $69.3 million and $65.0 million during the first nine months of 2021 and 2020, for a discussionrespectively.
There were no discretionary share repurchases in 2021 or 2020. Share repurchases of additional risk factorscommon stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units during the first nine months of 2021 and a more complete discussion2020 were $11.5 million or 0.3 million shares and $7.9 million or 0.3 million shares, respectively. As of someSeptember 26, 2021, there were 18.2 million shares remaining on board-approved share repurchase authorizations.
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Financing cash flows related to debt and deposit activity resulted in net cash outflows of $1.5 billion in the first nine months of 2021 compared to net cash inflows of $2.0 billion in the first nine months of 2020. The Company’s total outstanding debt and deposits consisted of the cautionary statements noted above.following (in thousands):
Item 3. Quantitative and Qualitative Disclosures About Market Risk
September 26,
2021
September 27,
2020
Outstanding debt:
Unsecured commercial paper$749,620 $1,077,763 
364-day credit facility borrowings— 150,000 
Asset-backed Canadian commercial paper conduit facility98,310 127,500 
Asset-backed U.S. commercial paper conduit facilities242,254 467,338 
Asset-backed securitization debt, net1,952,368 2,096,355 
Medium-term notes, net3,444,664 4,845,961 
Senior notes, net744,494 743,806 
$7,231,710 $9,508,723 
Deposits, net$290,270 $29,999 
The Company is exposedRefer 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 911 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 $290.3 million and $30.0 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of September 26, 2021 and September 27, 2020, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.
Credit Facilities – 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 the end of the first quarter of 2021, the Company had borrowings of $15.5 million outstanding under this facility, which the Company repaid in full on April 7, 2021. The Company also amended 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. Additionally, the Company had a $350.0 million 364-day credit facility that matured in May 2021. The five-year credit facilities (together, the Global Credit Facilities) bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.
Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.42 billion as of September 26, 2021 supported by the Global Credit Facilities, as discussed above. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured commercial paper or through other means, such as borrowing under the Global Credit Facilities, borrowing under its asset-backed U.S. commercial paper conduit facility or through the use of operating cash flow and cash on hand.(1)
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Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at September 26, 2021 (in thousands):
Principal AmountRateIssue DateMaturity Date
$550,0004.05%February 2019February 2022
$400,0002.55%June 2017June 2022
$350,0003.35%February 2018February 2023
    $756,763(a)
4.94%May 2020May 2023
    $698,550(b)
3.14%November 2019November 2024
$700,0003.35%June 2020June 2025
(a)Euro denominated, €650.0 million par value remeasured to U.S. dollar at September 26, 2021
(b)Euro denominated, €600.0 million par value remeasured to U.S. dollar at September 26, 2021
The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by $10.6 million and $17.3 million at September 26, 2021 and September 27, 2020, respectively. There were no medium-term note maturities during the third quarter of 2021 or 2020. During the second quarter of 2021, $350.0 million of 3.55% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2021, $600.0 million of 2.85% medium-term notes and $450.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full. During the second quarter of 2020, $450.0 million of floating-rate and $350.0 million of 2.4% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2020, $600.0 million of 2.15% medium-term notes matured, and the principal and accrued interest were paid in full.
Senior Notes – In July 2015, the Company issued $750.0 million of unsecured senior notes in an underwritten offering. The senior notes provide for semi-annual interest payments and principal due at maturity. $450.0 million of the senior notes mature in July 2025 and have an interest rate of 3.50%, and $300.0 million of the senior notes mature in July 2045 and have an interest rate of 4.625%. The Company used the proceeds from the debt to repurchase shares of its common stock in 2015.
On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – In June 2021, the Company renewed and amended its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the renewal and amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of September 26, 2021, the Canadian Conduit has an expiration date of June 27, 2022.
During the third quarter of 2021, the Company transferred $32.8 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $27.4 million. There were no finance receivable transfers under the Canadian Conduit Facility during the first half of 2021 or the second or third quarters of 2020. During the first quarter of 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $61.6 million.
On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – Until November 25, 2020, the Company 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 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 addition to the $900.0 million aggregate commitment, the agreement allows for additional borrowings, at the lender’s
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discretion, of up to $300.0 million. Availability under the $900.0 million revolving facility (the U.S. Conduit Facility) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.
There were no finance receivable transfers under the U.S. Conduit Facility during the nine months ended September 26, 2021 or the second or third quarters of 2020. 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.
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 Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 4 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of September 26, 2021, the U.S. Conduit Facility has an expiration date of November 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 collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2022 to 2029.
Quarterly transfers of U.S. retail motorcycle finance receivables to SPEs, the respective proceeds, and the respective proceeds, net of discounts and issuance costs were as follows (in millions):
20212020
TransfersProceedsProceeds, netTransfersProceedsProceeds, net
First quarter$663.1 $600.0 $597.4 $580.2 $525.0 $522.7 
Second quarter— — — 1,840.5 1,550.2 1,541.8 
Third quarter635.5 575.0 572.5 — — — 
$1,298.6 $1,175.0 $1,169.9 $2,420.7 $2,075.2 $2,064.5 
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.
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.
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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. 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 26, 2021, HDFS and the Company remained in compliance with all of the then existing covenants.
Motorcycles and Related Products Segment
Motorcycle Unit Shipments
Wholesale Harley-Davidson motorcycle unit shipments were as follows:
 Nine months ended  
September 26, 2021September 27, 2020UnitUnit
UnitsMix %UnitsMix %Increase (Decrease)% Change
U.S. motorcycle shipments104,190 65.4 %69,359 55.8 %34,831 50.2 %
Worldwide motorcycle shipments:
Grand American Touring motorcycles(a)
79,485 49.9 %52,656 42.4 %26,829 51.0 %
Cruiser motorcycles(b)
52,117 32.7 %42,660 34.3 %9,457 22.2 
Adventure Touring motorcycles8,555 5.4 %— — %8,555 100.0 
Sportster® / Street motorcycles19,262 12.0 %29,009 23.3 %(9,747)(33.6)
159,419 100.0 %124,325 100.0 %35,094 28.2 %
(a)Includes CVOTM and Trike
(b)Includes Softail® and LiveWire®
The Company shipped 159,419 Harley-Davidson motorcycles worldwide during the first nine months of 2021, which was 28.2% higher than the same period in 2020 reflecting the positive impact of the shift in new model year launch timing from August 2020 to the first quarter of 2021. In addition, wholesale shipments last year were adversely impacted by the temporary suspension of the Company's global manufacturing operations during the second quarter in response to the COVID-19 pandemic.
During the first nine months of 2021, the mix of Grand American Touring and Cruiser motorcycles shipped increased as a percent of total shipments while the mix of Sportster/Street motorcycles decreased compared to the same period last year. In addition, motorcycle unit shipments during 2021 include the Company's new Pan America™ models, its first Adventure Touring motorcycles which were launched in the second quarter of 2021.
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Segment Results
Condensed statements of operations for the Motorcycles segment were as follows (dollars in thousands):
 Nine months ended  
September 26, 2021September 27, 2020Increase
(Decrease)
%
Change
Revenue:
Motorcycles$2,931,669 $2,030,448 $901,221 44.4 %
Parts & Accessories577,035 513,201 63,834 12.4 
General Merchandise155,378 136,321 19,057 14.0 
Licensing22,865 21,826 1,039 4.8 
Other37,278 31,295 5,983 19.1 
3,724,225 2,733,091 991,134 36.3 
Cost of goods sold2,586,264 2,019,310 566,954 28.1 
Gross profit1,137,961 713,781 424,180 59.4 
Operating expenses:
Selling & administrative expense506,245 477,286 28,959 6.1 
Engineering expense119,966 141,626 (21,660)(15.3)
Restructuring expense731 84,586 (83,855)(99.1)
626,942 703,498 (76,556)(10.9)%
Operating income$511,019 $10,283 $500,736 
Operating margin13.7 %0.4 %13.3 pts.
The estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first nine months of 2020 to the first nine months of 2021 were as follows (in millions):
Net
Revenue
Cost of
Goods Sold
Gross
Profit
Nine months ended September 27, 2020$2,733.1 $2,019.3 $713.8 
Volume662.3 459.7 202.6 
Price and sales incentives, net of related costs31.8 (7.0)38.8 
Foreign currency exchange rates and hedging62.0 29.3 32.7 
Shipment mix235.0 65.6 169.4 
Raw material prices— 45.7 (45.7)
Manufacturing and other costs— (26.4)26.4 
991.1 566.9 424.2 
Nine months ended September 26, 2021$3,724.2 $2,586.2 $1,138.0 
Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first nine months of 2020 to the first nine months of 2021 were as follows:
The increase in volume was due to higher wholesale motorcycle shipments and higher Parts & Accessories and General Merchandise sales.
During the first nine months of 2021, revenue benefited from higher prices and lower sales incentives.
Revenue and gross profit were favorably impacted by stronger foreign currency exchange rates relative to the U.S. dollar partially offset by unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements recorded in cost of goods sold.
Changes in the shipment mix between motorcycle families had a favorable impact on revenue and gross profit during the first nine months of 2021 due primarily to a higher mix of Grand American Touring and Cruiser models.
Raw material cost increases were driven by higher prices primarily due to supply chain challenges.
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Manufacturing and other costs decreased primarily due to a lower fixed cost per unit given higher production volumes. Production volumes in 2020 were adversely impacted by the temporary suspension of global manufacturing operations during the second quarter of 2020 in response to the COVID-19 pandemic. The Company also benefited in 2021 from cost savings resulting from the Company's 2020 restructuring actions. These favorable impacts to cost were partially offset by higher supply chain costs and increased tariff costs. The impact of additional EU tariffs was $44.3 million in the first nine months of 2021 compared to $17.7 million in the first nine months of 2020.
Operating expenses were lower in the first nine months of 2021 compared to the same period in 2020 due primarily to lower restructuring costs related to the Company's 2020 restructuring actions. Selling, administrative and engineering expenses benefited from cost savings resulting from the Company's 2020 restructuring actions; however, these benefits were offset by increased spending on The Hardwire initiatives and last year's cost saving efforts undertaken to preserve cash at the onset of the COVID-19 pandemic. Refer to Note 4 of the Notes to Consolidated financial statements for additional information regarding restructuring activities.
Financial Services Segment
Segment Results
Condensed statements of operations for the Financial Services segment were as follows (in thousands):
 Nine months ended  
September 26, 2021September 27, 2020(Decrease)
Increase
%
Change
Revenue:
Interest income$501,645 $512,726 $(11,081)(2.2)%
Other income94,005 83,338 10,667 12.8 
595,650 596,064 (414)(0.1)
Expenses:
Interest expense149,098 182,193 (33,095)(18.2)
Provision for credit losses4,935 178,433 (173,498)(97.2)
Operating expense121,454 115,145 6,309 5.5 
Restructuring expense436 1,278 (842)(65.9)
275,923 477,049 (201,126)(42.2)
Operating income$319,727 $119,015 $200,712 168.6 %
Interest income was lower for the first nine months of 2021, primarily due to lower average outstanding finance receivables, partially offset by a higher average yield. Other income increased due in part to higher insurance and licensing income. Interest expense decreased due to lower average outstanding debt and a lower cost of funds.
The provision for credit losses decreased $173.5 million compared to the first nine months of 2020 driven primarily by improved economic conditions and favorable retail credit loss performance. The provision for credit losses was favorable compared to prior year a result of improvement in the U.S. economy and the Company’s outlook on future economic conditions. However, the pace of economic recovery remains uncertain as demonstrated by unemployment levels above those experienced prior to the COVID-19 pandemic, muted consumer confidence and continuing COVID-19 pandemic-related challenges across the U.S., among other factors. As such, at the end of the third quarter of 2021, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios included continued slow economic improvement in its economic scenario weighting. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.
Annualized credit losses for the Company's retail motorcycle loans were 0.84% through the first nine months of 2021 compared to 1.40% through the first nine months of 2020. The favorable retail credit loss performance was due to elevated used motorcycle values at auction in the U.S. and continued lower than normal delinquency levels driven by benefits provided under the U.S. federal stimulus packages and COVID-19 retail payment extensions. Favorable used motorcycle values stemmed from an ongoing low number of motorcycles at auction. The 30-day delinquency rate for retail motorcycle loans at September 26, 2021 was 2.76% compared to 2.59% at September 27, 2020. The continued low delinquency levels were driven by benefits provided under U.S. federal stimulus packages as well as the effects of COVID-19 pandemic-related extensions. Starting in the second quarter of 2020, the Company granted COVID-19 pandemic-related extensions to help customers get through financial difficulties associated with the pandemic. During the first nine months of 2021, the volume of extensions
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declined from the levels experienced during 2020 as a result of the COVID-19 pandemic, but extensions did not return to pre-COVID-19 pandemic levels until the end of the second quarter of 2021. Extensions specific to the COVID-19 pandemic were discontinued by the Company at the beginning of the third quarter of 2021. The Company continues to grant standard payment extensions to customers in accordance with its policies. While the Company expects the delinquency rate to normalize over time, given the influx of stimulus funding and improved economic conditions, the Company believes it is likely credit losses will continue to remain low through the remainder of 2021.(1)
Operating expenses increased $6.3 million compared to the first nine months of 2020 primarily due to higher employee-related costs and sales and marketing expenses.
Changes in the allowance for credit losses on finance receivables were as follows (in thousands):
 Nine months ended
September 26,
2021
September 27,
2020
Balance, beginning of period$390,936 $198,581 
Cumulative effect of change in accounting(a)
— 100,604 
Provision for credit losses4,935 178,433 
Charge-offs, net of recoveries(40,037)(68,916)
Balance, end of period$355,834 $408,702 
(a)On January 1, 2020, the Company adopted ASU 2016-13 and increased the allowance for loan loss through Retained Earnings, net of income taxes, to establish an allowance that represents expected lifetime credit losses on the finance receivable portfolios at date of adoption.
Other Matters
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. Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.
Liquidity and Capital Resources(1)
Based on the Company's current outlook, for both the near and longer terms, it expects Motorcycles segment operations to continue to be funded primarily through cash flows generated by operations and Financial Services segment operations to continue to be funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and deposits.(1)
The Company's cash allocation priorities are first to fund growth through The Hardwire initiatives, then to reward shareholders through dividends, and finally the Company may also choose to execute discretionary share repurchases in 2021 and 2022.
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The Company's strategy is to maintain a minimum of twelve months of its projected liquidity needs through a combination of cash and cash equivalents and availability under its credit facilities. In response to liquidity concerns related to the COVID-19 pandemic, the Company increased its cash and cash equivalents during 2020. The Company's cash and cash equivalents remain higher than pre-COVID-19 pandemic levels at the end of September 2021, but during the first nine months of 2021, the Company began to gradually reduce its cash and cash equivalents from December 2020 levels. The Company’s cash and cash equivalents and availability under its credit and conduit facilities at September 26, 2021 were as follows (in thousands):
Cash and cash equivalents$2,061,303 
 Availability under credit and conduit facilities:
Credit facilities665,380 
Asset-backed U.S. commercial paper conduit facility(a)
657,746 
$3,384,429 
(a)Includes facilities expiring in the next 12 months which the Company expects to renew prior to expiration.(1)
To access the debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or withdraw the Company's ratings based on its assessment of the Company's current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings, as of September 26, 2021 were as follows:
Short-TermLong-TermOutlook
Moody’sP3Baa3Stable
Standard & Poor’sA3BBB-Stable
FitchF2BBB+Negative
The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The Financial Services operations could be negatively affected by higher costs of funding and increased difficulty of raising, or potential unsuccessful efforts to raise, funding in the short-term and long-term capital markets.(1) These negative consequences could in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital, reduced funds available through its Financial Services operations to provide loans to independent dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.
Cash Flow Activity
The Company's cash flow activities were as follows (in thousands):
 Nine months ended
September 26, 2021September 27, 2020
Net cash provided by operating activities$925,551 $1,135,068 
Net cash used by investing activities(535,547)(235,054)
Net cash (used) provided by financing activities(1,551,546)1,930,677 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(11,050)6,071 
Net (decrease) increase in cash, cash equivalents and restricted cash$(1,172,592)$2,836,762 
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Operating Activities
The decrease in net cash from operating activities for the first nine months of 2021 compared to the same period in 2020 was driven by lower cash flow from wholesale finance receivable activity. During the first nine months of 2020, operating cash inflow from wholesale finance receivable activity was significant resulting from a decrease in receivables outstanding in connection with the decline in wholesale shipments in the U.S. and Canada. During the first nine months of 2021, cash flow from wholesale finance receivable activity resulted in a modest reduction to operating cash flow as receivable levels remained relatively flat supported by increased wholesale shipments in the U.S. and Canada.
The Company continues to expect that it will generate sufficient cash inflows from operations to fund its ongoing operating cash requirements including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments relate to leases, retirement plan obligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in Note 10 of the Notes to Consolidated financial statements. There are no required qualified pension plan contributions in 2021. The Company’s expected future contributions and benefit payments related to its defined benefit retirement plans are discussed further in Note 15 of the Notes to Consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. The Company has a liability for unrecognized tax benefits of $52.5 million and related accrued interest and penalties of $27.3 million as of September 26, 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 $61.5 million in the first nine months of 2021 compared to $92.3 million in the same period last year. The Company's 2021 plan includes estimated capital expenditures between $135 million to $150 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 of 2021 were $333.5 million higher compared to the same period last year due primarily to higher retail finance receivable originations. The Company funds its finance receivables net lending activity through the issuance of debt, discussed in "Financing Activities" below.
Financing Activities
The Company’s financing activities consist primarily of dividend payments, share repurchases, and debt activity.
The Company paid dividends of $0.45 and $0.42 per share totaling $69.3 million and $65.0 million during the first nine months of 2021 and 2020, respectively.
There were no discretionary share repurchases in 2021 or 2020. Share repurchases of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units during the first nine months of 2021 and 2020 were $11.5 million or 0.3 million shares and $7.9 million or 0.3 million shares, respectively. As of September 26, 2021, there were 18.2 million shares remaining on board-approved share repurchase authorizations.
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Financing cash flows related to debt and deposit activity resulted in net cash outflows of $1.5 billion in the first nine months of 2021 compared to net cash inflows of $2.0 billion in the first nine months of 2020. The Company’s total outstanding debt and deposits consisted of the following (in thousands):
September 26,
2021
September 27,
2020
Outstanding debt:
Unsecured commercial paper$749,620 $1,077,763 
364-day credit facility borrowings— 150,000 
Asset-backed Canadian commercial paper conduit facility98,310 127,500 
Asset-backed U.S. commercial paper conduit facilities242,254 467,338 
Asset-backed securitization debt, net1,952,368 2,096,355 
Medium-term notes, net3,444,664 4,845,961 
Senior notes, net744,494 743,806 
$7,231,710 $9,508,723 
Deposits, net$290,270 $29,999 
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 $290.3 million and $30.0 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of September 26, 2021 and September 27, 2020, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.
Credit Facilities – 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 the end of the first quarter of 2021, the Company had borrowings of $15.5 million outstanding under this facility, which the Company repaid in full on April 7, 2021. The Company also amended 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. Additionally, the Company had a $350.0 million 364-day credit facility that matured in May 2021. The five-year credit facilities (together, the Global Credit Facilities) bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.
Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.42 billion as of September 26, 2021 supported by the Global Credit Facilities, as discussed above. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured commercial paper or through other means, such as borrowing under the Global Credit Facilities, borrowing under its asset-backed U.S. commercial paper conduit facility or through the use of operating cash flow and cash on hand.(1)
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Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at September 26, 2021 (in thousands):
Principal AmountRateIssue DateMaturity Date
$550,0004.05%February 2019February 2022
$400,0002.55%June 2017June 2022
$350,0003.35%February 2018February 2023
    $756,763(a)
4.94%May 2020May 2023
    $698,550(b)
3.14%November 2019November 2024
$700,0003.35%June 2020June 2025
(a)Euro denominated, €650.0 million par value remeasured to U.S. dollar at September 26, 2021
(b)Euro denominated, €600.0 million par value remeasured to U.S. dollar at September 26, 2021
The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by $10.6 million and $17.3 million at September 26, 2021 and September 27, 2020, respectively. There were no medium-term note maturities during the third quarter of 2021 or 2020. During the second quarter of 2021, $350.0 million of 3.55% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2021, $600.0 million of 2.85% medium-term notes and $450.0 million of floating-rate medium-term notes matured, and the principal and accrued interest were paid in full. During the second quarter of 2020, $450.0 million of floating-rate and $350.0 million of 2.4% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2020, $600.0 million of 2.15% medium-term notes matured, and the principal and accrued interest were paid in full.
Senior Notes – In July 2015, the Company issued $750.0 million of unsecured senior notes in an underwritten offering. The senior notes provide for semi-annual interest payments and principal due at maturity. $450.0 million of the senior notes mature in July 2025 and have an interest rate of 3.50%, and $300.0 million of the senior notes mature in July 2045 and have an interest rate of 4.625%. The Company used the proceeds from the debt to repurchase shares of its common stock in 2015.
On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – In June 2021, the Company renewed and amended its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. Prior to the renewal and amendment, the Canadian Conduit was contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$220.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of September 26, 2021, the Canadian Conduit has an expiration date of June 27, 2022.
During the third quarter of 2021, the Company transferred $32.8 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $27.4 million. There were no finance receivable transfers under the Canadian Conduit Facility during the first half of 2021 or the second or third quarters of 2020. During the first quarter of 2020, the Company transferred $77.9 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $61.6 million.
On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – Until November 25, 2020, the Company 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 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 addition to the $900.0 million aggregate commitment, the agreement allows for additional borrowings, at the lender’s
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discretion, of up to $300.0 million. Availability under the $900.0 million revolving facility (the U.S. Conduit Facility) is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.
There were no finance receivable transfers under the U.S. Conduit Facility during the nine months ended September 26, 2021 or the second or third quarters of 2020. 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.
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 Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. When calculating the unused fee, the aggregate commitment does not include any unused portion of the $300.0 million additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 4 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of September 26, 2021, the U.S. Conduit Facility has an expiration date of November 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 collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2022 to 2029.
Quarterly transfers of U.S. retail motorcycle finance receivables to SPEs, the respective proceeds, and the respective proceeds, net of discounts and issuance costs were as follows (in millions):
20212020
TransfersProceedsProceeds, netTransfersProceedsProceeds, net
First quarter$663.1 $600.0 $597.4 $580.2 $525.0 $522.7 
Second quarter— — — 1,840.5 1,550.2 1,541.8 
Third quarter635.5 575.0 572.5 — — — 
$1,298.6 $1,175.0 $1,169.9 $2,420.7 $2,075.2 $2,064.5 
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.
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.
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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. 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 26, 2021, HDFS and the Company remained in compliance with all of the then existing covenants.
Cautionary Statements
Important factors that could affect future results and cause those results to differ materially from those expressed in the forward-looking statements include, among others, the following: (i) the COVID-19 pandemic, including the length and severity of the pandemic across the globe and the pace of recovery following the pandemic; and (ii) the Company’s ability to: (A) execute its business plans and strategies, including The Hardwire and the evolution of LiveWire as a standalone brand, successfully execute its remodeled approach to supply and inventory management, and strengthen its existing business while allowing for desirable growth; (B) manage supply chain and logistic issues, including quality issues, unexpected interruptions or price increases caused by supplier volatility, raw material shortages or natural disasters, and longer shipping times and increased logistics costs, including by successfully implementing pricing surcharges; (C) invest in electric vehicle (EV) technology required to lead the transformation of motorcycling and leverage its engineering expertise, manufacturing footprint, supply chain infrastructure, and global logistics capabilities in the EV sector; (D) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests; (E) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (F) successfully carry out its global manufacturing and assembly operations; (G) develop and introduce products, services and experiences on a timely basis that the market accepts, that enable the Company to generate desired sales levels and that provide the desired financial returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Grand American Touring, large Cruiser and Trike, and growing its complementary businesses; (H) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (I) successfully appeal: (i) the revocation of the Binding Origin Information (BOI) and (ii) the denial of the Company's application for temporary relief from the effect of the revocation; (J) manage and predict the impact that new, reinstated or adjusted tariffs may have on the Company's ability to sell products internationally, and the cost of raw materials and components; (K) prevent, detect, and remediate any issues with its motorcycles or any issues associated with the manufacturing processes to avoid delays in new model launches, recall campaigns, regulatory agency investigations, increased warranty costs or litigation and adverse effects on its reputation and brand strength, and carry out any product programs or recalls within expected costs and timing; (L) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (M) realize expectations concerning market demand for electric models, which will depend in part on the building of necessary infrastructure; (N) successfully manage and reduce costs throughout the business; (O) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing political environment; (P) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its independent dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; (Q) continue to develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (R) maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (S) successfully maintain a manner in which to sell motorcycles in China and the Company’s Association of Southeast Asian Nations (ASEAN) countries that does not subject its motorcycles to incremental tariffs; (T) manage its Thailand corporate and manufacturing operation in a manner that allows the Company to avail itself of preferential free trade agreements and duty rates, and sufficiently lower prices of its motorcycles in certain markets; (U) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (V) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (W) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding data security; (X) manage the credit quality, the loan servicing and collection activities, and the recovery rates of HDFS' loan portfolio; (Y) adjust to tax reform, healthcare inflation and reform and pension reform, and successfully estimate the impact of any such reform on the Company's business; (Z) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; (AA) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (BB) manage changes and prepare for requirements in legislative and regulatory environments for its products, services and operations; (CC) manage its exposure to product liability claims and commercial or contractual disputes; (DD) continue to
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manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness; (EE) achieve anticipated results with respect to the Company's recently launched pre-owned motorcycle program, Harley-Davidson Certified, and the Company's H-D1 Marketplace; and (FF) accurately predict the margins of its Motorcycles and Related Products segment in light of, among other things, tariffs, the cost associated with product development initiatives and the Company's complex global supply chain.
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 U.S. Securities and Exchange Commission. Many of these risk factors are impacted by the current changing capital, credit and retail markets and the Company's ability to manage through inconsistent economic conditions.
The Company’s ability to sell its motorcycles and related products and services and to meet its financial expectations also depends on the ability of the Company’s independent dealers to sell its motorcycles and related products and services to retail customers. The Company depends on the capability and financial capacity of its independent dealers to develop and implement effective retail sales plans to create demand for the motorcycles and related products and services they purchase from the Company. In addition, the Company’s independent dealers and distributors may experience difficulties in operating their businesses and selling Harley-Davidson motorcycles and related products and services as a result of weather, economic conditions, the impact of the COVID-19 pandemic, or other factors.
In recent years, HDFS has experienced historically low levels of retail credit losses, but there is no assurance that this will continue. The Company believes that HDFS' retail credit losses may increase over time due to changing consumer credit behavior, HDFS' efforts to increase prudently structured loan approvals to sub-prime borrowers and the favorable impact of recent federal stimulus payments, as well as actions that the Company has taken and could take that impact motorcycle values.
Refer to Item 1A. Risk Factors of this report and Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in foreign currency exchange rates, commodity prices and interest rates. To reduce such risks, the Company selectively uses derivative financial instruments. All hedging transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes. Sensitivity analysis is used to manage and monitor foreign currency exchange rate and interest rate risks. Further disclosure relating to the fair value of the Company's derivative financial instruments is included in Note 9 of the Notes to Consolidated financial statements.
Motorcycles and Related Products Segment
The Company sells its motorcycles and related products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, the Motorcycles segment operating results are affected by fluctuations in the value of the U.S. dollar relative to foreign currencies. The Company’s most significant foreign currency exchange rate risk resulting from the sale of motorcycles and related products relates to the Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Chinese yuan, Thai baht, Indian rupee, Singapore dollar and Pound sterling. The Company utilizes foreign currency contracts to mitigate the effect of certain currencies' fluctuations on Motorcycles segment operating results. The foreign currency contracts are entered into with banks and allow the Company to exchange currencies at a future date, based on a fixed exchange rate. There have been no material changes to the foreign currency exchange rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
The Company purchases commodities for the use in the production of motorcycles. As a result, Motorcycles segment operating results are affected by changes in commodity prices. The Company uses derivative financial instruments on a limited basis to hedge the prices of certain commodities. There have been no material changes to the commodity market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
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Financial Services Segment
The Company has interest rate sensitive financial instruments including financial receivables, debt and interest rate derivative financial instruments. As a result, Financial Services operating income is affected by changes in interest rates. The Company utilizes interest rate caps to reduce the impact of fluctuations in interest rates on its asset-backed securitization
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transactions. There have been no material changes to the interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
HDFS also has short-term commercial paper and debt issued through the commercial paper conduit facilities that is subject to changes in interest rates which it does not hedge. There have been no material changes to the interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
The Company has foreign denominated medium-term notes. Asdebt transactions, and as a result, Financial Services operating income is affected by fluctuations in the value of the U.S. dollar relative to foreign currencies and interest rates. At March 28,September 26, 2021, this exposure related to the Euro. The Company utilizes cross-currency swaps to mitigate the effect of the foreign currency exchange rate and interest rate fluctuations related to foreign denominated debt.Financial Services segment operating results. There have been no material changes to the foreign currency exchange rate and interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 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 Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.
Changes in Internal Controls
There were no changes in the Company's internal control over financial reporting during the quarter ended March 28,September 26, 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 16 of the Notes to Consolidated financial statements, and such information is incorporated herein by reference in this Item 1 of Part II.
Item 1A. Risk Factors
An investment in Harley-Davidson, Inc. involves risks, including the risk factors discussed in Item 1A. Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, which have not materially changed except as set forth below.
Trade policies and changes in trade policies, including the imposition of tariffs, their enforcement and downstream consequences, may continue to have a material adverse impact on our business, results of operations and outlook. Tariffs and/or other developments with respect to trade policies, trade agreements and government regulations could have a material adverse impact on the Company's business, financial condition and results of operations. To date,Previously, the European Union (EU) has placed a 25% incrementaladditional tariff (31% total tariff) on motorcycles imported into the EU from the U.S. and that is scheduledwhich was initially set to increase to a 50% incrementaladditional tariff (56% total tariff) effective June 1, 2021. In May 2021, the EU suspended the increase to December 1, 2021 while the EU and the U.S. worked towards politically resolving the restrictive tariffs imposed by each country. While the U.S. and EU announced an agreement that will result in the removal of the additional EU tariffs effective January 1, 2022, trade policies and changes in trade policies, including the imposition or reinstatement of tariffs, their enforcement and downstream consequences, may continue to have a material adverse impact on the Company's business, results of operations and outlook.
Shipments of motorcycles to the European UnionEU 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 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,EU, the Company would be subject to the revocation of the BOI rulings, effective April 19, 2021. Following the revocation, non-electric motorcycles Harley-Davidson importsthe Company imported into the European Union,EU, regardless of origin, will bewere subject to a total tariff rate of 31% from April 19, 2021 to May 31,November 30, 2021. This rate is expected to increasewould have increased to 56% effective JuneDecember 1, 2021. This ruling will effectively prohibit2021 if the EU and the U.S. had not reached a political resolution before that date. In May 2021, the Company from functioning competitively in the European Union. The Company is appealing the revocation of the BOIs. It has also soughtapplied for temporary extended reliance on the 6% tariff rate for motorcycles produced in Thailand and ordered prior to April 19, 2021; however, that application was rejected on July 30, 2021. ThereThe Company estimates it could have avoided approximately $50 million of additional EU tariffs in 2021 if the application for extended reliance had been granted. To date, the Company continues its appeals of the revocation of the BOIs and the denial of temporary extended reliance although there is no assurance that the appealthese appeals will continue or be successful or that the Company will receive the extended reliance.successful. The fullremaining impact of the revocation is subject to uncertainties that include the following, among other factors: (i) uncertainties regarding the quantity and mix of motorcycles that the Company imports into the EU; (ii) uncertainties regarding the import prices of motorcycles; (iii) whether the Company will be granted extended reliance on the 6% tariff rate for motorcycles ordered prior to April 19, 2021; (iv) whether the Company will be successful incontinue appealing the revocation of the BOI rulings; (v) uncertainties regardingrulings and the sizedenial of temporary extended reliance and duration of the 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 successbe successful 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 or reinstatement by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition or reinstatement by foreign countries of tariffs on U.S. products, including tariffs imposed in response to U.S. tariffs, could materially increase: (a) the cost of Harley-Davidson products that the Company is offering for sale in relevant countries, (b) the cost of certain products that the Company sources from foreign manufacturers and (c) the prices of certain raw materials that the Company utilizes. The Company may not be able to pass such increased costs on to distributors, independent dealers or their customers, and the Company may not be able to secure sources of certain products and materials that are not subject to tariffs on a timely basis. Such developments could have a material adverse impact on the Company's business, financial condition and results of operations.
The Company disclaims any obligation to update these risk factors or any other forward-looking statements. The Company assumes no obligation, and specifically disclaims any such obligation, to update these risk factors or any other forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company's share repurchases, which consisted of 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,September 26, 2021:
2021 Fiscal MonthTotal Number of
Shares Purchased
Average Price
Paid per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
January 1 to January 312,815 $36 2,815 18,246,721 
February 1 to February 28154,562 $36 154,562 18,246,721 
March 1 to March 28479 $36 479 18,246,721 
157,856 $36 157,856 
2021 Fiscal MonthTotal Number of
Shares Purchased
Average Price
Paid per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
June 28 to August 11,468 $47 1,468 18,246,721 
August 2 to August 2913,811 $40 13,811 18,246,721 
August 30 to September 26498 $39 498 18,246,721 
15,777 $40 15,777 
In February 2018, the Company's Board of Directors authorized the Company to repurchase up to 15.0 million shares of its common stock on a discretionary basis with no dollar limit or expiration date. In February 2020, the Company's Board of Directors authorized the Company to repurchase up to 10.0 million additional shares of its common stock on a discretionary basis with no dollar limit or expiration date. As of March 28,September 26, 2021, 18.2 million shares remained under these authorizations. The Company repurchased no shares on a discretionary basis during the quarter ended March 28,September 26, 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 firstthird quarter of 2021, the Company acquired 157,85615,777 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock units and performance share units.
Item 5. Other Information
Item 5.02
On November 4, 2021, the Company announced the retirement of Darrell Thomas, Vice President and Treasurer. Mr. Thomas will retire from the Company effective March 1, 2022 after 11 years of service.
The Company maintains the Harley-Davidson, Inc. Employee Incentive Plan (the Plan) under which it provides its employees and the employees of its participating affiliates with incentive compensation depending upon, among other things, the achievement of corporate or business unit performance that furthers corporate objectives. On October 29, 2021, the Human Resources Committee of the Company's Board of Directors approved an amendment and restatement of the Plan, effective January 1, 2021, to: (i) remove or modify certain restrictions under the Plan that were intended to qualify compensation as “performance-based” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), that are no longer necessary following the changes to the Code Section 162(m) made by the Tax Cuts and Jobs Act; (ii) incorporate state performance-based compensation tax rules; (iii) remove workers compensation payments from the calculation of eligible compensation; and (iv) increase the maximum performance award to $8 million.
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
Restated Articles of Incorporation of Harley-Davidson, Inc. as amended through May 28, 2020
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))
Amended and Restated Harley-Davidson, Inc. Director Stock Plan as amended effective August 31, 2021
Amended and restatedRestated Harley-Davidson, Inc. Employee Incentive Plan as amended 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 Shareholders held May 10, 2018 filed on March 29, 2018 (File No. 1-9183))January 1, 2021
Chief Executive Officer Certification pursuant to Rule 13a-14(a)
Chief Financial Officer Certification pursuant to Rule 13a-14(a)
Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101

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

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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 HARLEY-DAVIDSON, INC.
Date: May 6,November 4, 2021/s/ Gina Goetter
Gina Goetter
Chief Financial Officer
(Principal financial officer)
Date: May 6,November 4, 2021/s/ Mark R. Kornetzke
Mark R. Kornetzke
Chief Accounting Officer
(Principal accounting officer)

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