Harley-Davidson - 10-Q quarterly report FY2023 Q1

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2023


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

For the transition period from to

Commission file number 1-9183

Harley-Davidson, Inc.

(Exact name of registrant as specified in its charter)


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

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

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

None

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

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


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

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

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

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


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

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

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

The registrant had outstanding 143,760,258 shares of common stock as of April 28, 2023.

HARLEY-DAVIDSON, INC.

Form 10-Q

For The Quarter Ended March 31, 2023


Part I	Financial Information	3
Item 1.	Financial Statements	3
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Balance Sheets	5
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Shareholders' Equity	8
	Notes to Consolidated Financial Statements	9
	1. Basis of Presentation and Use of Estimates	9
	2. New Accounting Standards	9
	3. Revenue	10
	4. Income Taxes	10
	5. Earnings Per Share	11
	6. Additional Balance Sheet and Cash Flow Information	11
	7. Finance Receivables	12
	8. Derivative Financial Instruments and Hedging Activities	18
	9. Debt	21
	10. Asset-Backed Financing	22
	11. Fair Value	25
	12. Product Warranty and Recall Campaigns	27
	13. Employee Benefit Plans	28
	14. Commitments and Contingencies	29
	15. Accumulated Other Comprehensive Loss	30
	16. Reportable Segments	31
	17. Supplemental Consolidating Data	31
	18. Subsequent Event	38
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55
Part II	Other Information	55
Item 1.	Legal Proceedings	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56

Item 6.	Exhibits	56
Signatures		58

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 31, 2023		March 27, 2022
Revenue:
Motorcycles and related products		$	1,565,591	$	1,303,171
Financial services		223,095		192,015
		1,788,686		1,495,186
Costs and expenses:
Motorcycles and related products cost of goods sold		1,007,301		895,536
Financial services interest expense		73,549		42,099
Financial services provision for credit losses		52,364		28,822
Selling, administrative and engineering expense		285,863		239,625
Restructuring benefit		—		(128)
		1,419,077		1,205,954
Operating income		369,609		289,232
Other income, net		20,096		11,030
Investment income (loss)		10,025		(1,979)
Interest expense		7,720		7,711
Income before income taxes		392,010		290,572
Income tax provision		90,181		68,070
Net income		301,829		222,502
Less: Loss attributable to noncontrolling interests		2,261		—
Net income attributable to Harley-Davidson, Inc.		$	304,090	$	222,502
Earnings per share:
Basic		$	2.08	$	1.46
Diluted		$	2.04	$	1.45
Cash dividends per share		$	0.1650	$	0.1575

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three months ended
		March 31, 2023		March 27, 2022
Net income		$	301,829	$	222,502
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		10,121		(4,121)
Derivative financial instruments		(21,882)		9,928

Pension and postretirement benefit plans		(962)		5,502
		(12,723)		11,309
Comprehensive income		289,106		233,811
Less: Comprehensive loss attributable to noncontrolling interests		2,261		—
Comprehensive income attributable to Harley-Davidson, Inc.		$	291,367	$	233,811

The accompanying notes are integral to the consolidated financial statements.

Table of Contents

HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)


	(Unaudited)				(Unaudited)
	March 31, 2023		December 31, 2022		March 27, 2022
ASSETS

Cash and cash equivalents	$	1,561,200	$	1,433,175	$	1,393,731

Accounts receivable, net	333,533		252,225		254,286
Finance receivables, net of allowance of $62,706, $62,488, and $60,889	2,245,628		1,782,631		1,699,642
Inventories, net	830,521		950,960		714,259
Restricted cash	164,965		135,424		142,812
Other current assets	154,660		196,238		182,527
Current assets	5,290,507		4,750,653		4,387,257
Finance receivables, net of allowance of $295,725, $296,223, and $279,584	5,328,095		5,355,807		5,121,911
Property, plant and equipment, net	690,051		689,886		663,807
Pension and postretirement assets	336,569		320,133		399,029
Goodwill	62,426		62,090		62,607
Deferred income taxes	141,208		135,041		71,926
Lease assets	43,540		43,931		45,073
Other long-term assets	137,189		134,935		143,030
	$	12,029,585	$	11,492,476	$	10,894,640
LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable	$	404,414	$	378,002	$	476,917
Accrued liabilities	625,296		620,945		597,924
Short-term deposits, net	144,854		79,710		65,049
Short-term debt	501,243		770,468		816,016
Current portion of long-term debt, net	1,408,777		1,684,782		1,327,357
Current liabilities	3,084,584		3,533,907		3,283,263
Long-term deposits, net	224,457		237,665		283,034
Long-term debt, net	5,275,169		4,457,052		4,470,086
Lease liabilities	26,674		26,777		27,633
Pension and postretirement liabilities	66,968		67,955		93,792
Deferred income taxes	31,032		29,528		9,578
Other long-term liabilities	224,852		232,784		218,153
Commitments and contingencies (Note 14)
Shareholders’ equity:

Common stock	1,711		1,704		1,704
Additional paid-in-capital	1,707,214		1,688,159		1,554,840
Retained earnings	2,770,616		2,490,649		2,040,867
Accumulated other comprehensive loss	(354,652)		(341,929)		(229,610)
Treasury stock, at cost	(1,031,831)		(935,064)		(858,700)
Total Harley-Davidson, Inc. shareholders' equity	3,093,058		2,903,519		2,509,101
Noncontrolling interest	2,791		3,289		—
Total equity	3,095,849		2,906,808		2,509,101
	$	12,029,585	$	11,492,476	$	10,894,640

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HARLEY-DAVIDSON, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands)


	(Unaudited)				(Unaudited)
	March 31, 2023		December 31, 2022		March 27, 2022
Balances held by consolidated variable interest entities (Note 10):
Finance receivables, net - current	$	597,952	$	559,651	$	455,638
Other assets	$	10,738	$	9,805	$	4,373
Finance receivables, net - non-current	$	2,463,095	$	2,317,956	$	1,487,650
Restricted cash - current and non-current	$	171,285	$	141,128	$	156,297
Current portion of long-term debt, net	$	684,180	$	619,683	$	551,305
Long-term debt, net	$	1,946,435	$	1,825,525	$	1,075,787

The accompanying notes are integral to the consolidated financial statements.

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HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three months ended
	March 31, 2023		March 27, 2022
Net cash provided by operating activities (Note 6)	$	46,677	$	139,321
Cash flows from investing activities:
Capital expenditures	(45,114)		(27,999)
Origination of finance receivables	(917,145)		(1,058,461)
Collections on finance receivables	890,852		965,190




Other investing activities	821		135
Net cash used by investing activities	(70,586)		(121,135)
Cash flows from financing activities:
Proceeds from issuance of medium-term notes	693,276		495,785
Repayments of medium-term notes	(350,000)		(550,000)


Proceeds from securitization debt	547,706		—
Repayments of securitization debt	(310,640)		(271,499)
Borrowings of asset-backed commercial paper	—		62,455
Repayments of asset-backed commercial paper	(62,634)		(56,634)
Net (decrease) increase in unsecured commercial paper	(270,119)		64,521

Net increase in deposits	51,822		57,660

Dividends paid	(24,123)		(24,056)
Repurchase of common stock	(96,767)		(261,737)
Other financing activities	69		—
Net cash provided (used) by financing activities	178,590		(483,505)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	3,820		(1,743)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	158,501	$	(467,062)

Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	$	1,579,177	$	2,025,219
Net increase (decrease) in cash, cash equivalents and restricted cash	158,501		(467,062)
Cash, cash equivalents and restricted cash, end of period	$	1,737,678	$	1,558,157

Reconciliation of cash, cash equivalents and restricted cash on the Consolidated balance sheets to the Consolidated statements of cash flows:
Cash and cash equivalents	$	1,561,200	$	1,393,731
Restricted cash	164,965		142,812
Restricted cash included in Other long-term assets	11,513		21,614
Cash, cash equivalents and restricted cash per the Consolidated statements of cash flows	$	1,737,678	$	1,558,157

The accompanying notes are integral to the consolidated financial statements.

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HARLEY-DAVIDSON, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands, except share and per share amounts)

(Unaudited)


	Equity Attributable to Harley-Davidson, Inc.
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total		Equity Attributable to Noncontrolling Interests		Total Equity
	Issued Shares	Balance
Balance, December 31, 2022	170,400,212	$	1,704	$	1,688,159	$	2,490,649	$	(341,929)	$	(935,064)	$	2,903,519	$	3,289	$	2,906,808
Net income	—	—		—		304,090		—		—		304,090		(2,261)		$	301,829
Other comprehensive income, net of tax (Note 15)	—	—		—		—		(12,723)		—		(12,723)		—		$	(12,723)
Dividends ($0.1650 per share)	—	—		—		(24,123)		—		—		(24,123)		—		$	(24,123)
Repurchase of common stock	—	—		—		—		—		(96,767)		(96,767)		—		$	(96,767)
Share-based compensation	733,658	7		19,055		—		—		—		19,062		1,763		$	20,825

Balance, March 31, 2023	171,133,870	1,711		1,707,214		2,770,616		(354,652)		(1,031,831)		3,093,058		2,791		3,095,849















Balance, December 31, 2021	169,364,686	$	1,694	$	1,547,011	$	1,842,421	$	(240,919)	$	(596,963)	$	2,553,244	$	—	$	2,553,244
Net income	—	—		—		222,502		—		—		222,502		—		$	222,502
Other comprehensive income, net of tax (Note 15)	—	—		—		—		11,309		—		11,309		—		$	11,309
Dividends ($0.1575 per share)	—	—		—		(24,056)		—		—		(24,056)		—		$	(24,056)
Repurchase of common stock	—	—		—		—		—		(261,737)		(261,737)		—		$	(261,737)
Share-based compensation	976,062	10		7,829		—		—		—		7,839		—		$	7,839

Balance, March 27, 2022	170,340,748	1,704		1,554,840		2,040,867		(229,610)		(858,700)		2,509,101		—		2,509,101

The accompanying notes are integral to the consolidated financial statements.

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HARLEY-DAVIDSON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Use of Estimates

Principles of Consolidation and Basis of Presentation – The consolidated financial statements include the accounts of Harley-Davidson, Inc. and its subsidiaries and certain variable interest entities (VIEs) related to secured financing as the Company is the primary beneficiary. All intercompany accounts and material intercompany transactions have been eliminated. The Company has a controlling equity interest in LiveWire Group, Inc. As the controlling shareholder, the Company consolidates LiveWire Group, Inc. results with additional adjustments to recognize non-controlling shareholder interests.

The Company operates in three reportable segments: Harley-Davidson Motor Company (HDMC), LiveWire and Harley-Davidson Financial Services (HDFS). The Company changed its segments in the period ended December 31, 2022. The change has been retrospectively reflected in the periods presented below.

Substantially all of the Company’s international subsidiaries use their respective local currency as their functional currency. Assets and liabilities of international subsidiaries have been translated at period-end exchange rates, and revenues and expenses have been translated using average exchange rates for the period. Monetary assets and liabilities denominated in a currency that is different from an entity's functional currency are remeasured from the transactional currency to the entity's functional currency on a monthly basis. The aggregate transaction gain resulting from foreign currency remeasurements was $3.3 million and $1.6 million for the three month periods ended March 31, 2023 and March 27, 2022, respectively.

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 31, 2023 and March 27, 2022, the Consolidated statements of operations for the three month periods then ended, the Consolidated statements of comprehensive income for the three month periods then ended, the Consolidated statements of cash flows for the three month periods then ended, and the Consolidated statements of shareholders' equity for the three month periods ended March 31, 2023 and March 27, 2022.

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, 2022.

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

Fair Value Measurements – The Company assesses the inputs used to measure fair value using a three-tier hierarchy.

Level 1 inputs include quoted prices for identical instruments and are the most observable.

Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity prices, and yield curves. The Company uses the market approach to derive the fair value for its Level 2 fair value measurements. Foreign currency contracts, commodity contracts, and cross-currency swaps are valued using quoted forward rates and prices; interest rate caps are valued using quoted interest rates and yield curves.

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

2. New Accounting Standards

Accounting Standards Recently Adopted

In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (ASU 2022-02). ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of its previously issued credit losses standard (ASU 2016-13) that introduced the current expected credit losses (CECL) model. ASU 2022-02

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eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhances disclosure requirements for certain loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, ASU 2022-02 requires a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. The Company adopted ASU 2022-02 on January 1, 2023. The adoption did not have a material impact on the Company's consolidated financial statements.

3. Revenue

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue.

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


	Three months ended
		March 31, 2023		March 27, 2022
HDMC:
Motorcycles		$	1,302,378	$	1,057,005
Parts and accessories		167,671		165,320
Apparel		71,391		51,404
Licensing		6,210		6,497
Other		10,179		12,544
		1,557,829		1,292,770
LiveWire		7,762		10,401
Motorcycles and related products revenue		1,565,591		1,303,171

HDFS:
Interest income		182,270		161,734
Other		40,825		30,281
Financial services revenue		223,095		192,015
		$	1,788,686	$	1,495,186

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


	March 31, 2023		March 27, 2022
Balance, beginning of period	$	44,100	$	40,092
Balance, end of period	$	43,176	$	38,842

Previously deferred revenue recognized as revenue in the three months ended March 31, 2023 and March 27, 2022 was $6.8 million and $7.7 million, respectively. The Company expects to recognize approximately $17.8 million of the remaining unearned revenue over the next 12 months and $25.4 million thereafter.

4. Income Taxes

The Company’s effective income tax rate for the three months ended March 31, 2023 was 23.0% compared to 23.4% for the three months ended March 27, 2022.

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5. 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 31, 2023		March 27, 2022
Net income attributable to Harley-Davidson, Inc.		$	304,090	$	222,502

Basic weighted-average shares outstanding		146,048		152,820
Effect of dilutive securities – employee stock compensation plan		2,883		1,104
Diluted weighted-average shares outstanding		148,931		153,924
Net earnings per share:
Basic		$	2.08	$	1.46
Diluted		$	2.04	$	1.45

Shares of common stock related to share-based compensation that were not included in the effect of dilutive securities because the effect would have been anti-dilutive include 1.3 million and 0.5 million shares for the three months ended March 31, 2023 and March 27, 2022, respectively.

6. 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 31, 2023		December 31, 2022		March 27, 2022

Mutual funds	$	34,017	$	33,071	$	45,189

Mutual funds, included in Other long-term assets on the Consolidated balance sheets, are carried at fair value with gains and losses recorded in income. Mutual funds are held to support certain deferred compensation obligations.

Inventories, net – Substantially all inventories located in the U.S. are valued using the last-in, first-out (LIFO) method. Other inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Motorcycle finished goods inventories include motorcycles that are ready for sale and motorcycles that are substantially complete but awaiting installation of certain components affected by global supply chain constraints. Inventories, net consisted of the following (in thousands):


	March 31, 2023		December 31, 2022		March 27, 2022
Raw materials and work in process	$	387,466	$	331,380	$	376,600
Motorcycle finished goods	380,083		549,041		291,623
Parts and accessories and apparel	182,905		187,039		130,156
Inventory at lower of FIFO cost or net realizable value	950,454		1,067,460		798,379
Excess of FIFO over LIFO cost	(119,933)		(116,500)		(84,120)
	$	830,521	$	950,960	$	714,259

Deposits – HDFS offers brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. The Company had $369.3 million, $317.4 million and $348.1 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of March 31, 2023, December 31, 2022, and March 27, 2022, respectively. The liabilities for deposits are included in Short-term deposits, net or Long-term deposits, net on the Consolidated balance sheets based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.

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Future maturities of the Company's certificates of deposit as of March 31, 2023 were as follows (in thousands):


2023	$	81,167
2024	115,491
2025	39,740
2026	79,742
2027	54,158
Thereafter	—
Future maturities	370,298
Unamortized fees	(987)
	$	369,311

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


	Three months ended
	March 31, 2023		March 27, 2022
Cash flows from operating activities:
Net income	$	301,829	$	222,502
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization	34,352		39,258
Amortization of deferred loan origination costs	21,858		22,995
Amortization of financing origination fees	3,011		3,701
Provision for long-term employee benefits	(16,939)		(5,050)
Employee benefit plan contributions and payments	(1,739)		(2,143)
Stock compensation expense	23,628		8,903
Net change in wholesale finance receivables related to sales	(487,314)		(205,727)
Provision for credit losses	52,364		28,822



Deferred income taxes	5,648		6,307

Other, net	(21,671)		(5,408)
Changes in current assets and liabilities:
Accounts receivable, net	(77,993)		(74,993)
Finance receivables – accrued interest and other	2,252		3,115
Inventories, net	123,047		(2,630)
Accounts payable and accrued liabilities	43,787		106,969

Other current assets	40,557		(7,300)
	(255,152)		(83,181)
Net cash provided by operating activities	$	46,677	$	139,321

7. Finance Receivables

Finance receivables include both retail and wholesale finance receivables, including amounts held by consolidated VIEs. Finance receivables are recorded in the financial statements at amortized cost net of an allowance for credit losses.

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

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

Finance receivables, net were as follows (in thousands):


	March 31, 2023		December 31, 2022		March 27, 2022
Retail finance receivables	$	6,708,103	$	6,748,201	$	6,511,845
Wholesale finance receivables	1,224,051		748,948		650,181
	7,932,154		7,497,149		7,162,026
Allowance for credit losses	(358,431)		(358,711)		(340,473)
	$	7,573,723	$	7,138,438	$	6,821,553

The Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. The Company's allowance for credit losses reflects expected lifetime credit losses on its finance receivables. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for credit losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past credit loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.

The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Each quarter, the Company’s outlook on economic conditions impacts the Company's retail and wholesale estimates for expected credit losses. During the first quarter of 2023, the overall macro-economic conditions remained uncertain as near-term recession concerns did not abate, elevated levels of inflation continued to challenge the U.S. and global economies, and muted consumer confidence persisted, among other factors. As such, at the end the first quarter of 2023, the Company’s outlook on economic conditions and its probability weighting of its economic forecast scenarios were weighted towards a near-term recession.

Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance for credit losses balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and changes in other portfolio-specific loan characteristics.

Due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and the Company’s expectations surrounding the economic

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forecasts. The Company will continue to monitor future economic trends and conditions. Expectations surrounding the Company's economic forecasts may change in future periods as additional information becomes available.

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


	Three months ended March 31, 2023
		Retail		Wholesale		Total
Balance, beginning of period		$	345,275	$	13,436	$	358,711
Provision for credit losses		50,969		1,395		52,364
Charge-offs		(68,008)		—		(68,008)
Recoveries		15,364		—		15,364
Balance, end of period		$	343,600	$	14,831	$	358,431
	Three months ended March 27, 2022
		Retail		Wholesale		Total
Balance, beginning of period		$	326,320	$	13,059	$	339,379
Provision for credit losses		28,614		208		28,822
Charge-offs		(41,804)		—		(41,804)
Recoveries		14,076		—		14,076
Balance, end of period		$	327,206	$	13,267	$	340,473

The Company manages retail credit risk through its credit approval process and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. For the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.

As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the two portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.

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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 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
U.S. Retail:
Super prime	$	284,656	$	1,007,543	$	547,008	$	240,495	$	133,205	$	72,247	$	2,285,154
Prime	314,959		1,317,733		799,814		378,539		224,682		170,944		3,206,671
Sub-prime	86,541		379,206		264,358		145,132		94,898		85,829		1,055,964
	686,156		2,704,482		1,611,180		764,166		452,785		329,020		6,547,789
Canadian Retail:
Super prime	10,428		44,213		26,550		15,250		9,921		4,668		111,030
Prime	3,650		14,850		9,711		6,482		4,439		3,917		43,049
Sub-prime	579		2,013		1,237		1,033		754		619		6,235
	14,657		61,076		37,498		22,765		15,114		9,204		160,314
	$	700,813	$	2,765,558	$	1,648,678	$	786,931	$	467,899	$	338,224	$	6,708,103
Current-period gross charge-offs:
US Retail	$	—	$	23,440	$	22,535	$	10,215	$	5,818	$	5,100	$	67,108
Canadian Retail	—		300		245		150		33		172		900
	$	—	$	23,740	$	22,780	$	10,365	$	5,851	$	5,272	$	68,008


	December 31, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
U.S. Retail:
Super prime	$	1,118,198	$	612,890	$	276,492	$	159,550	$	69,652	$	26,701	$	2,263,483
Prime	1,433,141		887,817		425,401		260,458		135,454		79,611		3,221,882
Sub-prime	420,660		298,153		164,946		108,372		57,993		46,827		1,096,951
	2,971,999		1,798,860		866,839		528,380		263,099		153,139		6,582,316
Canadian Retail:
Super prime	49,033		30,090		17,553		12,215		4,975		1,527		115,393
Prime	16,094		10,705		7,283		5,098		3,068		1,787		44,035
Sub-prime	2,223		1,402		1,173		869		475		315		6,457
	67,350		42,197		26,009		18,182		8,518		3,629		165,885
	$	3,039,349	$	1,841,057	$	892,848	$	546,562	$	271,617	$	156,768	$	6,748,201

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	March 27, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
U.S. Retail:
Super prime	$	311,114	$	890,413	$	422,454	$	268,692	$	139,540	$	68,682	$	2,100,895
Prime	394,793		1,247,764		627,102		407,242		233,630		176,018		3,086,549
Sub-prime	125,280		427,813		240,999		159,968		91,444		91,610		1,137,114
	831,187		2,565,990		1,290,555		835,902		464,614		336,310		6,324,558
Canadian Retail:
Super prime	14,015		47,025		29,382		23,367		11,524		4,515		129,828
Prime	4,228		15,842		11,513		8,349		5,454		4,391		49,777
Sub-prime	506		2,180		1,961		1,401		861		773		7,682
	18,749		65,047		42,856		33,117		17,839		9,679		187,287
	$	849,936	$	2,631,037	$	1,333,411	$	869,019	$	482,453	$	345,989	$	6,511,845

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated by the Company on a quarterly basis.

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


	March 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—
Medium Risk	—		—		—		—		—		—		—
Low Risk	857,152		335,247		9,123		6,191		11,130		5,208		1,224,051
	$	857,152	$	335,247	$	9,123	$	6,191	$	11,130	$	5,208	$	1,224,051


	December 31, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—
Medium Risk	—		—		—		—		—		—		—
Low Risk	714,238		11,478		6,646		8,457		7,938		191		748,948
	$	714,238	$	11,478	$	6,646	$	8,457	$	7,938	$	191	$	748,948


	March 27, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—
Medium Risk	—		—		—		—		—		—		—
Low Risk	489,283		127,797		9,108		11,147		9,893		2,953		650,181
	$	489,283	$	127,797	$	9,108	$	11,147	$	9,893	$	2,953	$	650,181

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. The Company reverses accrued interest related to charged-off accounts against Financial Services interest income when the account is charged-off. The Company reversed $7.2 million and $4.9 million of accrued interest against Financial Services interest income during the three months ended March 31, 2023 and March 27, 2022, 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 to exclude accrued interest from its allowance for credit losses. Accordingly, as of March 31, 2023, December 31, 2022 and March 27, 2022, all retail finance receivables were accounted for as interest-earning receivables.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against interest income. As the Company follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio.

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There were no charged-off accounts during the three months ended March 31, 2023 and March 27, 2022. As such, the Company did not reverse any wholesale accrued interest in those periods. There were no dealers on non-accrual status at March 31, 2023, December 31, 2022, and March 27, 2022.

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


	March 31, 2023
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,488,892	$	125,327	$	44,748	$	49,136	$	219,211	$	6,708,103
Wholesale finance receivables	1,223,752		298		—		1		299		1,224,051
	$	7,712,644	$	125,625	$	44,748	$	49,137	$	219,510	$	7,932,154

	December 31, 2022
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,473,462	$	152,343	$	60,446	$	61,950	$	274,739	$	6,748,201
Wholesale finance receivables	748,682		222		44		—		266		748,948
	$	7,222,144	$	152,565	$	60,490	$	61,950	$	275,005	$	7,497,149

	March 27, 2022
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,343,673	$	99,705	$	32,521	$	35,946	$	168,172	$	6,511,845
Wholesale finance receivables	649,948		178		27		28		233		650,181
	$	6,993,621	$	99,883	$	32,548	$	35,974	$	168,405	$	7,162,026

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 loan modifications. Total finance receivables in troubled loan modifications were not significant as of March 31, 2023, December 31, 2022 and March 27, 2022. In accordance with its policies, in certain situations, the Company may offer short-term adjustments to customer payment due dates without affecting the associated interest rate or loan term.

8. Derivative Financial Instruments and Hedging Activities

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

The Company sells products in foreign currencies and utilizes foreign currency exchange contracts to mitigate the effects of foreign currency exchange rate fluctuations related to the Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Chinese yuan, Singapore dollar, Thai baht, and Pound sterling. The Company's foreign currency exchange contracts generally have maturities of less than one year.

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

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

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

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Changes in the fair value of derivative financial instruments that are designated as cash flow hedges are initially recorded in Other comprehensive (loss) income (OCI) and subsequently reclassified into income when the hedged item affects income. The Company assesses, both at the inception of each hedge and on an ongoing basis, whether the derivative financial instruments that are designated as cash flow hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. No component of a designated hedging derivative financial instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative financial instruments not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign currency, commodity risks, and interest rate risks. Changes in the fair value of derivative financial instruments not designated as hedging instruments are recorded directly in income. Cash flow activity associated with the Company's derivative financial instruments is recorded in Cash flows from operating activities on the Consolidated statement of cash flow.

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


	Derivative Financial Instruments Designated as Cash Flow Hedging Instruments
	March 31, 2023						December 31, 2022						March 27, 2022
	Notional Value		Assets(a)		Liabilities(b)		Notional Value		Assets(a)		Liabilities(b)		Notional Value		Assets(a)		Liabilities(b)
Foreign currency contracts	$	530,175	$	3,134	$	12,659	$	550,160	$	6,054	$	13,440	$	585,451	$	18,832	$	3,576
Commodity contracts	906		—		339		1,361		—		410		964		316		—
Cross-currency swaps	2,127,240		—		34,685		1,367,460		—		36,101		1,367,460		18,835		—


Swap rate lock contracts	324,843		—		1,780		—		—		—		—		—		—
	$	2,983,164	$	3,134	$	49,463	$	1,918,981	$	6,054	$	49,951	$	1,953,875	$	37,983	$	3,576

	Derivative Financial Instruments Not Designated as Hedging Instruments
	March 31, 2023						December 31, 2022						March 27, 2022
	Notional Value		Assets(a)		Liabilities(b)		Notional Value		Assets(a)		Liabilities(b)		Notional Value		Assets(a)		Liabilities(b)
Foreign currency contracts	$	—	$	—	$	—	$	—	$	—	$	—	$	230,336	$	587	$	722
Commodity contracts	11,229		99		755		10,803		310		310		11,866		2,435		—
Interest rate caps	938,768		1,414		—		1,058,827		2,373		—		412,478		2,060		—
	$	949,997	$	1,513	$	755	$	1,069,630	$	2,683	$	310	$	654,680	$	5,082	$	722

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(a)Includes $1.4 million and $2.4 million of interest rate caps recorded in Other long-term assets as of March 31, 2023 and December 31, 2022, respectively, with all remaining amounts recorded in Other current assets.

(b)Includes $27.9 million and $24.2 million of cross-currency swaps recorded in Other long-term liabilities as of March 31, 2023 and December 31, 2022, respectively, with all remaining amounts recorded in Accrued liabilities.

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


		Gain/(Loss) Recognized in OCI					Gain/(Loss) Reclassified from AOCL into Income
	Three months ended					Three months ended
		March 31, 2023		March 27, 2022			March 31, 2023		March 27, 2022
Foreign currency contracts		$	(1,706)	$	8,444		$	6,290	$	5,655
Commodity contracts		(309)		562			(379)		226
Cross-currency swaps		1,416		(16,236)			21,625		(25,800)
Treasury rate lock contracts		1,139		—			(66)		(127)
Swap rate lock contracts		(1,780)		—			(5)		—
		$	(1,240)	$	(7,230)		$	27,465	$	(20,046)

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


	Motorcycles and related products cost of goods sold		Selling, administrative & engineering expense		Interest expense		Financial services interest expense
	Three months ended March 31, 2023



















Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	1,007,301	$	285,863	$	7,720	$	73,549

Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts	$	6,290	$	—	$	—	$	—
Commodity contracts	$	(379)	$	—	$	—	$	—
Cross-currency swaps	$	—	$	21,625	$	—	$	—
Treasury rate lock contracts	$	—	$	—	$	(91)	$	25

Swap rate lock contracts	$	—	$	—	$	—	$	(5)
	Three months ended March 27, 2022
Line item on the Consolidated statements of operations in which the effects of cash flow hedges are recorded	$	895,536	$	239,625	$	7,711	$	42,099

Gain/(loss) reclassified from AOCL into income:
Foreign currency contracts	$	5,655	$	—	$	—	$	—
Commodity contracts	$	226	$	—	$	—	$	—
Cross-currency swaps	$	—	$	(25,800)	$	—	$	—
Treasury rate lock contracts	$	—	$	—	$	(91)	$	(36)

The amount of net loss included in Accumulated other comprehensive loss (AOCL) at March 31, 2023, estimated to be reclassified into income over the next 12 months was $17.6 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 and related products cost of goods sold. Gains and losses on interest rate caps were recorded in Selling, administrative & engineering expense.


		Amount of Gain/(Loss) Recognized in Income
	Three months ended
		March 31, 2023		March 27, 2022
Foreign currency contracts		$	(627)	$	(3,506)
Commodity contracts		(99)		2,387
Interest rate caps		(958)		1,700
		$	(1,684)	$	581

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.

9. Debt

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


	March 31, 2023		December 31, 2022		March 27, 2022
Unsecured commercial paper	$	501,243	$	770,468	$	816,016

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


			March 31, 2023		December 31, 2022		March 27, 2022
Secured debt:
Asset-backed Canadian commercial paper conduit facility			$	62,195	$	71,785	$	95,664
Asset-backed U.S. commercial paper conduit facility			372,816		425,794		269,534
Asset-backed securitization debt			2,267,516		2,028,155		1,363,254
Unamortized discounts and debt issuance costs			(9,717)		(8,741)		(5,696)
			2,692,810		2,516,993		1,722,756
Unsecured notes (at par value):
Medium-term notes:

Due in 2022, issued June 2017	2.55	%	—		—		400,000
Due in 2023, issued February 2018	3.35	%	—		350,000		350,000
Due in 2023, issued May 2020(a)	4.94	%	706,972		695,727		723,886
Due in 2024, issued November 2019(b)	3.14	%	652,590		642,210		668,202
Due in 2025, issued June 2020	3.35	%	700,000		700,000		700,000
Due in 2027, issued February 2022	3.05	%	500,000		500,000		500,000
Due in 2028, issued March 2023	6.50	%	700,000		—		—
Unamortized discounts and debt issuance costs			(13,971)		(8,464)		(12,243)
			3,245,591		2,879,473		3,329,845

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			March 31, 2023		December 31, 2022		March 27, 2022
Senior notes:
Due in 2025, issued July 2015	3.50	%	450,000		450,000		450,000
Due in 2045, issued July 2015	4.625	%	300,000		300,000		300,000
Unamortized discounts and debt issuance costs			(4,455)		(4,632)		(5,158)
			745,545		745,368		744,842
			3,991,136		3,624,841		4,074,687
Long-term debt			6,683,946		6,141,834		5,797,443
Current portion of long-term debt, net			(1,408,777)		(1,684,782)		(1,327,357)
Long-term debt, net			$	5,275,169	$	4,457,052	$	4,470,086

(a)€650.0 million par value remeasured to U.S. dollar at March 31, 2023, December 31, 2022, and March 27, 2022, respectively

(b)€600.0 million par value remeasured to U.S. dollar at March 31, 2023, December 31, 2022, and March 27, 2022, respectively

Future principal payments of the Company's debt obligations as of March 31, 2023 were as follows (in thousands):


2023	$	1,783,948
2024	1,302,020
2025	1,857,244
2026	606,941
2027	663,172
Thereafter	1,000,007
Future principal payments	7,213,332
Unamortized discounts and debt issuance costs	(28,143)
	$	7,185,189

10. Asset-Backed Financing

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

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

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

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

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

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The assets and liabilities related to the on-balance sheet asset-backed financings included in the Consolidated balance sheets were as follows (in thousands):


	March 31, 2023
	Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations	$	2,815,885	$	(144,336)	$	142,265	$	8,799	$	2,822,613	$	2,257,799
Asset-backed U.S. commercial paper conduit facility	410,529		(21,031)		29,020		1,939		420,457		372,816
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	70,485		(2,980)		5,193		151		72,849		62,195
	$	3,296,899	$	(168,347)	$	176,478	$	10,889	$	3,315,919	$	2,692,810

	December 31, 2022
	Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations	$	2,558,450	$	(130,774)	$	114,254	$	7,899	$	2,549,829	$	2,019,414
Asset-backed U.S. commercial paper conduit facility	474,167		(24,236)		26,874		1,906		478,711		425,794
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	82,375		(3,452)		4,873		130		83,926		71,785
	$	3,114,992	$	(158,462)	$	146,001	$	9,935	$	3,112,466	$	2,516,993

	March 27, 2022
	Finance receivables		Allowance for credit losses		Restricted cash		Other assets		Total assets		Asset-backed debt, net
On-balance sheet assets and liabilities:
Consolidated VIEs:
Asset-backed securitizations	$	1,755,446	$	(88,090)	$	131,992	$	3,724	$	1,803,072	$	1,357,558
Asset-backed U.S. commercial paper conduit facility	290,481		(14,549)		24,305		649		300,886		269,534
Unconsolidated VIEs:
Asset-backed Canadian commercial paper conduit facility	108,052		(4,457)		8,129		43		111,767		95,664
	$	2,153,979	$	(107,096)	$	164,426	$	4,416	$	2,215,725	$	1,722,756

On-Balance Sheet Asset-Backed Securitization VIEs – The Company transfers U.S. retail motorcycle finance receivables to SPEs which in turn issue secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. Each on-balance sheet asset-backed securitization SPE is a separate legal entity, and the U.S. retail motorcycle finance receivables included in the asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the asset-backed securitization transactions and are not available to pay other obligations or claims of the Company’s creditors until the associated secured debt and other obligations are satisfied. Restricted cash balances held by the SPEs are used only to support the securitizations. There are no amortization schedules for the secured notes; however, the debt is reduced monthly as available collections on the related U.S. retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2024 to 2030.

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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 2023, the Company transferred $628.5 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $550.0 million, or $547.7 million net of discount and issuance costs, of secured notes through an on-balance sheet asset-backed securitization transaction. There were no on-balance sheet asset-backed securitization transactions during the first quarter of 2022.

On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facility VIE – The Company has a $1.50 billion revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset-backed U.S. commercial paper conduits. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party banks and their asset-backed U.S. commercial paper conduits. In November 2022, the Company renewed the U.S. Conduit Facility. As a result of the renewal, the agreement no longer allows for uncommitted additional borrowings, at the lender's discretion, of up to $300.0 million in addition to the $1.50 billion aggregate commitment. Prior to the November 2022 renewal, the Company drew against the $300.0 million of uncommitted additional borrowings that were available prior to the renewal and, at March 31, 2023, $72.8 million of the amount drawn remained outstanding. Availability under the U.S. Conduit Facility is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.

Under the U.S. Conduit Facility, the assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. Subsequent to the November 2022 renewal, the interest rate on all outstanding debt and future borrowings, if not funded by a conduit lender through the issuance of commercial paper, is based on the Secured Overnight Financing Rate (SOFR), with provisions for a transition to other benchmark rates in the future, if necessary. Prior to the renewal, if not funded by a conduit lender through the issuance of commercial paper, the terms of the interest were based on LIBOR or SOFR, as appropriate, with provisions for a transition to other benchmark rates. In addition to interest, a program fee is assessed based on the outstanding debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. 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 31, 2023, the U.S. Conduit Facility has an expiration date of November 17, 2023.

The Company is the primary beneficiary of its U.S. Conduit Facility VIE because it retains servicing rights and a residual interest in the VIE in the form of a debt security. As the servicer, the Company is the variable interest holder with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a residual interest holder, the Company has the obligation to absorb losses and the right to receive benefits which could potentially be significant to the VIE.

There were no finance receivable transfers under the U.S. Conduit Facility during the first quarter of 2023. During the first quarter of 2022, the Company transferred $47.1 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $41.3 million of debt under the U.S. Conduit Facility.

On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – The Company has a revolving facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. 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 4 years.

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Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of March 31, 2023, the Canadian Conduit has an expiration date of June 30, 2023.

The Company is not the primary beneficiary of the Canadian bank-sponsored, multi-seller conduit VIE; therefore, the Company does not consolidate the VIE. However, the Company treats the conduit facility as a secured borrowing as it maintains effective control over the assets transferred to the VIE and, therefore, does not meet the requirements for sale accounting.

As the Company participates in and does not consolidate the Canadian bank-sponsored, multi-seller conduit VIE, the maximum exposure to loss associated with this VIE, which would only be incurred in the unlikely event that all the finance receivables and underlying collateral have no residual value, was $10.7 million at March 31, 2023. The maximum exposure is not an indication of the Company's expected loss exposure.

There were no finance receivable transfers under the Canadian Conduit Facility during the first quarter of 2023. During the first quarter of 2022, the Company transferred $25.3 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $21.2 million.

11. Fair Value

The following tables present the fair values of certain of the Company's assets and liabilities within the fair value hierarchy as defined in Note 1.

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


	March 31, 2023
	Balance		Level 1		Level 2
Assets:
Cash equivalents	$	1,030,696	$	858,000	$	172,696
Marketable securities	34,017		34,017		—
Derivative financial instruments	4,647		—		4,647
	$	1,069,360	$	892,017	$	177,343
Liabilities:
Derivative financial instruments	$	50,218	$	—	$	50,218
LiveWire warrants	7,320		4,800		2,520
	$	57,538	$	4,800	$	52,738

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	December 31, 2022
	Balance		Level 1		Level 2
Assets:
Cash equivalents	$	805,629	$	594,000	$	211,629
Marketable securities	33,071		33,071		—
Derivative financial instruments	8,737		—		8,737
	$	847,437	$	627,071	$	220,366
Liabilities:
Derivative financial instruments	$	50,261	$	—	$	50,261
LiveWire warrants	8,388		5,500		2,888
	$	58,649	$	5,500	$	53,149
	March 27, 2022
	Balance		Level 1		Level 2
Assets:
Cash equivalents	$	968,395	$	803,400	$	164,995
Marketable securities	45,189		45,189		—
Derivative financial instruments	43,065		—		43,065
	$	1,056,649	$	848,589	$	208,060
Liabilities:
Derivative financial instruments	$	4,298	$	—	$	4,298
LiveWire warrants	—		$	—	$	—
	$	4,298	$	—	$	4,298

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 $24.9 million, $20.7 million and 17.9 million as of March 31, 2023, December 31, 2022 and March 27, 2022, respectively, for which the fair value adjustment was a decrease of $6.8 million, $7.5 million and $0.6 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 31, 2023				December 31, 2022				March 27, 2022
	Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value
Assets:
Finance receivables, net	$	7,611,579	$	7,573,723	$	7,248,353	$	7,138,438	$	6,920,395	$	6,821,553
Liabilities:
Deposits, net	$	391,238	$	369,311	$	339,981	$	317,375	$	359,995	$	348,083
Debt:
Unsecured commercial paper	$	501,243	$	501,243	$	770,468	$	770,468	$	816,016	$	816,016


Asset-backed U.S. commercial paper conduit facility	$	372,816	$	372,816	$	425,794	$	425,794	$	269,534	$	269,534
Asset-backed Canadian commercial paper conduit facility	$	62,195	$	62,195	$	71,785	$	71,785	$	95,664	$	95,664
Asset-backed securitization debt	$	2,240,966	$	2,257,799	$	1,996,550	$	2,019,414	$	1,343,706	$	1,357,558
Medium-term notes	$	3,153,175	$	3,245,591	$	2,760,093	$	2,879,473	$	3,326,310	$	3,329,845
Senior notes	$	665,665	$	745,545	$	661,630	$	745,368	$	724,089	$	744,842

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

Deposits, net – The carrying value of deposits is amortized cost, net of fees. The fair value of deposits is estimated based upon rates currently available for deposits with similar terms and maturities. Fair value is calculated using Level 3 inputs.

Debt – The carrying value of debt is generally cost, net of unamortized discounts and debt issuance costs. The fair value of unsecured commercial paper is calculated using Level 2 inputs and approximates carrying value due to its short maturity. The fair value of debt provided under the U.S. Conduit Facility and the Canadian Conduit Facility is calculated using Level 2 inputs and approximates carrying value since the interest rates charged under the facilities are tied directly to market rates and fluctuate as market rates change. The fair values of the medium-term notes and senior notes are estimated based upon rates currently available for debt with similar terms and remaining maturities (Level 2 inputs). The fair value of the fixed-rate debt related to on-balance sheet asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities (Level 2 inputs). The fair value of the floating-rate debt related to on-balance sheet asset-backed securitization transactions is calculated using Level 2 inputs and approximates carrying value since the interest rates charged are tied directly to market rates and fluctuate as market rates change.

12. Product Warranty and Recall Campaigns

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

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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
		March 31, 2023		March 27, 2022
Balance, beginning of period		$	75,960	$	61,621
Warranties issued during the period		11,927		10,711
Settlements made during the period		(12,051)		(7,096)
Recalls and changes to pre-existing warranty liabilities		(1,168)		(141)
Balance, end of period		$	74,668	$	65,095

The liability for recall campaigns, included in the balance above, was $26.6 million, $29.7 million and $16.7 million at March 31, 2023, December 31, 2022 and March 27, 2022, respectively.

13. 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 HDMC 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 and related products cost of goods sold and Inventories, net. Amounts capitalized in inventory are not significant. Non-service cost components of net periodic benefit (income) cost are presented in Other income, net. Components of net periodic benefit (income) cost for the Company's defined benefit plans were as follows (in thousands):


	Three months ended
		March 31, 2023		March 27, 2022
Pension and SERPA Benefits:
Service cost		$	1,294	$	4,763
Interest cost		20,476		15,472
Expected return on plan assets		(36,519)		(31,476)
Amortization of unrecognized:
Prior service cost (credit)		188		(328)
Net (gain) loss		(181)		7,978
Settlement gain		(222)		(256)

Net periodic benefit income		$	(14,964)	$	(3,847)


Postretirement Healthcare Benefits:
Service cost		$	797	$	1,161
Interest cost		2,772		1,904
Expected return on plan assets		(4,281)		(3,809)
Amortization of unrecognized:
Prior service credit		(166)		(581)
Net (gain) loss		(1,097)		122


Net periodic benefit income		$	(1,975)	$	(1,203)

There are no required or planned voluntary qualified pension plan contributions for 2023. The Company expects it will continue to make ongoing benefit payments under the SERPA and postretirement healthcare plans.

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14. Commitments and Contingencies

Litigation and Other Claims – The Company is subject to lawsuits and other claims related to product, commercial, employee, environmental and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. The Company accrues for matters when losses are both probable and estimable. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. The Company also maintains insurance coverage for product liability exposures. The Company believes that its accruals and insurance coverage are adequate and there are no material exposures to loss in excess of amounts accrued and insured for losses related to these matters.

Supply Matter – During the second quarter of 2022, the Company received information from a third-party sub-supplier concerning a potential regulatory compliance matter relating to the sub-supplier’s brake hose assemblies. As a result, out of an abundance of caution, the Company suspended all vehicle assembly and shipments (excluding LiveWire models, which did not utilize the brake hose assemblies at issue) for approximately two weeks during the second quarter of 2022. Since then, the Company has been working through the regulatory compliance matter with the sub-supplier, the Company’s relevant Tier-1 suppliers, and the National Highway Traffic Safety Administration (NHTSA), which is the agency responsible for brake hose assembly compliance in the United States.

In connection with this matter, in July 2022, the sub-supplier notified NHTSA of a population of brake hose assemblies that were non-compliant with select NHTSA laboratory test standards. Based on that filing, in August 2022, the Company notified NHTSA of the corresponding population of Harley-Davidson motorcycles containing those brake hose assemblies. In October 2022, the sub-supplier amended its original notification, expanding its population of non-compliant brake hose assemblies to include units produced by the sub-supplier for use in Harley-Davidson motorcycles beginning as early as model year 2008. In December 2022, the Company amended its August notification, expanding the population to also include Harley-Davidson motorcycles that contained the sub-supplier’s newly identified brake hose assemblies. On March 30, 2023, the sub-supplier again amended its notification to NHTSA, identifying additional compliance issues with its brake hose assemblies. The Company is currently evaluating the sub-supplier’s latest amended notification and plans to again amend its notification to NHTSA to align with the sub-supplier’s amended notification.

As permitted by federal law, both the sub-supplier and the Company have leveraged NHTSA’s standard process to petition the agency for a determination that these compliance issues are inconsequential to motor vehicle safety (an “Inconsequentiality Determination”). If NHTSA makes the Inconsequentiality Determination requested, the Company will be exempt from conducting a field action or a recall of its motorcycles related to this matter.

In its inconsequentiality petition, the Company has presented (and plans to further present) NHTSA with: (1) extensive independent, third-party and internal testing demonstrating that the brake hose assemblies at issue are robust to extreme conditions - which far exceed maximum expected motorcycle lifetime demands - with no impact to brake performance; and (2) real-world field safety data showing no documented crashes or injuries attributable to the identified compliance issues. The Company believes its petition is closely comparable to inconsequentiality petitions which have resulted in successful Inconsequentiality Determinations in the past. The Company is also confident that its position that the compliance issues are inconsequential to motor vehicle safety is strong and, therefore, no field action or recall will be necessary.

Based on its expectation that NHTSA will make an Inconsequentiality Determination, the Company does not expect that this matter will result in material costs in the future and no such costs have been accrued to date. However, it is possible that a field action or recall could be required that could cause the Company to incur material costs. There are several variables and uncertainties associated with any potential field action or recall that are not yet known including, but not limited to, the population of brake hose assemblies and motorcycles, the specific field action or recall required, the complexity of the required repair, and the number of motorcycle owners that would participate. Based on the Company’s information and assumptions, it estimates the cost of a potential field action or recall, if it were to occur, could range from approximately $200 million to $400 million. While the Company anticipates this estimated range to change based on information most recently provided by the sub-supplier, the Company cannot make a reasonable updated estimate at this time. The Company maintains its expectation that NHTSA will make an Inconsequentiality Determination and that this matter will not result in any material field action or recall costs. If material field action or recall costs were to result, the Company would seek full recovery of those amounts.

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15. Accumulated Other Comprehensive Loss

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


	Three months ended March 31, 2023
	Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans		Total
Balance, beginning of period	$	(80,271)	$	(10,440)	$	(251,218)	$	(341,929)
Other comprehensive income (loss), before reclassifications	10,976		(1,240)		—		9,736
Income tax (expense) benefit	(855)		374		—		(481)
	10,121		(866)		—		9,255
Reclassifications:

Net gain on derivative financial instruments	—		(27,465)		—		(27,465)
Prior service credits(a)	—		—		22		22
Actuarial gains(a)	—		—		(1,278)		(1,278)
Reclassifications before tax	—		(27,465)		(1,256)		(28,721)
Income tax benefit	—		6,449		294		6,743
	—		(21,016)		(962)		(21,978)
Other comprehensive (loss) income	10,121		(21,882)		(962)		(12,723)
Balance, end of period	$	(70,150)	$	(32,322)	$	(252,180)	$	(354,652)

	Three months ended March 27, 2022
	Foreign currency translation adjustments		Derivative financial instruments		Pension and postretirement benefit plans		Total
Balance, beginning of period	$	(44,401)	$	(2,005)	$	(194,513)	$	(240,919)
Other comprehensive loss, before reclassifications	(3,804)		(7,230)		—		(11,034)
Income tax (expense) benefit	(317)		1,493		—		1,176
	(4,121)		(5,737)		—		(9,858)
Reclassifications:

Net loss on derivative financial instruments	—		20,046		—		20,046
Prior service credits(a)	—		—		(909)		(909)
Actuarial losses(a)	—		—		8,100		8,100
Reclassifications before tax	—		20,046		7,191		27,237
Income tax expense	—		(4,381)		(1,689)		(6,070)
	—		15,665		5,502		21,167
Other comprehensive (loss) income	(4,121)		9,928		5,502		11,309
Balance, end of period	$	(48,522)	$	7,923	$	(189,011)	$	(229,610)

(a) Amounts reclassified are included in the computation of net periodic benefit (income) cost, discussed further in Note 13.

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16. Reportable Segments

The Company operates in three business segments: HDMC, LiveWire and HDFS. 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 Company changed its segments in the period ended December 31, 2022. The change has been retrospectively reflected in the periods presented below.

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


	Three months ended
		March 31, 2023		March 27, 2022
HDMC:
Revenue		$	1,557,829	$	1,292,770
Gross profit		557,026		407,582
Selling, administrative and engineering expense		221,290		188,776
Restructuring benefit		—		(128)
Operating income		335,736		218,934
LiveWire:
Revenue		7,762		10,401
Gross profit		1,264		53
Selling, administrative and engineering expense		25,811		16,112
Operating loss		(24,547)		(16,059)
HDFS:
Financial services revenue		223,095		192,015
Financial services expense		164,675		105,658

Operating income		58,420		86,357
Operating income		$	369,609	$	289,232

Total assets for the HDMC, LiveWire and HDFS segments were $3.1 billion, $325.8 million and $8.6 billion, respectively, as of March 31, 2023, $3.3 billion, $351.4 million and $7.9 billion, respectively, as of December 31, 2022, and $2.9 billion, $75.7 million and $7.9 billion, respectively, as of March 27, 2022.

17. Supplemental Consolidating Data

The supplemental consolidating data includes separate legal entity data for Harley-Davidson Financial Services, Inc. and its subsidiaries (Financial Services Entities) and all other Harley-Davidson, Inc. entities (Non-Financial Services Entities). This information is presented to highlight the separate financial statement impacts of the Company's Financial Services Entities and its Non-Financial Services Entities. The legal entity income statement information presented below differs from reportable segment income statement information due to the allocation of legal entity consolidating adjustments to income for reportable segments. Supplemental consolidating data is as follows (in thousands):

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	Three months ended March 31, 2023
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
Revenue:
Motorcycles and related products	$	1,567,709	$	—	$	(2,118)	$	1,565,591
Financial services	—		223,523		(428)		223,095
	1,567,709		223,523		(2,546)		1,788,686
Costs and expenses:
Motorcycles and related products cost of goods sold	1,007,301		—		—		1,007,301
Financial services interest expense	—		73,549		—		73,549
Financial services provision for credit losses	—		52,364		—		52,364
Selling, administrative and engineering expense	247,695		40,880		(2,712)		285,863

	1,254,996		166,793		(2,712)		1,419,077
Operating income	312,713		56,730		166		369,609
Other income, net	20,096		—		—		20,096
Investment income	10,025		—		—		10,025
Interest expense	7,720		—		—		7,720
Income before income taxes	335,114		56,730		166		392,010
Provision for income taxes	78,729		11,452		—		90,181
Net income	256,385		45,278		166		301,829
Less: (income) loss attributable to noncontrolling interests	2,261		—		—		2,261
Net income attributable to Harley-Davidson, Inc.	$	258,646	$	45,278	$	166	$	304,090
























	Three months ended March 27, 2022
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
Revenue:
Motorcycles and related products	$	1,306,293	$	—	$	(3,122)	$	1,303,171
Financial services	—		192,390		(375)		192,015
	1,306,293		192,390		(3,497)		1,495,186
Costs and expenses:
Motorcycles and related products cost of goods sold	895,536		—		—		895,536
Financial services interest expense	—		42,099		—		42,099
Financial services provision for credit losses	—		28,822		—		28,822
Selling, administrative and engineering expense	205,417		37,858		(3,650)		239,625
Restructuring benefit	(128)		—		—		(128)
	1,100,825		108,779		(3,650)		1,205,954
Operating income	205,468		83,611		153		289,232
Other income, net	11,030		—		—		11,030
Investment loss	(1,979)		—		—		(1,979)
Interest expense	7,711		—		—		7,711
Income before income taxes	206,808		83,611		153		290,572
Provision for income taxes	47,847		20,223		—		68,070
Net income	158,961		63,388		153		222,502
Less: (income) loss attributable to noncontrolling interests	—		—		—		—
Net income attributable to Harley-Davidson, Inc.	$	158,961	$	63,388	$	153	$	222,502

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	March 31, 2023
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	876,248	$	684,952	$	—	$	1,561,200

Accounts receivable, net	798,728		—		(465,195)		333,533
Finance receivables, net	—		2,245,628		—		2,245,628
Inventories, net	830,521		—		—		830,521
Restricted cash	—		164,965		—		164,965
Other current assets	110,559		50,727		(6,626)		154,660
	2,616,056		3,146,272		(471,821)		5,290,507
Finance receivables, net	—		5,328,095		—		5,328,095
Property, plant and equipment, net	667,474		22,577		—		690,051
Pension and postretirement assets	336,569		—		—		336,569
Goodwill	62,426		—		—		62,426
Deferred income taxes	58,175		83,725		(692)		141,208
Lease assets	37,868		5,672		—		43,540
Other long-term assets	217,124		28,650		(108,585)		137,189
	$	3,995,692	$	8,614,991	$	(581,098)	$	12,029,585
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	375,395	$	494,214	$	(465,195)	$	404,414
Accrued liabilities	488,814		142,192		(5,710)		625,296
Short-term deposits, net	—		144,854		—		144,854
Short-term debt	—		501,243		—		501,243
Current portion of long-term debt, net	—		1,408,777		—		1,408,777
	864,209		2,691,280		(470,905)		3,084,584
Long-term deposits, net	—		224,457		—		224,457
Long-term debt, net	745,545		4,529,624		—		5,275,169
Lease liabilities	21,160		5,514		—		26,674
Pension and postretirement liabilities	66,968		—		—		66,968
Deferred income taxes	28,180		2,852		—		31,032
Other long-term liabilities	155,487		67,626		1,739		224,852
Commitments and contingencies (Note 14)
Shareholders’ equity	2,114,143		1,093,638		(111,932)		3,095,849
	$	3,995,692	$	8,614,991	$	(581,098)	$	12,029,585

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	March 27, 2022
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	678,616	$	715,115	$	—	$	1,393,731

Accounts receivable, net	601,148		—		(346,862)		254,286
Finance receivables, net	—		1,699,642		—		1,699,642
Inventories, net	714,259		—		—		714,259
Restricted cash	—		142,812		—		142,812
Other current assets	149,955		61,455		(28,883)		182,527
	2,143,978		2,619,024		(375,745)		4,387,257
Finance receivables, net	—		5,121,911		—		5,121,911
Property, plant and equipment, net	636,216		27,591		—		663,807
Pension and postretirement assets	399,029		—		—		399,029
Goodwill	62,607		—		—		62,607
Deferred income taxes	—		75,185		(3,259)		71,926
Lease assets	38,126		6,947		—		45,073
Other long-term assets	210,157		37,595		(104,722)		143,030
	$	3,490,113	$	7,888,253	$	(483,726)	$	10,894,640
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	434,731	$	389,048	$	(346,862)	$	476,917
Accrued liabilities	495,921		129,581		(27,578)		597,924
Short-term deposits, net	—		65,049		—		65,049
Short-term debt	—		816,016		—		816,016
Current portion of long-term debt, net	—		1,327,357		—		1,327,357
	930,652		2,727,051		(374,440)		3,283,263
Long-term deposits, net	—		283,034		—		283,034
Long-term debt, net	744,842		3,725,244		—		4,470,086
Lease liabilities	20,544		7,089		—		27,633
Pension and postretirement liabilities	93,792		—		—		93,792
Deferred income taxes	10,478		1,848		(2,748)		9,578
Other long-term liabilities	165,990		50,190		1,973		218,153
Commitments and contingencies (Note 14)
Shareholders’ equity	1,523,815		1,093,797		(108,511)		2,509,101
	$	3,490,113	$	7,888,253	$	(483,726)	$	10,894,640

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	Three months ended March 31, 2023
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
Cash flows from operating activities:
Net income	$	256,385	$	45,278	$	166	$	301,829
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization	32,120		2,232		—		34,352
Amortization of deferred loan origination costs	—		21,858		—		21,858
Amortization of financing origination fees	177		2,834		—		3,011
Provision for long-term employee benefits	(16,939)		—		—		(16,939)
Employee benefit plan contributions and payments	(1,739)		—		—		(1,739)
Stock compensation expense	22,494		1,134		—		23,628
Net change in wholesale finance receivables related to sales	—		—		(487,314)		(487,314)
Provision for credit losses	—		52,364		—		52,364



Deferred income taxes	4,261		1,717		(330)		5,648
Other, net	(18,087)		(3,418)		(166)		(21,671)
Changes in current assets and liabilities:
Accounts receivable, net	(426,221)		—		348,228		(77,993)
Finance receivables – accrued interest and other	—		2,252		—		2,252
Inventories, net	123,047		—		—		123,047
Accounts payable and accrued liabilities	14,610		379,094		(349,917)		43,787
Other current assets	25,342		13,131		2,084		40,557
	(240,935)		473,198		(487,415)		(255,152)
Net cash provided by operating activities	15,450		518,476		(487,249)		46,677

Cash flows from investing activities:
Capital expenditures	(44,894)		(220)		—		(45,114)
Origination of finance receivables	—		(2,100,019)		1,182,874		(917,145)
Collections on finance receivables	—		1,586,477		(695,625)		890,852

Other investing activities	821		—		—		821
Net cash used by investing activities	(44,073)		(513,762)		487,249		(70,586)

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	Three months ended March 31, 2023
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
Cash flows from financing activities:


Proceeds from issuance of medium-term notes	—		693,276		—		693,276
Repayments of medium-term notes	—		(350,000)		—		(350,000)
Proceeds from securitization debt	—		547,706		—		547,706
Repayments of securitization debt	—		(310,640)		—		(310,640)

Repayments of asset-backed commercial paper	—		(62,634)		—		(62,634)
Net decrease in unsecured commercial paper	—		(270,119)		—		(270,119)

Net increase in deposits	—		51,822		—		51,822

Dividends paid	(24,123)		—		—		(24,123)
Repurchase of common stock	(96,767)		—		—		(96,767)

Other financing activities	69		—		—		69
Net cash (used) provided by financing activities	(120,821)		299,411		—		178,590
Effect of exchange rate changes on cash, cash equivalents and restricted cash	3,894		(74)		—		3,820
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(145,550)	$	304,051	$	—	$	158,501

Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	$	1,021,798	$	557,379	$	—	$	1,579,177
Net (decrease) increase in cash, cash equivalents and restricted cash	(145,550)		304,051		—		158,501
Cash, cash equivalents and restricted cash, end of period	$	876,248	$	861,430	$	—	$	1,737,678

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	Three months ended March 27, 2022
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
Cash flows from operating activities:
Net income	$	158,961	$	63,388	$	153	$	222,502
Adjustments to reconcile Net income to Net cash provided by operating activities:
Depreciation and amortization	37,106		2,152		—		39,258
Amortization of deferred loan origination costs	—		22,995		—		22,995
Amortization of financing origination fees	174		3,527		—		3,701
Provision for long-term employee benefits	(5,050)		—		—		(5,050)
Employee benefit plan contributions and payments	(2,143)		—		—		(2,143)
Stock compensation expense	8,233		670		—		8,903
Net change in wholesale finance receivables related to sales	—		—		(205,727)		(205,727)
Provision for credit losses	—		28,822		—		28,822



Deferred income taxes	6,176		665		(534)		6,307
Other, net	(5,322)		67		(153)		(5,408)
Changes in current assets and liabilities:
Accounts receivable, net	(319,329)		—		244,336		(74,993)
Finance receivables – accrued interest and other	—		3,115		—		3,115
Inventories, net	(2,630)		—		—		(2,630)
Accounts payable and accrued liabilities	86,546		289,876		(269,453)		106,969
Other current assets	(47,418)		14,467		25,651		(7,300)
	(243,657)		366,356		(205,880)		(83,181)
Net cash (used) provided by operating activities	(84,696)		429,744		(205,727)		139,321
Cash flows from investing activities:
Capital expenditures	(27,149)		(850)		—		(27,999)
Origination of finance receivables	—		(2,023,861)		965,400		(1,058,461)
Collections on finance receivables	—		1,724,863		(759,673)		965,190

Other investing activities	135		—		—		135
Net cash used by investing activities	(27,014)		(299,848)		205,727		(121,135)

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	Three months ended March 27, 2022
	Non-Financial Services Entities		Financial Services Entities		Consolidating Adjustments		Consolidated
Cash flows from financing activities:

Proceeds from issuance of medium-term notes	—		495,785		—		495,785
Repayments of medium-term notes	—		(550,000)		—		(550,000)

Repayments of securitization debt	—		(271,499)		—		(271,499)
Borrowings of asset-backed commercial paper	—		62,455		—		62,455
Repayments of asset-backed commercial paper	—		(56,634)		—		(56,634)
Net decrease in unsecured commercial paper	—		64,521		—		64,521

Net increase in deposits	—		57,660		—		57,660
Dividends paid	(24,056)		—		—		(24,056)
Repurchase of common stock	(261,737)		—		—		(261,737)

Net cash used by financing activities	(285,793)		(197,712)		—		(483,505)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2,086)		343		—		(1,743)
Net decrease in cash, cash equivalents and restricted cash	$	(399,589)	$	(67,473)	$	—	$	(467,062)

Cash, cash equivalents and restricted cash:
Cash, cash equivalents and restricted cash, beginning of period	$	1,078,205	$	947,014	$	—	$	2,025,219
Net decrease in cash, cash equivalents and restricted cash	(399,589)		(67,473)		—		(467,062)
Cash, cash equivalents and restricted cash, end of period	$	678,616	$	879,541	$	—	$	1,558,157

18. Subsequent Event

In April 2023, the Company issued €700.0 million of medium-term notes that mature in April 2026 and have an annual interest rate of 6.36%.

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

Unless the context otherwise requires, all references to the “Company” include Harley-Davidson, Inc. and all its subsidiaries. Harley-Davidson, Inc. operates in three segments: Harley-Davidson Motor Company (HDMC), LiveWire and Harley-Davidson Financial Services (HDFS).

The “% Change” figures included in the Results of Operations sections were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented. Certain “% Change” deemed not meaningful (NM) have been excluded.

(1) Note Regarding Forward-Looking Statements

The Company intends that certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the Company “believes,” “anticipates,” “expects,” “plans,” “may,” “will,” “estimates,” “targets,” “intends,” "forecasts," “is on-track,” "sees," "feels," or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this report. Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including under the caption "Cautionary Statements" in this Item 2, as well as in Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in the "Key Factors Impacting the Company" and the “Guidance” sections in this Item 2 are only made as of April 27, 2023 and the remaining forward-looking statements in this report are made as of the date of the filing of this report (May 10, 2023), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

Overview(1)

Net income attributable to Harley-Davidson, Inc. was $304.1 million, or $2.04 per diluted share, in the first quarter of 2023 compared to $222.5 million, or $1.45 per diluted share, in the first quarter of 2022.

In the first quarter of 2023, HDMC segment operating income was $335.7 million, up $116.8 million from the first quarter of 2022. The increase in operating income from the HDMC segment for the first quarter of 2023 was driven primarily by higher motorcycle shipments, price increases and favorable product mix partially offset by the impact of unfavorable foreign currency exchange rates and increased operating expenses compared to the same quarter last year. Operating loss from the LiveWire segment in the first quarter of 2023 was $24.5 million compared to an operating loss of $16.1 million in the prior year quarter due primarily to lower electric motorcycle and electric balance bike shipments and increased operating expenses. Operating income from the HDFS segment in the first quarter of 2023 was $58.4 million, down $27.9 million compared to the prior year quarter due primarily to higher interest expense and an increase in the provision for credit losses.

Retail sales of new Harley-Davidson motorcycles in the first quarter of 2023 were down 12.4% compared to the first quarter of 2022, including a decline of 17.3% and 3.3% in U.S. and international markets, respectively. Refer to the Harley-Davidson Motorcycles Retail Sales and Registration Data section for further discussion of retail sales results.

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Key Factors Impacting the Company(1)

Supply Chain Challenges – Starting in 2020, the Company began to experience disruption and increasing costs related to global supply chain challenges, including global semiconductor chip shortages. During the second half of 2022, these cost increases began to moderate primarily through the normalization of logistics inflation and to a lesser extent raw materials inflation which slowed as metal markets improved. In addition, during the second half of 2022, the Company began to reduce its reliance on expedited shipping. During the first quarter of 2023, the Company continued to experience a moderate level of cost inflation, primarily related to labor and warehousing costs, partially offset by deflation related to freight and raw materials. The Company also continued to reduce its use of expedited modes of freight during the first quarter of 2023. The Company continues to expect overall supply-chain cost inflation to moderate for the 2023 full year, as compared to 2022.

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Interest Rates - Interest rates increased significantly during 2022 and continued to increase in 2023 as central banks attempted to reduce inflation. Rising interest rates may adversely impact HDFS's interest income margin to the extent HDFS is unable to offset a higher cost of funds with increased interest rates on products it offers to its customers. Additionally, higher interest rates may make the Company’s motorcycles less affordable, adversely impact product mix or impact customers’ ability to obtain financing to purchase the Company’s motorcycles.

Suspension of Additional European Union Tariffs – In April 2021, the Company received notification from the Economic Ministry of Belgium that, following a request from the European Union (EU), the Company would be subject to revocation of the Binding Origin Information (BOI) decisions that allowed it to supply its EU markets with certain motorcycles produced at its Thailand manufacturing facility at tariff rates of 6%. As a result of the revocation, all non-electric motorcycles that Harley-Davidson imported into the EU, regardless of origin, were subject to a total tariff rate of 31% from April 19, 2021 through the end of 2021. On October 30, 2021, the U.S. and EU announced an agreement related to the Section 232 tariffs on steel and aluminum that were implemented in 2018 by the U.S. and the subsequent rebalancing tariff measures taken by the EU. This agreement suspended the additional tariffs initially imposed by the EU on the Company's motorcycles, reducing the total EU tariff rate on the Company’s motorcycles from 31% to 6%, effective January 1, 2022. The lower 6% tariff rate applies to all motorcycles imported by the Company into the EU, regardless of origin. Under the agreement between the U.S. and the EU, the lower tariff rate will remain in effect until December 31, 2023. The U.S. and EU will monitor and review the operation of the agreement, seeking to conclude the negotiations on steel and aluminum tariffs by December 31, 2023. These negotiations are ongoing, and there are no assurances the U.S. and EU will reach a resolution that concludes the trade conflict on steel and aluminum tariffs beyond December 31, 2023.

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

COVID-19 Pandemic – The Company continues to monitor the impact of the COVID-19 pandemic and government actions and measures taken to prevent its spread. The full impact of the COVID-19 pandemic on future results depends on future developments, such as the ultimate duration and scope of the pandemic including associated variants, the success of vaccination programs, the consequences of vaccine requirements, and its impact on the Company's employees, customers, dealers, distributors, and suppliers. Future impacts and disruptions could have an adverse effect on production, supply chains, distribution, and demand for the Company's products.

Guidance(1)

On April 27, 2023, the Company shared the following guidance for 2023:

The Company expects HDMC revenue growth of between 4% and 7% in 2023 compared to 2022. The Company expects revenue to be positively impacted by modest unit growth, beneficial product mix as the Company focuses on its most profitable products, and pricing actions intended to offset a moderated inflationary outlook. Furthermore, the Company expects revenue growth from parts and accessories and apparel and licensing as it executes The Hardwire strategy.

The Company expects HDMC operating margin as a percent of revenue to be in the range of 14.1% to 14.6% in 2023. The Company believes the anticipated positive impact of pricing and supply chain productivity will offset cost inflation and unfavorability related to foreign currency exchange rates.

Considering the impact of the suspension of production and shipments for approximately two weeks during the second quarter of 2022, the Company expects the year-over-year HDMC revenue growth rate in the first half of 2023 to be in the high teens. In addition, the Company expects an HDMC operating income margin percent in the high teens for the first half of 2023. In the second half of 2023, the Company expects HDMC revenue and operating income to be down compared to 2022 based on more normalized production and seasonality as compared to 2022. For HDFS, the Company expects the forecasted year-over-year operating income decline to moderate in the second half of the year compared to the first half given the historical seasonality of credit losses and the impact of borrowing cost increases experienced by HDFS in the second half of 2022.

The Company expects to sell 750 to 2,000 LiveWire motorcycle units and a LiveWire operating loss of $115 million to $125 million in 2023. The LiveWire expectations assume a launch of LiveWire's Del Mar electric motorcycle in the third quarter of 2023, consistent with the Company's current planned launch timeline.

The Company expects HDFS operating income to decline 20% to 25% in 2023 compared to 2022. This decline is largely a result of the higher interest rate environment causing the Company's borrowing costs to increase combined with an increase in credit losses. The Company recognizes there is risk that the current economic outlook and its expectation for credit losses

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could deteriorate during the remainder of the year. HDFS has several actions underway to mitigate the impact of losses, including increased investment behind collections and stronger repossession efforts.

The Company has a cost productivity target to eliminate $400 million of incremental costs by 2025. The Company reduced costs by approximately $50 million during 2022 and expects to reduce an additional $140 million in 2023 through production efficiency and reduced waste which is reflected in the Company guidance above.

The Company expects capital investments in 2023 of between $225 and $250 million. The Company plans to continue to invest behind product development and capability enhancement in support of The Hardwire strategy.

The Company's capital allocation priorities are to fund growth through The Hardwire initiatives, to pay dividends, and to execute discretionary share repurchases.

Results of Operations for the Three Months Ended March 31, 2023

Compared to the Three Months Ended March 27, 2022

Consolidated Results


	Three months ended
(in thousands, except earnings per share)	March 31, 2023		March 27, 2022		Increase (Decrease)
Operating income - HDMC	$	335,736	$	218,934	$	116,802
Operating loss - LiveWire	(24,547)		(16,059)		(8,488)
Operating income - HDFS	58,420		86,357		(27,937)
Operating income	369,609		289,232		80,377
Other income, net	20,096		11,030		9,066
Investment income (loss)	10,025		(1,979)		12,004
Interest expense	7,720		7,711		9
Income before income taxes	392,010		290,572		101,438
Income tax provision	90,181		68,070		22,111
Net income	301,829		222,502		79,327
Less: Loss attributable to noncontrolling interests	2,261		—		2,261
Net income attributable to Harley-Davidson, Inc.	$	304,090	$	222,502	$	81,588
Diluted earnings per share	$	2.04	$	1.45	$	0.59

The Company reported operating income of $369.6 million in the first quarter of 2023 compared to $289.2 million in the same period last year. The HDMC segment reported operating income of $335.7 million in the first quarter of 2023, an increase of $116.8 million compared to the first quarter of 2022. Operating loss from the LiveWire segment increased $8.5 million compared to the first quarter of 2022. Operating income from the HDFS segment decreased $27.9 million compared to the first quarter of 2022. Refer to the HDMC Segment, LiveWire Segment and HDFS Segment sections for a more detailed discussion of the factors affecting operating results.

Other income in the first quarter of 2023 was higher than in the first quarter of 2022, impacted by higher non-operating income related to the Company's defined benefit plans.

The Company's effective income tax rate for the first quarter of 2023 was 23.0% compared to 23.4% for the first quarter of 2022.

Diluted earnings per share was $2.04 in the first quarter of 2023, up 40.7% from the same period last year. Diluted weighted average shares outstanding decreased from 153.9 million in the first quarter of 2022 to 148.9 million in the first quarter of 2023, driven by the Company's discretionary repurchases of common stock. Refer to Liquidity and Capital Resources for additional information concerning the Company's share repurchase activity.

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Harley-Davidson 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, 2023	March 31, 2022	(Decrease) Increase	% Change
United States	24,277	29,344	(5,067)	(17.3)	%
Canada	1,744	1,869	(125)	(6.7)
North America	26,021	31,213	(5,192)	(16.6)
Europe/Middle East/Africa (EMEA)	5,917	6,290	(373)	(5.9)
Asia Pacific	6,881	6,699	182	2.7
Latin America	606	809	(203)	(25.1)
	39,425	45,011	(5,586)	(12.4)	%

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

Worldwide retail sales of new Harley-Davidson motorcycles were down 12.4% during the first quarter of 2023 compared to the same period last year, driven primarily by a decline in North America. The Company believes retail sales in North America were adversely impacted during the first quarter of 2023 by the timing of new model year shipments, which includes rollouts of the Company's anniversary models on a staggered basis and the introduction of other new products subsequent to the first quarter, as well as shifting macro-economic conditions.

Worldwide average retail inventory of new motorcycles was up 70% and 24% during the first quarter of 2023 compared to the first quarter of 2022 and the fourth quarter of 2022, respectively. Improved production in the first quarter of this year and in the second half of 2022 has allowed for improved product availability in the dealer network ahead of the riding season. Average retail inventory is calculated based on a four-point average including inventory on the first day of the quarter and each subsequent month-end within the quarter.

In the U.S., new motorcycle transaction prices on average as a percent of Manufacturer's Suggested Retail Prices were within the Company's targeted range of plus or minus 2% during the first quarter of 2023. As retail inventory levels of new motorcycles improved, the Company observed used motorcycle prices relative to new were lower on average in the first quarter of 2023 compared to the first quarter of 2022. The Company believes used prices remain healthy relative to historical levels.

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

The Company's U.S. market share of new 601+cc motorcycles decreased during the first three months of 2023 compared to the first three months of 2022 on lower retail sales relative to the industry. The Company's European market share of new 601+cc motorcycles for the first three months of 2023 increased compared to the first three months of 2022. Industry retail registration data for new motorcycles and the Company's market share was as follows:


	Three months ended
	March 31, 2023		March 31, 2022		(Decrease) Increase	% Change
Industry new motorcycle registrations:
United States(b)	59,262		62,207		(2,945)	(4.7)	%
Europe(c)	121,574		107,786		13,788	12.8	%

Harley-Davidson market share data:
United States(b)	39.5	%	47.1	%	(7.6)	pts.
Europe(c)	5.0	%	4.9	%	0.1	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.

HDMC Segment

Harley-Davidson Motorcycle Unit Shipments

Motorcycle unit shipments were as follows:


	Three months ended
	March 31, 2023			March 27, 2022			Unit	Unit
	Units	Mix %		Units	Mix %		Increase (Decrease)	% Change

U.S. motorcycle shipments	42,588	68.4	%	35,819	65.4	%	6,769	18.9	%



Worldwide motorcycle shipments:
Grand American Touring(a)	32,219	51.8	%	26,012	47.5	%	6,207	23.9	%
Cruiser	21,258	34.1	%	15,563	28.5	%	5,695	36.6
Sportster® / Street	5,544	8.9	%	9,654	17.6	%	(4,110)	(42.6)
Lightweight	1,041	1.7	%	—	—	%	1,041	100.0
Adventure Touring	2,175	3.5	%	3,517	6.4	%	(1,342)	(38.2)
	62,237	100.0	%	54,746	100.0	%	7,491	13.7	%

(a)Includes CVOTM and Trike

The Company shipped 62,237 motorcycles worldwide during the first quarter of 2023, which was 13.7% higher than the first quarter of 2022. The Company's shipments to dealers were up compared to the same quarter last year on higher production as the Company launched its new 2023 model year motorcycles ahead of the riding season. The Company also began shipping Lightweight motorcycles to dealers in China during the first quarter of 2023.

During the first quarter of 2023, the Company shipped a higher mix of Grand American Touring and Cruiser motorcycles as a percent of total shipments and a lower mix of Sportster / Street and Adventure Touring motorcycles.

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Segment Results

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


	Three months ended
	March 31, 2023			March 27, 2022			Increase (Decrease)		% Change
Revenue:
Motorcycles	$	1,302,378		$	1,057,005		$	245,373	23.2	%
Parts and accessories	167,671			165,320			2,351		1.4
Apparel	71,391			51,404			19,987		38.9
Licensing	6,210			6,497			(287)		(4.4)
Other	10,179			12,544			(2,365)		(18.9)
	1,557,829			1,292,770			265,059		20.5
Cost of goods sold	1,000,803			885,188			115,615		13.1
Gross profit	557,026			407,582			149,444		36.7
Operating expenses:
Selling & administrative expense	197,439			163,014			34,425		21.1
Engineering expense	23,851			25,762			(1,911)		(7.4)
Restructuring benefit	—			(128)			128		(100.0)
	221,290			188,648			32,642		17.3
Operating income	$	335,736		$	218,934		$	116,802	53.4	%
Operating margin	21.6		%	16.9		%	4.6		pts.

The estimated impact of significant factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first quarter of 2022 to the first quarter of 2023 were as follows (in millions):


	Net Revenue		Cost of Goods Sold		Gross Profit
Three months ended March 27, 2022	$	1,292.8	$	885.2	$	407.6
Volume	153.2		109.0		44.2
Price and sales incentives	103.8		—		103.8
Foreign currency exchange rates and hedging	(28.6)		(6.1)		(22.5)
Shipment mix	36.6		7.8		28.8
Raw material prices	—		(6.8)		6.8
Manufacturing and other costs	—		11.7		(11.7)
	265.0		115.6		149.4
Three months ended March 31, 2023	$	1,557.8	$	1,000.8	$	557.0

Factors affecting the comparability of net revenue, cost of goods sold and gross profit from the first quarter of 2022 to the first quarter of 2023 were as follows:

•The increase in volume was primarily due to higher motorcycle shipments and higher apparel sales.

•Revenue benefited from higher prices on new model year 2023 motorcycles.

•Revenue and gross profit were negatively impacted by weaker foreign currency exchange rates relative to the U.S. dollar, partially offset by favorable net foreign currency gains associated with hedging recorded in cost of goods sold.

•Changes in the shipment mix had a favorable impact on gross profit.

•Raw material costs benefited from continued moderation in the rate of inflation related primarily to metals.

•Manufacturing and other costs increased due to supply chain cost inflation and other startup costs experienced in the quarter, partially offset by productivity savings including reduced reliance on expedited freight.

Operating expenses were higher in the first quarter of 2023 compared to the same period last year related to Hardwire initiatives and employee-related costs.

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LiveWire Segment

Segment Results

Condensed statements of operations for the LiveWire segment were as follows (in thousands, except unit shipments):


	Three months ended
	March 31, 2023		March 27, 2022		Increase (Decrease)		% Change
Revenue	$	7,762	$	10,401	$	(2,639)	(25.4)	%
Cost of goods sold	6,498		10,348		(3,850)		(37.2)	%
Gross profit	1,264		53		1,211		2,284.9
Selling, administrative and engineering expense	25,811		16,112		9,699		60.2
Operating loss	$	(24,547)	$	(16,059)	$	(8,488)	52.9	%

LiveWire motorcycle unit shipments	63		97		(34)		(35.1)

During the first quarter of 2023, revenue decreased by $2.6 million, or 25.4%, compared to the first quarter of 2022. The decrease was primarily due to lower revenue driven by lower volumes on electric motorcycles and electric balance bikes. Cost of sales decreased by $3.9 million, or 37.2%, during the first quarter of 2023 compared to the first quarter of 2022 on lower volumes.

During the first quarter of 2023, selling, administrative and engineering expense increased $9.7 million, or 60.2%, compared to the first quarter of 2022 driven by higher product development costs as well as higher costs associated with standing up the new organization.

HDFS Segment

Segment Results

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


	Three months ended
	March 31, 2023		March 27, 2022		Increase (Decrease)		% Change
Revenue:
Interest income	$	182,270	$	161,734	$	20,536	12.7	%
Other income	40,825		30,281		10,544		34.8
	223,095		192,015		31,080		16.2
Expenses:
Interest expense	73,549		42,099		31,450		74.7
Provision for credit losses	52,364		28,822		23,542		81.7
Operating expense	38,762		34,737		4,025		11.6

	164,675		105,658		59,017		55.9
Operating income	$	58,420	$	86,357	$	(27,937)	(32.4)	%

Interest income was higher for the first three months of 2023 compared to the same period last year, primarily due to higher average outstanding finance receivables at a higher average yield. Other income increased largely driven by higher investment income and insurance revenue. Interest expense increased due to higher average outstanding debt at a higher average interest rate.

The provision for credit losses increased $23.5 million compared to the first quarter of 2022, primarily driven by higher retail delinquencies and credit losses, which returned to pre-COVID-19 pandemic levels at the end of 2022. The Company experienced higher retail delinquencies and credit losses as consumers faced increased pressure from higher debt levels and the impacts of inflation, both more generally as well as through higher payments on larger retail motorcycle loans. Further, the Company continues to experience challenges with motorcycle repossessions as the repossession industry contracted

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during the COVID-19 pandemic and has yet to expand to meet current demand. This has resulted in more motorcycle loans with larger loan balances that are in the later stages of delinquency being charged-off without a successful repossession. In the future, the Company anticipates recovering some portion of those charge-offs as the motorcycles are located, repossessed and sold at auction.

The allowance for credit losses at the end of the first quarter of 2023 was consistent with the balance at the end of 2022 as the overall macro-economic conditions remained uncertain given near-term recession concerns did not abate, elevated levels of inflation continued to challenge the U.S. and global economies, and muted consumer confidence persisted, among other factors. As such, at the end of the first quarter of 2023, the Company’s outlook on economic conditions and its probability weighting of its economic forecast scenarios were weighted towards a near-term recession.

Annualized losses on the Company's retail motorcycle loans were 3.21% during the first quarter of 2023 compared to 1.77% in the first quarter of 2022. The 30-day delinquency rate for retail motorcycle loans at March 31, 2023 increased to 3.74% from 2.87% at March 27, 2022.

Operating expenses increased $4.0 million compared to the first quarter of 2022 due in part to higher employee and repossession related costs as well as a valuation loss on a securitization interest rate cap.

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


	Three months ended
	March 31, 2023		March 27, 2022
Balance, beginning of period	$	358,711	$	339,379
Provision for credit losses	52,364		28,822
Charge-offs, net of recoveries	(52,644)		(27,728)

Balance, end of period	$	358,431	$	340,473

Other Matters

Commitments and Contingencies

The Company is subject to lawsuits and other claims related to product, product recall, commercial, employee, environmental and other matters. In determining costs to accrue related to these items, the Company carefully analyzes cases and considers the likelihood of adverse judgments or outcomes, as well as the potential range of possible loss. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. Refer to Note 14 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.

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Liquidity and Capital Resources

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.

The Company believes its current cash, cash equivalents and availability under its credit facilities are sufficient to meet its liquidity requirements, consistent with its strategy. The Company expects to fund its operations, excluding the origination of finance receivables, primarily with cash flows from operating activities and cash and cash equivalents on hand.(1) The Company expects to fund the origination of finance receivables primarily with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations and brokered certificates of deposit.(1)

The Company’s cash and cash equivalents and availability under its credit and conduit facilities at March 31, 2023 were as follows (in thousands):



Cash and cash equivalents(a)		$	1,561,200



U.S. commercial paper conduit facility:
Committed asset-backed U.S. commercial paper conduit facility(b)	1,500,000
Borrowings against committed facility	(300,000)
Net asset-backed U.S. commercial paper conduit committed facility availability	1,200,000

Uncommitted asset-backed U.S. commercial paper conduit facility	72,816
Borrowings against uncommitted facility	(72,816)
Net asset-backed U.S. commercial paper conduit uncommitted facility availability	—
Total net U.S. commercial paper conduit facility availability		1,200,000

Asset-backed Canadian commercial paper conduit facility(b)(c)		92,295
Borrowings against committed facility		(62,195)
Net asset-backed Canadian commercial paper conduit facility		30,100

Availability under credit and conduit facilities:
Credit facilities		1,420,000
Commercial paper outstanding		(501,243)
Net credit facility availability		918,757
		$	3,710,057

(a)Includes $236.0 million of cash and cash equivalents held by LiveWire Group, Inc.

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

(c)C$125.0 million Canadian Conduit facility agreement remeasured to U.S. dollars at March 31, 2023.

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 31, 2023 were as follows:

Short-Term

Long-Term

Outlook

Moody’s

Baa3

Stable

Standard & Poor’s

BBB-

Stable

Fitch

BBB+

Stable

The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) HDFS segment results 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 HDFS to provide loans to dealers and their retail customers, and dilution to existing shareholders through the use of alternative sources of capital.

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Cash Flow Activity

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


	Three months ended
	March 31, 2023		March 27, 2022
Net cash provided by operating activities	$	46,677	$	139,321
Net cash used by investing activities	(70,586)		(121,135)
Net cash provided (used) by financing activities	178,590		(483,505)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	3,820		(1,743)
Net increase (decrease) in cash, cash equivalents and restricted cash	$	158,501	$	(467,062)

Operating Activities

Cash flow provided by operating activities in the first three months of 2023 compared to the first three months of 2022 was adversely impacted by an increase in wholesale finance receivables, partially offset by a benefit from changes in working capital. Working capital was positively impacted by favorable changes in inventory, partially offset by less favorable changes in accounts payable compared to the first three months of 2022.

The Company continues to expect that it will generate sufficient cash inflows from operating activities to fund its ongoing operating cash requirements excluding operating cash requirements related to the origination of finance receivables which the Company expects to fund through the issuance of debt. The Company's ongoing operating cash requirements include those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments at March 31, 2023 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 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. There are no required qualified pension plan contributions in 2023. 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, 2022. The Company has a liability for unrecognized tax benefits of $28.4 million and related accrued interest and penalties of $16.0 million as of March 31, 2023. 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 $45.1 million in the first three months of 2023 compared to $28.0 million in the same period last year. The Company's 2023 plan includes estimated capital investments between $225 million and $250 million, all of which the Company expects to fund with net cash flow generated by operations.(1)

Net cash outflows for finance receivables during the first three months of 2023 were $67.0 million lower compared to the same period last year due to lower retail finance receivable originations, partially offset by lower collections of finance receivables. 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 $0.165 and $0.158 per share totaling $24.1 million and $24.1 million during the first three months of 2023 and 2022, respectively.

Cash outflows for share repurchases were $96.8 million in the first three months of 2023 compared to $261.7 million in the same period last year. Share repurchases during the first three months of 2023 include $84.0 million or 2.0 million shares of common stock related to discretionary repurchases and $12.8 million or 0.3 million shares of common stock employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares. As of March 31, 2023, there were 7.8 million shares remaining on a board-approved share repurchase authorization.

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Financing cash flows related to debt and brokered certificates of deposit activity resulted in net cash inflows of $0.3 billion in the first three months of 2023 compared to a net cash outflow of $0.2 billion in the same period last year. The Company’s total outstanding debt and liability for brokered certificates of deposit consisted of the following (in thousands):


	March 31, 2023		March 27, 2022
Outstanding debt:

Unsecured commercial paper	$	501,243	$	816,016
Asset-backed Canadian commercial paper conduit facility	62,195		95,664
Asset-backed U.S. commercial paper conduit facility	372,816		269,534
Asset-backed securitization debt, net	2,257,799		1,357,558
Medium-term notes, net	3,245,591		3,329,845
Senior notes, net	745,545		744,842
	$	7,185,189	$	6,613,459

Deposits, net	$	369,311	$	348,083

Refer to Note 9 of the Notes to Consolidated financial statements for a summary of future principal payments on the Company's debt obligations. Refer to Note 6 of the Notes to Consolidated financial statements for a summary of future maturities on the Company's certificates of deposit.

Deposits – HDFS offers brokered certificates of deposit to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary. The Company had $369.3 million and $348.1 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of March 31, 2023 and March 27, 2022, 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 2022, the Company entered into a $710.0 million five-year credit facility to replace the $707.5 million five-year credit facility that was due to mature in April 2023. The new five-year credit facility matures in April 2027. The Company also amended its other $707.5 million five-year credit facility to $710.0 million with no change to the maturity date of April 2025. The five-year credit facilities (together, the Global Credit Facilities) bear interest at variable rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities also require the Company to pay a fee based on the average daily unused portion of the aggregate commitments. The Global Credit Facilities are committed facilities primarily used to support the Company's unsecured commercial paper program.

Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.42 billion as of March 31, 2023 supported by the Global Credit Facilities, as discussed above. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured commercial paper or through other means, such as borrowing under the Global Credit Facilities, borrowing under its asset-backed U.S. commercial paper conduit facility or through the use of operating cash flow and cash on hand.(1)

Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at March 31, 2023 (in thousands):

Principal Amount

Rate

Issue Date

Maturity Date

$706,972(a)

4.94%

May 2020

May 2023

$652,590(b)

3.14%

November 2019

November 2024

$700,000

3.35%

June 2020

June 2025

$500,000

3.05%

February 2022

February 2027

$700,000

6.50%

March 2023

March 2028

(a)€650.0 million par value remeasured to U.S. dollar at March 31, 2023

(b)€600.0 million par value remeasured to U.S. dollar at March 31, 2023

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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 $14.0 million and $12.2 million at March 31, 2023 and March 27, 2022, respectively. During the first quarter of 2023, $350.0 million of 3.35% medium-term notes matured, and the principal and accrued interest were paid in full. During the first quarter of 2022, $550.0 million of 4.05% medium-term notes matured, and the principal and accrued interest were paid in full.

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 U.S. Commercial Paper Conduit Facilities VIE – The Company has a $1.50 billion revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset-backed U.S. commercial paper conduits. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party banks and their asset-backed U.S. commercial paper conduits. In November 2022, the Company renewed the U.S. Conduit Facility. As a result of the renewal, the agreement no longer allows for uncommitted additional borrowings, at the lender's discretion, of up to $300.0 million in addition to the $1.50 billion aggregate commitment. Prior to the November 2022 renewal, the Company drew against the $300.0 million of uncommitted additional borrowings that were available prior to the renewal and, at March 31, 2023, $72.8 million of the amount drawn remained outstanding. Availability under the U.S. Conduit Facility is based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral.

The terms for this debt provide for interest on the outstanding principal based on prevailing commercial paper rates if funded by a conduit lender through the issuance of commercial paper. Subsequent to the November 2022 renewal, the interest rate on all outstanding debt and future borrowings, if not funded by a conduit lender through the issuance of commercial paper, is based on the Secured Overnight Financing Rate (SOFR), with provisions for a transition to other benchmark rates in the future, if necessary. Prior to the renewal, if not funded by a conduit lender through the issuance of commercial paper, the terms of the interest were based on LIBOR or SOFR, as appropriate, with provisions for a transition to other benchmark rates. In addition to interest, a program fee is assessed based on the outstanding debt principal balance. The U.S. Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. 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 31, 2023, the U.S. Conduit Facility has an expiration date of November 17, 2023.

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

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rates to investors. All of the notes held by the VIEs are secured by future collections of the purchased U.S. retail motorcycle finance receivables. The U.S. retail motorcycle finance receivables included in the asset-backed securitization transactions are not available to pay other obligations or claims of the Company's creditors until the associated debt and other obligations are satisfied. Restricted cash balances held by the VIEs are used only to support the securitizations.

The accounting treatment for asset-backed securitizations depends on the terms of the related transaction and the Company’s continuing involvement with the VIE. The Company's current outstanding asset-backed securitizations do not meet the criteria to be accounted for as a sale because, in addition to retaining servicing rights, the Company retains a financial interest in the VIE in the form of a debt security. These transactions are treated as secured borrowings, and as such, the retail motorcycle finance receivables remain on the balance sheet with a corresponding obligation reflected as debt. There is no amortization schedule for the secured notes; however, the debt is reduced monthly as available collections on the related retail motorcycle finance receivables are applied to outstanding principal. The secured notes currently have various contractual maturities ranging from 2024 to 2030.

Intercompany Agreements – On January 27, 2023, Harley-Davidson, Inc. entered into a revolving line of credit with Harley-Davidson Financial Services, Inc. whereby Harley-Davidson Financial Services, Inc. may borrow up to $200.0 million at market interest rates with an expiration date of July 27, 2024. As of March 31, 2023, Harley-Davidson Financial Services, Inc. had no outstanding borrowings owed to Harley-Davidson, Inc. under this agreement.

Harley Davidson, Inc. also has a support agreement with Harley-Davidson Financial Services Inc. whereby, if required, Harley-Davidson, Inc. agrees to provide Harley-Davidson Financial Services Inc. with financial support to maintain Harley-Davidson Financial Services Inc.’s fixed-charge coverage at 1.25 and minimum net worth of $40.0 million. Support may be provided at Harley-Davidson, Inc.'s option as capital contributions or loans. No amount has ever been provided to Harley-Davidson Financial Services Inc. under the support agreement.

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

The operating covenants limit the Company’s and Harley-Davidson Financial Services Inc’s ability to:

•Assume or incur certain liens;

•Participate in certain mergers or consolidations; and

•Purchase or hold margin stock.

Under the current financial covenants of the Global Credit Facilities, the ratio of Harley-Davidson Financial Services Inc.’s consolidated debt, excluding secured debt, to Harley-Davidson Financial Services' consolidated allowance for credit losses on finance receivables plus Harley-Davidson Financial Services Inc’s consolidated shareholders' equity, excluding accumulated other comprehensive loss (AOCL), cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and consolidated shareholders’ equity (where the Company's consolidated debt in each case excludes that of Harley-Davidson Financial Services Inc. 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 31, 2023, Harley-Davidson Financial Services Inc. 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 Company’s ability to: (a) execute its business plans and strategies, including The Hardwire, each of the pillars, and the evolution of LiveWire as a standalone brand, which includes the risks noted below; (b) manage supply chain and logistics issues, including quality issues, availability of semiconductor chip components and the ability to find alternative sources of those components in a timely manner, unexpected interruptions or price increases caused by supplier volatility, raw material shortages, inflation, war or other hostilities, including the conflict in

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Ukraine, or natural disasters and longer shipping times and increased logistics costs, including by successfully implementing pricing surcharges; (c) realize the expected business benefits from LiveWire operating as a separate public company, which may be affected by, among other things: (I) the ability of LiveWire to: (1) execute its plans to develop, produce, market and sell its electric vehicles; (2) achieve profitability, which is dependent on the successful development and commercial introduction and acceptance of its electric vehicles, and its services, which may not occur; (3) adequately control the costs of its operations as a new entrant into a new space; (4) develop, maintain and strengthen its brand; (5) execute its plans to develop, produce, market and sell its electric vehicles on expected timelines; and (6) effectively establish and maintain cooperation from its retail partners, largely drawn from the Company's traditional motorcycle dealer network, to be able to effectively establish or maintain relationships with customers for electric vehicles; (II) competition; and (III) other risks and uncertainties indicated in documents filed with the SEC by the Company or LiveWire Group, Inc., including those risks and uncertainties noted in Risk Factors under Item 1.A of LiveWire Group Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022; (d) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests; (e) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (f) successfully carry out its global manufacturing and assembly operations; (g) develop and introduce products, services and experiences on a timely basis that the market accepts, that enable the Company to generate desired sales levels and that provide the desired financial returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Grand American Touring, large Cruiser and Trike, and grow its complementary businesses; (h) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (i) manage ongoing risks related to the impact of the COVID-19 pandemic, such as supply chain disruptions, its ability to carry out business as usual, and government actions and restrictive measures implemented in response; (j) manage the regulatory compliance matter relating to a third-party supplier's component part in a manner that avoids additional costs or recall expenses that are material; (k) successfully appeal: (I) the revocation of the Binding Origin Information (BOI) decisions that allowed the Company to supply its European Union (EU) market with certain of its motorcycles produced at its Thailand operations at a reduced tariff rate and (II) the denial of the Company's application for temporary relief from the effect of the revocation of the BOI decisions; (l) manage and predict the impact that new, reinstated or adjusted tariffs may have on the Company's ability to sell products internationally, and the cost of raw materials and components, including the temporary lifting of the Section 232 steel and aluminum tariffs and incremental tariffs on motorcycles imported into the EU from the U.S., between the U.S. and EU, which expires on December 31, 2023; (m) 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; (n) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (o) successfully manage and reduce costs throughout the business; (p) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, particularly with the recent turmoil in the banking industry, and the changing domestic and international political environments, including as a result of the conflict in Ukraine; (q) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods and manage the risks that its dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; (r) continue to develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner; (s) maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (t) 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; (u) 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; (v) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (w) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (x) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding data security; (y) manage the credit quality, the loan servicing and collection activities, and the recovery rates of Harley-Davidson Financial Services' loan portfolio; (z) 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; (aa) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; (bb) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (cc) manage changes, prepare for, and respond to evolving requirements in legislative and regulatory environments related to its products, services and operations; (dd) manage its exposure to product liability claims and commercial or contractual disputes; (ee) continue to manage the relationships and agreements that the Company has with its labor unions to help drive long-term competitiveness; (ff) achieve anticipated results with respect to the Company's pre-owned motorcycle program, Harley-Davidson Certified, the Company's H-D1 Marketplace, and Apparel and Licensing; (gg) accurately predict the margins of its segments in light of, among other things, tariffs, inflation, foreign currency exchange rates, the cost associated with product development initiatives and the Company's complex global supply chain; and (hh) optimize capital allocation in light of the Company's capital allocation

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priorities; and (ii) manage through the effects increased environmental, safety, emissions or other regulations or other influences may have on the business and its operating results.

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

In recent years, Harley-Davidson Financial Services (HDFS) experienced historically low levels of retail credit losses, but credit losses have been normalizing to higher levels in recent quarters. Further, the Company believes that HDFS's retail credit losses will continue to change over time due to changing consumer credit behavior, macroeconomic conditions including the impact of inflation, and HDFS's efforts to adjust underwriting criteria based on market and economic conditions, as well as actions that the Company has taken and could take that impact motorcycle values.

The Company's operations, demand for its products, and its liquidity could be adversely impacted by work stoppages, facility closures, strikes, natural causes, widespread infectious disease, terrorism, war or other hostilities, including the conflict in Ukraine, or other factors. Refer to Risk Factors under Item 1.A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 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 8 of the Notes to Consolidated financial statements.

HDMC 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 HDMC segment operating results are affected by fluctuations in the value of the U.S. dollar relative to foreign currencies. The Company’s most significant foreign currency exchange rate risk resulting from the sale of motorcycles and related products relates to the Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Chinese yuan, Singapore dollar, Thai baht and Pound sterling. The Company utilizes foreign currency contracts to mitigate the effect of certain currencies' fluctuations on HDMC 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, 2022.

The Company purchases commodities for the use in the production of motorcycles. As a result, HDMC segment operating income is affected by changes in commodity prices. The Company uses derivative financial instruments on a limited basis to hedge the prices of certain commodities. There have been no material changes to the commodity market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

LiveWire Segment

LiveWire has sold and expects to sell its electric motorcycles, electric balance bikes and related products internationally, and in most markets, those sales are made in the foreign country’s local currency. As a result, LiveWire’s operating results are affected by fluctuations in the values of the U.S. dollar relative to foreign currencies; however, the impact of such fluctuations on LiveWire’s operations to date have not been material given the majority of LiveWire’s sales are currently in the U.S. LiveWire plans to expand its business and operations internationally and expects its exposure to currency rate risk to increase as it grows its international presence.

HDFS Segment

The Company has interest rate sensitive financial instruments including financial receivables, debt and interest rate derivative financial instruments. As a result, HDFS operating income is affected by changes in interest rates. The Company

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utilizes interest rate caps to reduce the impact of fluctuations in interest rates on its asset-backed securitization transactions. There have been no material changes to the interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

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, 2022.

The Company has foreign denominated medium-term notes, and as a result, HDFS operating income is affected by fluctuations in the value of the U.S. dollar relative to foreign currencies and interest rates. At March 31, 2023, this exposure related to the Euro. The Company utilizes cross-currency swaps to mitigate the effect of the foreign currency exchange rate and interest rate fluctuations related to foreign denominated debt. There have been no material changes to the foreign currency exchange rate and interest rate market risk information included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further information concerning the Company's market risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management evaluated, with the participation of the Company’s President and Chief Executive Officer and the Vice President, Treasurer, and Interim Chief Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Vice President, Treasurer, and Interim Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its President and Chief Executive Officer and Vice President, Treasurer, and Interim 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 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information required under this Item 1 of Part II is contained in Item 1 of Part I of this Quarterly Report on Form 10-Q in Note 14 of the Notes to Consolidated financial statements, and such information is incorporated herein by reference in this Item 1 of Part II.

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

The Company's share repurchases, which consisted of discretionary shares and shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares, were as follows during the quarter ended March 31, 2023:


2023 Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to March 31	331	$	42	331	9,872,167
February 1 to February 28	259,229	$	49	259,229	9,872,167
March 1 to March 31	2,040,212	$	41	2,040,212	7,835,898
	2,299,772	$	42	2,299,772

In February 2020, the Company's Board of Directors authorized the Company to repurchase up to 10.0 million shares of its common stock on a discretionary basis with no dollar limit or expiration date. The Company repurchased 2.0 million shares on a discretionary basis during the quarter ended March 31, 2023 under these authorizations. As of March 31, 2023, 7.8 million shares remained under the 2020 authorization.

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

The Harley-Davidson, Inc. 2020 Incentive Stock Plan and the 2022 Aspirational Incentive Stock Plan (Incentive Plans) and predecessor stock plans permit participants to satisfy all or a portion of the statutory federal, state, and local withholding tax obligations arising in connection with plan awards by electing to (a) have the Company withhold shares otherwise issuable under the award, (b) tender back shares received in connection with such award, or (c) deliver other previously owned shares, in each case having a value equal to the amount to be withheld. During the first quarter of 2023, the Company acquired 263,503 shares of common stock that employees presented to the Company to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares. At the Company's 2022 Annual Meeting of Shareholders held May 12, 2022, the shareholders of the Company approved an amendment to the 2020 Incentive Stock Plan to increase the authorized number of shares under the Incentive Plan by 3.1 million shares. As amended, the 2020 Incentive Stock Plan provides that up to a total of 8.5 million shares of the Company's common stock may be issued thereunder.

Item 6. Exhibits

Refer to the exhibit index immediately following this page.

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Harley-Davidson, Inc.

Exhibit Index to Form 10-Q


Exhibit No.						Description
4.1						Officers' Certificate, dated March 10, 2023, pursuant to Sections 102 and 301 of the Indenture, dated December 18, 2020, with the form of 6.50% Medium-Term Notes due 2028
4.2						Officers' Certificate, dated April 3, 2023, pursuant to a fiscal agency agreement dated April 5, 2023, with the form of 5.125% Guaranteed Notes due 2026
31.1						Chief Executive Officer Certification pursuant to Rule 13a-14(a)
31.2						Chief Financial Officer Certification pursuant to Rule 13a-14(a)
32.1						Written Statement of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. §1350
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File - formatted in Inline XBRL and contained in Exhibit 101

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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 10, 2023			/s/ David W. Viney
			David W. Viney
			Vice President, Treasurer, and Interim Chief Financial Officer
			(Principal financial officer)


Date: May 10, 2023			/s/ Mark R. Kornetzke
			Mark R. Kornetzke
			Chief Accounting Officer
			(Principal accounting officer)

Harley-Davidson - 10-Q quarterly report FY2023 Q1

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