HARLEY-DAVIDSON, INC. (HOG) FY 2022 MD&A

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

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

The “% Change” figures included in the Results of Operations section were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented. 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," "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 in Item 1A. Risk Factors and under the Cautionary Statements section in this Item 7. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in the Overview and Guidance sections in this Item 7 are only made as of February 2, 2023 and the remaining forward-looking statements in this report are only made as of the date of the filing of this report (February 24, 2023), and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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Overview(1)

Net income attributable to Harley-Davidson, Inc. for 2022 was $741.4 million, or $4.96 per diluted share, compared to $650.0 million, or $4.19 per diluted share, in 2021 driven by higher operating income in the HDMC segment partially offset by lower operating income in the HDFS segment and a higher operating loss in the LiveWire segment.

HDMC operating income was $677.1 million in 2022 compared to operating income of $476.8 million in 2021. The improvement in operating results in 2022 was driven by higher pricing and a 2.9% increase in wholesale motorcycle shipments which more than offset the unfavorable impact of foreign currency changes and higher costs incurred in 2022.

LiveWire operating loss was $85.3 million in 2022 compared to an operating loss of $68.2 million in 2021. The increase in operating loss in 2022 was due primarily to higher operating expenses in 2022 on increased investments in product development and higher people costs.

HDFS operating income was $317.5 million in 2022 compared to operating income of $414.8 million in 2021. The decline in operating income was driven by an increase in the provision for credit losses and higher interest expense, partially offset by higher interest income and lower operating expenses.

Worldwide dealer retail sales of new Harley-Davidson motorcycles declined 7.7% in 2022 compared to 2021 driven by a decline in North America. During 2022, retail sales decreased 12.4% in North America compared to 2021, which was partially offset by a 3.0% increase in the Company's markets outside of North America. Retail sales during 2022 were adversely impacted by low dealer inventory levels during the riding season related to a suspension of production and shipments for approximately two weeks during the second quarter as discussed further under Supply Matter below. Refer to the Retail Sales and Registration Data section for further discussion of retail sales results.

Key Factors Impacting the Company

Supply Chain – During 2022, the Company continued to experience disruption and increased costs related to global supply chain challenges, including continued global semiconductor chip shortages. As a result of these challenges, the Company experienced higher costs in 2022, although the rate of year-over-year inflation moderated during the second half of the year relative to inflation rates experienced during the first half of the year. The moderation in inflation experienced during the second half of the year resulted primarily from the normalization of logistics inflation and to a lesser extent raw materials inflation which slowed as the metal markets improved. In addition, the Company continued to reduce its reliance on expedited shipping during the second half of 2022. In 2023, the Company is expecting additional moderation in supply chain cost inflation with continued improvement in logistics. The Company also expects less volatility in its supply chain in 2023 and plans to reduce its use of expedited modes of freight.

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 of 2022, the sub-supplier notified NHTSA of a population of brake hose assemblies that were potentially non-compliant with select NHTSA laboratory test standards. Based on that filing, in August, the Company notified NHTSA of the corresponding population of Harley-Davidson motorcycles containing those brake hose assemblies. In October, the sub-supplier submitted an amendment to NHTSA expanding its population of potentially non-compliant brake hose assemblies to include units produced by the sub-supplier for use in the Company’s motorcycles beginning as early as model year 2008. In December, the Company supplemented its August notification, expanding the population of motorcycles to include all Harley-Davidson motorcycles that contained the newly identified brake hose assemblies. No LiveWire motorcycles are included in these populations.

As permitted by federal law, both the sub-supplier and the Company leveraged NHTSA’s standard process to petition the agency for a determination that the potential non-compliance is inconsequential to motor vehicle safety. If NHTSA grants the Company’s inconsequentiality petition, 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 presented 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

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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 laboratory test potential non-compliance at issue. The Company believes its petition is closely comparable to inconsequentiality petitions NHTSA has granted in the past. The Company is also confident that it has presented a strong position that the potential noncompliance is inconsequential to motor vehicle safety and, therefore, no field action or recall is necessary.

Based on its expectation that its petition will be granted, 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 recall or field action could be required that could cause the Company to incur material costs. There are several variables and uncertainties associated with any potential recall or field action that are not yet known including, but not limited to, the population of brake hose assemblies and motorcycles, the specific field or recall action 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 recall or field action, if it were to occur, could range from approximately $200 million to $400 million, and the Company would seek full recovery of that amount.

Interest Rates - Interest rates increased significantly during 2022 as central banks attempted to reduce inflation. Rising interest rates may adversely impact HDFS' 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.

LiveWire Transaction – On September 26, 2022, the Company's electric motorcycle subsidiary completed a merger with AEA-Bridges Impact Corp. (ABIC), a special purpose acquisition company, to create a new publicly traded company, LiveWire Group, Inc. (the "LiveWire Transaction"). As described below, the transaction was financed with ABIC's cash held in trust less redemptions, a cash investment from the Company and an investment from Kwang Yang Motor Co., Ltd. (KYMCO), an independent strategic investor.

At the closing of the LiveWire Transaction, LiveWire Group, Inc. received net proceeds of approximately $294 million, including a $180 million investment from the Company, net of transaction expenses, a $100 million investment from KYMCO and a $14 million investment from ABIC, net of redemptions and transaction expenses. Following the closing, the Company had an equity interest in LiveWire Group, Inc. of approximately 89.4%. ABIC's shareholders and founders had an equity interest of approximately 5.7% and KYMCO had an equity interest of approximately 4.9%. As the controlling shareholder, the Company continues to consolidate LiveWire Group, Inc. results, with additional adjustments to recognize non-controlling shareholder interests.

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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. Refer to Part I, Item 1A. Risk Factors for further discussion of these risks.

Guidance(1)

On February 2, 2023, the Company announced 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 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 from higher motorcycle volume, product mix and pricing, combined with supply chain productivity which the Company expects will offset cost inflation and currency headwinds.

The Company expects LiveWire motorcycle shipments of 750 to 2,000 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 second half of 2023.

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 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.

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.

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Results of Operations 2022 Compared to 2021

Consolidated Results

The Company reported operating income of $909.3 million in 2022 compared to $823.4 million in 2021. The HDMC segment reported operating income of $677.1 million, an improvement from $476.8 million in 2021. Operating loss from the LiveWire segment increased $17.1 million compared to 2021. Operating income from the HDFS segment decreased $97.3 million compared to 2021. Refer to the HDMC Segment, LiveWire Segment and HDFS Segment discussions for a more detailed analysis of the factors affecting operating results.

Other income (expense) in 2022 was impacted by higher non-operating income related to the Company's defined benefit plans as well as income related to a decrease in the fair value of LiveWire's warrants. Investment income decreased in 2022 as compared to 2021 driven by lower income from investments in marketable securities.

The Company's effective income tax rate for 2022 was a 20.6% expense compared to a 20.7% expense for 2021. The Company's 2022 effective tax rate was favorably impacted by discrete income tax benefits recorded during the year. Refer to Note 4 of the Notes to Consolidated financial statements for further discussion regarding the Company’s effective tax rate.

Diluted earnings per share was $4.96 in 2022 compared to $4.19 in 2021. Diluted weighted average shares outstanding decreased from 155.0 million in 2021 to 149.4 million in 2022.

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Harley-Davidson Motorcycle Retail Sales and Registration Data

Harley-Davidson Motorcycle Retail Sales(a)

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

(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 motorcycles decreased 7.7% during 2022 compared to 2021. Retail sales during 2022 were adversely impacted by low dealer inventory levels during the 2022 riding season following the Company's suspension of production and shipments for approximately two weeks during the second quarter of 2022.

In North America, retail sales in 2022 were down compared to 2021 led by a 13.1% decline in the U.S. where results were most heavily impacted by lower production and retail inventory levels. Retail sales were down slightly in EMEA and Latin America, but increased in Asia Pacific during 2022 compared to 2021.

Worldwide average retail inventory of new motorcycles at Harley-Davidson dealers was up approximately 13,000 units for the fourth quarter of 2022 compared to the prior year, but remained at historically low levels. Average retail inventory is calculated based on the average of monthly inventory levels within the quarter. The Company believes 2022 ending retail inventory is well-positioned for the start to the 2023 riding season.

The Company continued to observe strong retail pricing for both new and used motorcycles within the U.S. during 2022. In the U.S., new motorcycle transaction prices on average as a percent of Manufacturer's Suggested Retail Prices were within the Company's targeted range of plus or minus 2% during 2022.

The Company's Harley-Davidson motorcycle U.S. market share of new 601+cc motorcycles for 2022 was 41.2%, down 3.2 percentage points compared to 2021 (Source: Motorcycle Industry Council). The Company's U.S. market share declined on lower retail sales following the suspension of production and shipments for approximately two weeks during the second quarter of 2022.

The Company's Harley-Davidson motorcycle European market share of new 601+cc motorcycles for 2022 was 6.1%, up 0.2 percentage points compared to 2021 reflecting an increase in HDMC retail sales relative to the rest of the market in Europe (Source: Management Services Helwig Schmitt GmbH).

Motorcycle Registration Data - 601+cc(a)

Industry retail registration data for new motorcycles was as follows:

(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.

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

(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Industry data is derived from information provided by Management Services Helwig Schmitt GmbH. This third-party data is subject to revision and update.

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HDMC Segment

Harley-Davidson Motorcycle Unit Shipments

Wholesale motorcycle unit shipments were as follows:

(a)Includes CVOTM and Trike

HDMC shipped 193,527 motorcycles worldwide during 2022, which was 2.9% higher than during 2021. HDMC's shipments during 2022 were impacted by the suspension of production and shipments during the second quarter of 2022, which disrupted the flow of inventory to dealers during the peak riding season.

The motorcycles shipped during 2022 compared to 2021 included a lower mix of Grand American Touring and Cruiser motorcycles shipped as a percent of total shipments and a higher mix of Sportster/Street and Adventure Touring motorcycles. The Company's Pan America™ Adventure Touring motorcycles were launched in the second quarter of 2021.

Segment Results

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

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The estimated impacts of the significant factors affecting the comparability of revenue, cost of goods sold and gross profit from 2021 to 2022 were as follows (in millions):

The following factors affected the comparability of net revenue, cost of goods sold and gross profit from 2021 to 2022:

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

•During 2022, revenue benefited from higher prices on new model year 2022 motorcycles coupled with pricing surcharges in select markets.

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

•Changes in the shipment mix had a favorable impact on gross profit during 2022 due primarily to a change in the mix of models within motorcycle families.

•Raw material cost increases were driven by cost inflation as well as other supply chain challenges.

•Manufacturing and other costs increased due primarily to higher costs associated with supply chain challenges. These higher costs were partially offset by lower EU tariff costs compared to 2021 and a lower fixed cost per unit resulting from higher production volumes. The Company also benefited from cost productivity savings.

Operating expenses were higher in 2022 compared to 2021 due primarily to Hardwire initiatives and higher warranty and recall expenses. These costs increases were partially offset by the Company's ongoing effort to prudently manage spending.

LiveWire Segment

Segment Results

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

During 2022, revenue increased by $11.0 million, or 30.8%, compared to 2021. The increase was primarily due to higher revenue from electric balance bikes driven by a favorable product mix and pricing as well as higher revenue from electric motorcycles driven by higher shipment volumes. Cost of sales increased by $5.5 million, or 14.5%, during 2022 compared to 2021 on higher volumes of electric motorcycles and product mix of electric balance bikes.

During 2022, selling, administrative and engineering expense increased $22.6 million, or 34.5%, compared to 2021 as LiveWire continued to focus on technological innovation that will support future products and growth and incurred higher operating costs associated with standing up a stand-alone public company.

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HDFS Segment

Segment Results

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

Interest income was higher in 2022 compared to 2021, primarily due to higher average outstanding finance receivables, partially offset by a lower average yield. Other income increased largely driven by higher investment and licensing income. Interest expense increased due to higher average outstanding debt at a higher average interest rate.

The provision for credit losses increased $120.1 million compared to 2021 driven by an increase in the allowance and higher retail credit losses. During 2021, economic conditions and outlook improved from 2020 following the height of the COVID-19 pandemic resulting in a reduction in the allowance. In 2022, economic recovery slowed and the pace of recovery became more uncertain in the face of an increased risk of a near-term recession along with continued elevated levels of inflation, muted consumer confidence, and other factors. As such, at the end of 2022, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios was weighted towards a near-term recession. The Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available.

Annual losses on the Company's retail motorcycle loans were 1.88% during 2022 compared to 1.19% in 2021. The 30-day delinquency rate for retail motorcycle loans at December 31, 2022 increased to 4.50% from 3.33% at December 31, 2021. The unfavorable retail credit loss and delinquency performance were driven by delinquencies and losses returning to pre-COVID-19 pandemic levels following a period of favorable performance on federal stimulus benefits and COVID-19 related extensions. The COVID-19 related extensions ended in the second quarter of 2021. Additionally, credit losses were also unfavorably impacted by lower motorcycle recovery values at auction.

Operating expenses were lower in 2022 compared to 2021 due in part to lower shared services and employee-related costs, partially offset by higher sales and marketing expenses.

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

At December 31, 2022, the allowance for credit losses on finance receivables was $345.3 million for retail receivables and $13.4 million for wholesale receivables. At December 31, 2021, the allowance for credit losses on finance receivables was $326.3 million for retail receivables and $13.1 million for wholesale receivables.

Refer to Note 7 of the Notes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.

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Results of Operations 2021 Compared to 2020

Consolidated Results

The Company reported operating income of $823.4 million in 2021 compared to $9.7 million in 2020. The HDMC segment reported operating income of $476.8 million, an improvement from an operating loss of $109.1 million in 2020. Operating loss from the LiveWire segment decreased $8.9 million compared to 2020. Operating income from the HDFS segment increased $219.0 million compared to 2020. Refer to the HDMC Segment, LiveWire Segment, and HDFS Segment discussions for a more detailed analysis of the factors affecting operating results.

Other income (expense) in 2021 was impacted by higher non-operating income related to the Company's defined benefit plans. Investment income decreased in 2021 as compared to 2020 driven by lower income from investments in marketable securities.

The Company's effective income tax rate for 2021 was a 20.7% expense compared to a 108.3% benefit for 2020. The Company's 2021 effective tax rate was favorably impacted by discrete income tax benefits recorded during the year. During 2020, the Company recorded a pre-tax loss resulting in an income tax benefit which was further impacted by discrete income tax benefits recorded during 2020.

Diluted earnings per share was $4.19 in 2021 compared to $0.01 in 2020. Diluted weighted average shares outstanding increased from 153.9 million in 2020 to 155.0 million in 2021.

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Harley-Davidson Motorcycle Retail Sales and Registration Data

Harley-Davidson Motorcycle Retail Sales(a)

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

(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 motorcycles were up 7.7% during 2021 compared to 2020 when retail sales were impacted by the onset of the COVID-19 pandemic. Retail sales during 2021 also reflected strategic decisions made as part of The Rewire.

The increase in retail sales in 2021 was driven by the North American market which was positively impacted by increased demand for the Company's Grand American Touring and large Cruiser motorcycles. Retail sales in 2021 also benefited from the Company's introduction of Pan America™, its new Adventure Touring motorcycles.

Retail sales outside of North America in 2021 were impacted by actions taken under The Rewire to streamline the product portfolio to reduce complexity and direct resources towards the Company's core stronghold products. This includes the Company's decision to discontinue selling Street motorcycles and legacy Sportster motorcycles in EMEA and certain countries within the Asia Pacific and Latin American markets. Latin America retail sales were also impacted during 2021 by the reduction of dealers and pricing actions executed as part of The Rewire in 2020 to restore profitability in those markets. In addition, international retail sales were adversely impacted by longer shipping times.

For the fourth quarter of 2021, worldwide average retail inventory of new motorcycles at Harley-Davidson dealers was down approximately 9,000 units compared to the fourth quarter of 2020.

The Company's Harley-Davidson motorcycle U.S. market share of new 601+cc motorcycles for 2021 was 44.4%, up 2.5 percentage points compared to 2020 (Source: Motorcycle Industry Council). The Company's U.S. market share increased on stronger retail sales performance relative to the industry, as well as stronger performance in the Company's Grand American Touring and Cruiser segments.

The Company's Harley-Davidson motorcycle European market share of new 601+cc motorcycles for 2021 was 5.9%, down 1.8 percentage points compared to 2020 reflecting the decline in retail sales in Europe (Source: Management Services Helwig Schmitt GmbH).

Motorcycle Registration Data - 601+cc(a)

Industry retail registration data for new motorcycles was as follows:

(a)Data includes on-road models with internal combustion engines with displacements greater than 600cc's and electric motorcycles with kilowatt peak power equivalents greater than 600cc's (601+cc). On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. Registration data for Harley-Davidson Street® 500 motorcycles is not included in this table.

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

(c)Europe data includes Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, and the United Kingdom. Industry data is derived from information provided by Management Services Helwig Schmitt GmbH. This third-party data is subject to revision and update.

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HDMC Segment

Harley-Davidson Motorcycle Unit Shipments

Wholesale motorcycle unit shipments were as follows:

(a)Includes CVOTM and Trike

During 2021, motorcycle shipments were up 30.5% from 2020 when shipments were adversely impacted by the temporary suspension of the Company's global manufacturing operations and the temporary closure of dealers in the first half of 2020 resulting from the COVID-19 pandemic. The mix of Grand American Touring motorcycles shipped during 2021 increased as a percent of total shipments while the mix of Cruiser and Sportster/Street motorcycles decreased compared to 2020. In addition, motorcycle unit shipments during 2021 include the Company's new Pan America™ models, its first Adventure Touring motorcycles, which were launched in 2021.

Segment Results

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

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The estimated impacts of the significant factors affecting the comparability of revenue, cost of goods sold and gross profit from 2020 to 2021 were as follows (in millions):

The following factors affected the comparability of net revenue, cost of goods sold and gross profit from 2020 to 2021:

•The increase in volume was due to higher wholesale motorcycle shipments and higher parts and accessories and apparel sales.

•During 2021, revenue benefited from higher wholesale prices for motorcycles, including pricing surcharges that the Company imposed in the U.S. during the second half of 2021, and lower sales incentives.

•Revenue and gross profit were favorably impacted by stronger foreign currency exchange rates relative to the U.S. dollar, partially offset by unfavorable net foreign currency losses associated with hedging and balance sheet remeasurements recorded in cost of goods sold.

•Changes in the shipment mix between motorcycle families had a favorable impact on revenue and gross profit during 2021 as compared to 2020 due primarily to a higher mix of Grand American Touring models.

•Raw material cost increases were driven by higher prices primarily due to supply chain challenges.

•Manufacturing and other cost increases were due to higher supply chain costs and increased tariff costs, partially offset by a lower fixed cost per unit resulting from higher production volumes. The impact of additional EU tariffs was $55.5 million in 2021 compared to $18.3 million in 2020.

Operating expenses were lower in 2021 compared to 2020 due primarily to lower restructuring costs following the Company's 2020 restructuring actions. Selling, administrative and engineering expenses benefited from cost savings resulting from the Company's 2020 restructuring actions; however, these benefits were offset by increased spending on The Hardwire initiatives. In 2020, operating expenses also benefited from cost saving efforts undertaken to preserve cash at the onset of the COVID-19 pandemic. Refer to Note 3 of the Notes to Consolidated financial statements for additional information regarding the Company's restructuring expenses.

LiveWire Segment

Segment Results

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

During 2021, revenue increased $4.9 million, or 16.0%, compared to 2020. The increase was primarily due to an increase in shipments of electric balance bikes, partially offset by a $4.1 million decrease in electric motorcycle revenue. The decrease in electric motorcycle revenue was primarily driven by a decrease in shipments of electric motorcycles, partially offset by a decrease in sales promotions. Cost of sales decreased by $17.4 million, or 31.2%, during 2021 compared to 2020 primarily due to decreased shipments of electric motorcycles, partially offset by increased shipments of electric balance bikes.

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During 2021, selling, administrative and engineering expense increased $13.5 million, or 25.9%, compared to 2020 as LiveWire continued to focus on technological innovation that will support future products and growth, and incurred higher operating costs associated with its plans to become a stand-alone public company.

HDFS Segment

Segment Results

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

Interest income was lower in 2021 compared to 2020, primarily due to lower average outstanding finance receivables, partially offset by a higher average yield. Other income increased due in part to higher insurance and licensing income. Interest expense decreased due to lower average outstanding debt and a lower cost of funds.

The provision for credit losses decreased $156.8 million compared to 2020 primarily due to improved economic conditions, favorable retail credit loss performance and the Company’s outlook on future economic conditions at that time. However, the pace of economic recovery remained uncertain as demonstrated by unemployment levels above those experienced prior to the COVID-19 pandemic, muted consumer confidence, rising inflation, global supply chain disruptions, and continued COVID-19 pandemic-related challenges across the U.S., among other factors. As such, at the end of 2021, the Company's outlook on economic conditions and its probability weighting of its economic forecast scenarios included continued slow economic improvement in its economic scenario weighting.

Annual losses on the Company's retail motorcycle loans were 1.19% during 2021 compared to 1.38% in 2020. The favorable retail credit loss performance was due to elevated used motorcycle values at auction in the U.S. and continued lower than normal delinquency levels driven by benefits provided to individuals under the U.S. federal stimulus packages and COVID-19 pandemic retail payment extensions. Favorable used motorcycle values stemmed from an ongoing low number of motorcycles at auction. The 30-day delinquency rate for retail motorcycle loans at December 31, 2021 increased to 3.33% from 3.18% at December 31, 2020. Although the 30-day delinquency rate was elevated as compared to 2020, the 2021 delinquency rate remained below levels experienced prior to the COVID-19 pandemic. These continued low delinquency levels were driven by benefits to individuals provided under U.S. federal stimulus packages as well as the effects of COVID-19 pandemic-related retail payment extensions. Starting in the second quarter of 2020, the Company granted COVID-19 pandemic-related extensions to help customers get through financial difficulties associated with the pandemic. During 2021, the volume of extensions declined from the levels experienced during 2020 as a result of the COVID-19 pandemic, but extensions did not return to pre-COVID-19 pandemic levels until the end of the second quarter of 2021. Extensions specific to the COVID-19 pandemic were discontinued by the Company at the beginning of the third quarter of 2021.

Operating expenses increased $7.3 million compared to 2020 due to higher employee-related costs and The Hardwire initiatives.

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

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

At December 31, 2021, the allowance for credit losses on finance receivables was $326.3 million for retail receivables and $13.1 million for wholesale receivables. At December 31, 2020, the allowance for credit losses on finance receivables was $371.7 million for retail receivables and $19.2 million for wholesale receivables.

Refer to Note 7 of the Notes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.

Other Matters

New Accounting Standards Issued But Not Yet Adopted

Refer to Note 1 of the Notes to Consolidated financial statements for a discussion of new accounting standards that will become effective for the Company in the future.

Critical Accounting Estimates

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

Allowance for Credit Losses on Retail Finance Receivables – The allowance for credit losses on retail finance receivables represents the Company’s estimate of lifetime losses for its retail finance receivables.

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.

Refer to Note 7 of the Notes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.

Product Warranty and Recalls – Estimated warranty costs are recorded at the time of sale and are based on a combination of historical claim cost data and other known factors that may affect future warranty claims. The estimated costs associated with voluntary recalls are recorded when the liability is both probable and estimable. The accrued cost of a recall is based on an estimate of the cost to repair each affected motorcycle and the number of motorcycles expected to be repaired based on historical data concerning the percentage of affected customers that take advantage of recall offers. In the case of both warranty and recall costs, as actual experience becomes available it is used to update the accruals.

The factors affecting actual warranty and recall costs can be volatile. As a result, actual warranty claims experience and recall costs may differ from estimates, which could lead to material changes in the Company’s accrued warranty and recall

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costs. The Company’s warranty and recall liabilities are discussed further in Note 14 of the Notes to Consolidated financial statements.

Pensions and Other Postretirement Healthcare Benefits – The Company has a defined benefit pension plan and postretirement healthcare benefit plans, which cover certain eligible employees and retirees. The Company also has unfunded supplemental employee retirement plan agreements (SERPA) with certain employees.

U.S. Generally Accepted Accounting Principles (GAAP) requires that companies recognize in their consolidated balance sheets a liability for defined benefit pension and postretirement plans that are underfunded or an asset for defined benefit pension and postretirement benefit plans that are overfunded.

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

The Company determines its discount rate assumptions by referencing high-quality long-term bond rates that are matched to the duration of its benefit obligations. Based on this analysis, the Company increased the weighted-average discount rate for pension and SERPA obligations from 2.89% as of December 31, 2021 to 5.45% as of December 31, 2022. The Company increased the weighted-average discount rate for postretirement healthcare obligations from 2.72% as of December 31, 2021 to 5.42% as of December 31, 2022. The Company determines its healthcare trend assumption for the postretirement healthcare obligation by considering factors such as estimated healthcare inflation, the utilization of healthcare benefits and changes in the health of plan participants. Based on the Company’s assessment of this data as of December 31, 2022, the Company set its healthcare cost trend rate at 7.00% as of December 31, 2022. The Company expects the healthcare cost trend rate to reach its ultimate rate of 5.00% by 2032.(1) These assumption changes were reflected immediately in the benefit obligation and will be amortized into net periodic benefit costs over future periods.

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

Changes in the funded status of defined benefit pension and postretirement benefit plans resulting from the difference between assumptions and actual results are initially recognized in other comprehensive income and amortized to expense over future periods. Sensitivity to changes in major assumptions used in the pension and postretirement healthcare obligations and costs was as follows (in thousands):

The amounts based on current assumptions above exclude the impact of settlements and curtailments. This information should not be viewed as predictive of future amounts. The calculations of pension, SERPA and postretirement healthcare obligations and costs are based on many factors in addition to those discussed here. This information should be considered in combination with the information provided in Note 15 of the Notes to Consolidated financial statements.

Income Taxes – The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (Topic 740). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company reviews its deferred income tax asset valuation allowances on a quarterly basis or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred income tax asset is considered, along with any positive or negative evidence including tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

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The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. These tax laws and regulations are complex and significant judgment is required in determining the Company’s worldwide provision for income taxes and recording the related deferred tax assets and liabilities.

In the ordinary course of the Company’s business, there are transactions and calculations where the ultimate tax determination is uncertain. Accruals for unrecognized tax benefits are provided for in accordance with the requirements of Topic 740. An unrecognized tax benefit represents the difference between the recognition of benefits related to items for income tax reporting purposes and financial reporting purposes. The unrecognized tax benefit is included within Other long-term liabilities on the Consolidated balance sheets. The Company has a liability for interest and penalties on exposure items, if applicable, which is recorded as a component of the overall income tax provision. The Company is regularly audited by tax authorities as a normal course of business. Although the outcome of tax audits is always uncertain, the Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments(1). Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

Refer to Note 4 of the Notes to Consolidated financial statements for further discussion regarding the Company's income taxes.

Commitments and Contingencies

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. Any amounts accrued for these matters are monitored on an ongoing basis and are updated based on new developments or new information as it becomes available for each matter. Refer to Note 16 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.

Liquidity and Capital Resources

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. The Company expects to fund its non-financial services operations primarily with cash flows from operating activities and cash and cash equivalents on hand.(1) The Company expects to fund its financial services operations 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)

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The Company’s cash and cash equivalents and availability under its credit and conduit facilities at December 31, 2022 were as follows (in thousands):

(a)Includes $265.2 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 December 31, 2022

To access the debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings. Generally, lower credit ratings result in higher borrowing costs and reduced access to debt capital markets. A credit rating agency may change or withdraw the Company’s ratings based on its assessment of the Company’s current and future ability to meet interest and principal repayment obligations. The Company’s short-term debt ratings affect its ability to issue unsecured commercial paper. The Company’s short- and long-term debt ratings as of December 31, 2022 were as follows:

The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment. The Company intends to continue with a diversified funding profile through a combination of short-term and long-term funding vehicles and to pursue a variety of sources to obtain cost-effective funding.(1) The 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

Cash flow activities for the years ended December 31, were as follows (in thousands):

Operating Activities

The decrease in operating cash flow in 2022 compared to 2021 was primarily due to an increase in working capital and an increase in wholesale financing activity.

The Company's operating cash flows were lower than 2021 due to changes in working capital primarily related to accounts receivable, inventory and accounts payable. The Company's accounts receivable balance, which relate primarily to sales outside of North America, increased due to higher sales in the fourth quarter of 2022 compared to the fourth quarter of 2021. The Company also experienced an increase in inventory due primarily to a higher level of upcoming model year motorcycles in inventory compared to 2021.These motorcycles are held in inventory at levels the Company deems appropriate to support the annual launch of its new model year motorcycles in January. The Company's accounts payable balance increased during 2021 based on the timing of purchases and payments to suppliers, reducing the amount of operating cash outflow in 2021 compared to 2022.

The Company's increase in wholesale financing activity was driven by higher loan originations. The Company’s sales of motorcycles and related products to dealers in the U.S. and Canada are financed through HDFS and become finance receivables upon the sale to the dealer and become operating cash flows when the dealer repays the wholesale finance receivable. As a result, the timing of the Company's operating cash flow is impacted by the amount and duration of wholesale financing that dealers elect to utilize.

The Company continues to expect that cash and cash equivalents on hand as well as cash inflows generated from operations will fund its ongoing operating cash requirements, including those related to existing contractual commitments. The Company's purchase orders for inventory used in manufacturing generally do not become firm commitments until 90 days prior to expected delivery. The Company's material contractual operating cash commitments at December 31, 2022 relate to leases, retirement plan obligations and income taxes. The Company's long-term lease obligations and future payments are discussed further in Note 10 of the Notes to Consolidated financial statements. 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. As described in Note 4 of the Notes to Consolidated financial statements, the Company has a liability for unrecognized tax benefits of $32.0 million and related accrued interest and penalties of $17.4 million as of December 31, 2022. 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 $151.7 million and $120.2 million during 2022 and 2021, respectively. The Company's 2023 plan includes estimated capital investments between $225 to $250 million, all of which the Company expects to fund with net cash flow generated by operations.(1)

Net cash outflows for finance receivables in 2022, which consisted primarily of retail finance receivables, were $282.4 million higher than in 2021 primarily due to higher retail finance receivable originations during 2022. The Company funds its finance receivables net lending activity through the issuance of debt and brokered certificates of deposit as discussed in the Financing Activities section.

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Financing Activities

The Company’s financing activities consist primarily of dividend payments, share repurchases, cash received related to the LiveWire Transaction, and debt activities.

The Company paid dividends of $0.63 per share totaling $93.2 million during 2022 and $0.60 per share totaling $92.4 million during 2021.

Cash outflows for discretionary share repurchases were $324.5 million in 2022. There were no discretionary share repurchases in 2021. Share repurchases of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares were $14.2 million or 0.4 million shares and $11.6 million or 0.3 million shares during the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, there were 9.9 million shares remaining on a board-approved share repurchase authorization.

The Company received $114 million related to the LiveWire Transaction, including a $100 million investment from KYMCO, an independent strategic investor, and a $14 million investment from ABIC, net of redemptions and transaction expenses. Refer to Note 1 of the Notes to Consolidated financial statements for additional discussion of the LiveWire Transaction.

Financing cash flows related to debt and brokered certificates of deposit activities resulted in net cash inflows/(outflows) of $117.8 million and $(1.78) billion in 2022 and 2021, respectively. The Company’s total outstanding debt and liability for brokered certificates of deposit consisted of the following as of December 31 (in thousands):

Refer to Note 11 of the Notes to Consolidated financial statements for a summary of future principal payments on the Company's debt obligations. Refer to Note 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 $317.4 million and $290.3 million, net of fees, of interest-bearing brokered certificates of deposit outstanding as of December 31, 2022 and 2021, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued. Each separate brokered certificate of deposit is issued under a master certificate, and as such, all outstanding brokered certificates of deposit are considered below the Federal Deposit Insurance Corporation insurance coverage limits.

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 December 31, 2022 supported by the Global Credit Facilities, as discussed above. Outstanding unsecured commercial paper may not exceed the unused portion of the Global Credit Facilities. Maturities may range up to 365 days from the issuance date. The Company intends to repay unsecured commercial paper as it matures with additional unsecured

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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 December 31, 2022 (in thousands):

(a) €650.0 million par value remeasured to U.S. dollar at December 31, 2022

(b) €600.0 million par value remeasured to U.S. dollar at December 31, 2022

The U.S. dollar-denominated medium-term notes provide for semi-annual interest payments and the foreign currency-denominated medium-term notes provide for annual interest payments. Principal on the medium-term notes is due at maturity. Unamortized discounts and debt issuance costs on the medium-term notes reduced the outstanding balance by $8.5 million and $9.2 million at December 31, 2022 and 2021, respectively.

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

On-Balance Sheet Asset-Backed Canadian Commercial Paper Conduit Facility – In June 2022, the Company renewed its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$125.0 million. The transferred assets are restricted as collateral for the payment of the associated debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$125.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables is approximately 5 years. Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of December 31, 2022, the Canadian Conduit has an expiration date of June 30, 2023.

In 2022, the Company transferred $53.1 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $44.2 million. In 2021, the Company transferred $32.8 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $27.4 million.

On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – In September 2022, the Company amended its $900.0 million revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset-backed U.S. commercial paper conduits, increasing the aggregate commitment to $1.50 billion. Under the revolving facility agreement, the Company may transfer U.S. retail motorcycle finance receivables to an SPE, which in turn may issue debt to those third-party banks and their asset-backed U.S. commercial paper conduits. In 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. At December 31, 2022, $125.8 million remained outstanding under the uncommitted additional borrowings related to the $900.0 million revolving facility agreement that was amended during 2022. 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.

In 2022, the Company transferred $467.9 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $404.1 million of debt under the U.S. Conduit Facility. In 2021, the Company transferred $83.5 million of U.S. retail motorcycle finance receivables to an SPE which, in turn, issued $71.5 million of debt under the U.S. Conduit Facility.

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 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

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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, 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. Prior to the renewal, when calculating the unused fee, the aggregate commitment did not include any unused portion of the $300.0 million uncommitted additional borrowings allowed. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit Facility, any outstanding principal will continue to be reduced monthly through available collections. The expected remaining term of the related receivables held by the SPE is approximately 4 years. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of December 31, 2022, 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 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 asset-backed 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.

In 2022, the Company transferred $2.18 billion of U.S. retail motorcycle finance receivables to two separate SPEs which, in turn, issued $1.84 billion, or $1.83 billion net of discount and issuance costs, of secured notes through two separate on-balance sheet asset-backed securitization transactions. In 2021, the Company transferred $1.30 billion of U.S. retail motorcycle finance receivables to two separate SPEs which, in turn, issued $1.18 billion, or $1.17 billion net of discounts and issuance costs, of secured notes through two separate on-balance sheet asset-backed securitization transactions.

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 February 24, 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

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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.

At December 31, 2022 and 2021, Harley-Davidson Financial Services Inc. and the Company remained in compliance with all of the then existing covenants.

Cautionary 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," "sees," or words of similar meaning. Similarly, statements that describe or refer to future expectations, future plans, strategies, objectives, outlooks, targets, guidance, commitments or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially, unfavorably or favorably, from those anticipated as of the date of this report. Certain of such risks and uncertainties are described below. 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 this report are only made as of the date of this report, and the Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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 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; and (6) effectively establish and maintain cooperation from its retail partners, largely drawn from the Company's traditional motorcycle dealer network, to be able to effectively establish or maintain relationships with customers for electric vehicles; (II) competition; and (III) other risks and uncertainties indicated in the final prospectus of ABIC, including those under "Risk Factors" in that prospectus, and other documents filed with the SEC by the Company, LiveWire Group, Inc. or ABIC; (d) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests; (e) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (f) successfully carry out its global manufacturing and assembly operations; (g) develop and introduce products, services and experiences on a timely basis that the market accepts, that enable the Company to generate desired sales levels and that provide the desired financial returns, including successfully implementing and executing plans to strengthen and grow its leadership position in Grand American Touring, large Cruiser and Trike, and grow its complementary businesses; (h) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (i) manage the 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

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its business, including on retail sales of new motorcycles; (o) successfully manage and reduce costs throughout the business; (o) manage through changes in general economic and business conditions, including changing capital, credit and retail markets, and the changing domestic and international political environments, including as a result of the conflict in Ukraine; (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 in, 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 HDMC segment in light of, among other things, tariffs, inflation, foreign currency exchange rates, the cost associated with product development initiatives and the Company's complex global supply chain; and (hh) optimize capital allocation in light of the Company's capital allocation priorities.

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

In recent years, HDFS experienced historically low levels of retail credit losses, but credit losses have been normalizing in recent quarters. The Company believes that HDFS's retail credit losses could 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 this report for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above.