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What changed in HARLEY-DAVIDSON, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HARLEY-DAVIDSON, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+414 added−407 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in HARLEY-DAVIDSON, INC.'s 2023 10-K

414 paragraphs added · 407 removed · 290 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

14 edited+1 added−4 removed12 unchanged
Biggest changeTo drive desirability, the Company will: • Design, engineer and advance the most desirable motorcycles in the world - reflected in quality, innovation, and craftsmanship • Build a lifestyle brand valued for the emotion reflected in every product and experience for riders and non-riders alike • Focus on customers, delivering adventure and freedom for the soul 3 The Hardwire strategic priorities are as follows: Profit focus: Investing in its strongest motorcycle product segments – Harley-Davidson plans to invest significant time and resources on strengthening and growing its leadership positions in its strongest, most profitable motorcycle product segments: Grand American Touring, large Cruiser and Trike.
Biggest changeTo drive desirability, the Company will: • Design, engineer and advance the most desirable motorcycles in the world - reflected in quality, innovation, and craftsmanship • Build a lifestyle brand valued for the emotion reflected in every product and experience for riders and non-riders alike • Focus on customers, delivering adventure and freedom for the soul The Hardwire strategic priorities are as follows: Profit focus: Investing in its strongest motorcycle product segments – Harley-Davidson plans to invest significant time and resources on strengthening and growing its leadership positions in its strongest, most profitable motorcycle product segments: Grand American Touring, large Cruiser and Trike. 3 Selective expansion and redefinition: To win in attractive motorcycle segments and markets – The Company plans to selectively expand into and within motorcycle segments, focusing on product segments that are profitable and aligned with the Company's product and brand capabilities, such as Adventure Touring and middleweight Cruiser.
Harley-Davidson Motor Company Segment (HDMC) HDMC designs, manufactures and sells motorcycles. HDMC also sells motorcycle parts, accessories, and apparel as well as licenses its trademarks. HDMC conducts business on a global basis, with sales in the United States (U.S.), Canada, Europe/Middle East/Africa (EMEA), Asia Pacific, and Latin America.
Harley-Davidson Motor Company Segment (HDMC) HDMC designs, manufactures and sells Harley-Davidson motorcycles. HDMC also sells motorcycle parts, accessories, and apparel as well as licenses its trademarks. HDMC conducts business on a global basis, with sales in the United States (U.S.), Canada, Europe/Middle East/Africa (EMEA), Asia Pacific, and Latin America.
On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. 5 (b) The retail registration data for Harley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in
On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. (b) The retail registration data for Harley-Davidson motorcycles presented in this table will differ from the Harley-Davidson retail sales data presented in
HDMC's products are sold to retail customers primarily through a network of independent dealers. Dealers generally stock and sell Harley-Davidson motorcycles, parts and accessories, apparel, and licensed products and service motorcycles. Dealership points by geographic location as of December 31, 2022 were as follows: U.S.
HDMC's products are sold to retail customers primarily through a network of independent dealers. Dealers generally stock and sell Harley-Davidson motorcycles, parts and accessories, apparel, and licensed products and service motorcycles. Dealership points by geographic location as of December 31, 2023 were as follows: U.S.
Harley-Davidson has long been associated with igniting desirability, and it is embedded in its vision; it is at the heart of its mission and it is part of its 119-year legacy.
Harley-Davidson has long been associated with igniting desirability, and it is embedded in its vision; it is at the heart of its mission and it is part of its 120-year legacy.
The motorcycle industry uses the following motorcycle product segments: • Touring – emphasizes rider comfort and load capacity and incorporates features such as fairings and luggage compartments ideal for long rides, including the Company's Grand American Touring and Trike models • Dual – designed with the capability for use on-road as well as for some off-road recreational use, including the Company's Adventure Touring models • Cruiser – emphasizes styling, customization and casual riding including the Company's Cruiser and Sport models • Standard – a basic motorcycle typically featuring upright seating for one or two passengers • Sportbike – incorporates racing technology and performance and aerodynamic styling and riding position Competition in the motorcycle industry is based upon a number of factors including product capabilities and features, styling, price, quality, reliability, warranty, availability of financing, and quality of the dealer networks that sell the products.
The motorcycle industry uses the following motorcycle product segments: • Touring – emphasizes rider comfort and load capacity and incorporates features such as fairings and luggage compartments ideal for long rides, including the Company's Grand American Touring and Trike models • Dual Sport – designed primarily for off-highway recreational use with the capability for use on public roads as well • Adventure – designed primarily for on-highway use and capable of light-duty, off-highway riding, including the Company's Adventure Touring models • Cruiser – emphasizes styling, customization and casual riding, including the Company's Cruiser and Sport models • Standard – a basic motorcycle typically featuring upright seating for one or two passengers, including the Company's Lightweight models • Sportbike – incorporates racing technology and performance and aerodynamic styling and riding position Competition in the motorcycle industry is based upon a number of factors including product capabilities and features, styling, price, quality, reliability, warranty, availability of financing, and quality of the dealer networks that sell the products.
In addition, HDMC utilizes third-party eCommerce websites in other select international markets. 4 HDMC revenue by product line as a percent of total revenue for the last three fiscal years was as follows : 2022 2021 2020 Motorcycles 77.5 % 77.0 % 72.3 % Parts and accessories 15.0 16.4 20.4 Apparel 5.5 5.1 5.8 Licensing 0.8 0.8 0.9 Other products and services 1.2 0.7 0.6 100.0 % 100.0 % 100.0 % Motorcycles – HDMC offers internal combustion engine motorcycles under the Harley-Davidson brand.
In addition, HDMC utilizes third-party eCommerce websites in other select international markets. 4 HDMC revenue by product line as a percent of total revenue for the last three fiscal years was as follows : 2023 2022 2021 Motorcycles 78.4 % 77.5 % 77.0 % Parts and accessories 14.4 15.0 16.4 Apparel 5.0 5.5 5.1 Licensing 0.6 0.8 0.8 Other products and services 1.6 1.2 0.7 100.0 % 100.0 % 100.0 % Motorcycles – HDMC offers internal combustion engine motorcycles under the Harley-Davidson brand.
The focus will be on technology development, with an approach to product and go-to-market actions that reflect the expectations of the targeted customer to deliver the most desirable electric motorcycles in the world. Refer to the LiveWire Transaction discussion included in Item 7.
The focus will be on technology development, with an approach to product and go-to-market actions that reflect the expectations of the targeted customer to deliver the most desirable electric motorcycles in the world.
Canada EMEA Asia Pacific Latin America Total Dealership points 600 48 336 279 35 1,298 HDMC also distributes its motorcycles through an independent distributor in India. The independent distributor sells HDMC's products through independent Harley-Davidson dealers, included in the table above, as well as their existing dealer network.
Canada EMEA Asia Pacific Latin America Total Dealership points 589 48 325 282 33 1,277 HDMC also distributes its motorcycles through an independent distributor in India. The independent distributor sells HDMC's products through independent Harley-Davidson dealers in India, included in the table above, as well as through the distributor's existing dealer network.
The Company's reportable segments, which are discussed in greater detail below, are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.
The Company operates in three segments: Harley-Davidson Motor Company (HDMC), LiveWire, and Harley-Davidson Financial Services (HDFS). The Company's reportable segments, which are discussed in greater detail below, are strategic business units that offer different products and services and are managed separately based on the fundamental differences in their operations.
HDMC's internal combustion engines generally have displacements that are greater than 600 cubic centimeters (cc), up to a maximum displacement of approximately 1900cc. HDMC markets its motorcycles in five categories that reflect customer needs and preferences and the Company's unique combination of product heritage and innovation. HDMC's product categories include: Grand American Touring, Trike, Adventure Touring, Cruiser, and Sport.
The majority of HDMC's internal combustion engines have displacements that are greater than 600 cubic centimeters (cc) up to approximately 1900cc's. Additionally, during 2023, HDMC introduced a smaller-displacement Lightweight motorcycle in certain markets. HDMC markets its motorcycles in six categories that reflect customer needs and preferences and the Company's unique combination of product heritage and innovation.
Industry retail registration data (a)(b) for 601+cc motorcycles was as follows: 2022 2021 2020 Industry new motorcycle registrations: United States (c) 264,367 281,502 241,790 Europe (d) 406,223 431,127 411,991 Harley-Davidson new motorcycle registrations: United States (c) 108,984 125,044 101,272 Europe (d) 24,775 25,438 31,548 Harley-Davidson market share data: United States (c) 41.2 % 44.4 % 41.9 % Europe (d) 6.1 % 5.9 % 7.7 % (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).
Other significant markets for HDMC, based on the HDMC's 2023 retail sales data, include Canada, Japan, Australia, New Zealand and China. 5 Industry retail registration data (a)(b) for 601+cc motorcycles was as follows: 2023 2022 2021 Industry new motorcycle registrations: United States (c) 256,710 264,367 281,502 Europe (d) 473,486 406,145 431,127 Harley-Davidson new motorcycle registrations: United States (c) 97,169 109,034 125,044 Europe (d) 22,494 24,752 25,438 Harley-Davidson market share data: United States (c) 37.9 % 41.2 % 44.4 % Europe (d) 4.8 % 6.1 % 5.9 % (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).
In 2022, approximately 78% of the total annual dealer retail sales of new Harley-Davidson motorcycles were sold in the U.S. and European 601+cc markets. Other significant markets for HDMC, based on the HDMC's 2022 retail sales data, include Canada, Japan, Australia, New Zealand and China.
In 2023, approximately 77% of the total annual dealer retail sales of new Harley-Davidson motorcycles were sold in the U.S. and European 601+cc markets.
Revenue by segment for the last three fiscal years was as follows (in thousands): 2022 2021 2020 HDMC $ 4,887,672 $ 4,504,434 $ 3,233,191 LiveWire 46,833 35,806 30,863 HDFS 820,625 796,068 790,323 $ 5,755,130 $ 5,336,308 $ 4,054,377 Strategy (1) During 2020, the Company executed a set of actions, referred to as The Rewire.
Revenue by segment for the last three fiscal years was as follows (in thousands): 2023 2022 2021 HDMC $ 4,844,594 $ 4,887,672 $ 4,504,434 LiveWire 38,298 46,833 35,806 HDFS 953,586 820,625 796,068 $ 5,836,478 $ 5,755,130 $ 5,336,308 Strategy (1) The Hardwire is the Company's 2021-2025 strategic plan guided by its mission and vision, which the Company introduced on February 2, 2021.
Removed
In connection with the LiveWire Transaction (refer to the LiveWire Transaction discussion included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this report), the Company reorganized its business into three segments: Harley-Davidson Motor Company (HDMC), LiveWire, and Harley-Davidson Financial Services (HDFS). The change has been retrospectively reflected in the periods presented below.
Added
HDMC's product categories include: Grand American Touring, Trike, Cruiser, Sport, Lightweight, and Adventure Touring.
Removed
The Rewire was a critical overhaul of the Company's business to set the Company on a new course and to provide a solid foundation to execute its 2021-2025 strategic plan, The Hardwire. The Hardwire is the Company's 2021-2025 strategic plan guided by its mission and vision, which the Company introduced on February 2, 2021.
Removed
Selective expansion and redefinition: To win in attractive motorcycle segments and markets – The Company plans to selectively expand into and within motorcycle segments, focusing on product segments that are profitable and aligned with the Company's product and brand capabilities, such as Adventure Touring and middleweight Cruiser.
Removed
Management's Discussion and Analysis of Financial Condition and Results of Operations of this report for more information regarding recent actions the Company has taken to lead in electric.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

94 edited+83 added−36 removed59 unchanged
Biggest changeImportant 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 50 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.
Biggest changeImportant 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, unexpected interruptions or price increases caused by supplier volatility, raw material shortages, inflation, war or other hostilities, including the conflict in Ukraine and the Red Sea conflict, or natural disasters and longer shipping times and increased logistics costs; (c) accurately analyze, predict and react to changing market conditions and successfully adjust to shifting global consumer needs and interests; (d) maintain and enhance the value of the Harley-Davidson brand; (e) 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 execute its plans to develop, produce, market and sell its 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, 2023; (f) successfully access the capital and/or credit markets on terms that are acceptable to the Company and within its expectations; (g) successfully carry out its global manufacturing and assembly operations; (h) 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; (i) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (j) manage the quality and regulatory non-compliance issues relating to the brake hose assemblies provided to the Company by Proterial Cable America, Inc. in a manner that avoids future quality or non-compliance issues and additional costs or recall expenses that are material; (k) 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; (l) manage the impact that prices for and supply of used motorcycles may have on its business, including on retail sales of new motorcycles; (m) 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) continue to manage the relationships and agreements that the Company has with its labor unions, including the successful negotiations of key agreements that will expire March 31, 2024, to help drive long-term competitiveness; (o) successfully manage and reduce costs throughout the business; (p) manage risks related to a resurgence of the COVID-19 pandemic, emergence of a new pandemic, epidemic, disease outbreak or other public health crises, such as supply chain disruptions, its ability to carry out business as usual, and government actions and restrictive measures implemented in response; (q) continue to develop the capabilities of its distributors and dealers, effectively implement changes relating to its dealers and distribution methods, including the Company's dealer footprint, and manage the risks that its dealers may have difficulty obtaining capital and managing through changing economic conditions and consumer demand; (r) 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; (s) continue to develop and maintain a productive relationship with Zhejiang Qianjiang Motorcycle Co., Ltd. and launch related products in a timely manner and that meet or exceed customers' expectations; (t) maintain a productive relationship with Hero MotoCorp as a distributor and licensee of the Harley-Davidson brand name in India; (u) 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 incremental tariffs on motorcycles imported into the EU from the U.S., which was extended to March 52 31, 2025; (v) 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; (w) 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; (x) 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; (y) retain and attract talented employees, and eliminate personnel duplication, inefficiencies and complexity throughout the organization; (z) accurately estimate and adjust to fluctuations in foreign currency exchange rates, interest rates and commodity prices; (aa) manage the credit quality, the loan servicing and collection activities, and the recovery rates of Harley-Davidson Financial Services' loan portfolio; (bb) prevent a cybersecurity breach involving consumer, employee, dealer, supplier, or Company data and respond to evolving regulatory requirements regarding cybersecurity and data privacy; (cc) 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; (dd) manage through the effects inconsistent and unpredictable weather patterns may have on retail sales of motorcycles; (ee) implement and manage enterprise-wide information technology systems, including systems at its manufacturing facilities; (ff) manage changes, prepare for, and respond to evolving requirements in legislative and regulatory environments related to its products, services and operations, including increased environmental, safety, emissions or other regulations; (gg) manage its exposure to product liability claims and commercial or contractual disputes; (hh) achieve anticipated results with respect to the Company's preowned motorcycle program, Harley-Davidson Certified, the Company's H-D1 Marketplace, and Apparel and Licensing; and (ii) optimize capital allocation in light of the Company's capital allocation priorities.
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 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 The Hardwire initiatives and higher warranty and recall expenses.
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.
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 Inc.’s 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.
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.
These transactions are treated as secured borrowings, and as such, the retail 50 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.
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.
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.
The Company intends to repay unsecured commercial paper as it matures with additional unsecured 47 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.
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.
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.
Investment income decreased in 2022 as compared to 2021 driven by lower income from investments in marketable securities. 39 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.
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 49 Company's consolidated shareholders’ equity excludes AOCL) cannot exceed 0.7 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.
Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary. 43 The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions.
Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions.
(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.
(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, 2023 To access the debt capital markets, the Company relies on credit rating agencies to assign short-term and long-term credit ratings.
The Company’s short- and long-term debt ratings as of December 31, 2022 were as follows: Short-Term Long-Term Outlook Moody’s P3 Baa3 Stable Standard & Poor’s A3 BBB- Stable Fitch F2 BBB+ Stable The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment.
The Company’s short- and long-term debt ratings as of December 31, 2023 were as follows: Short-Term Long-Term Outlook Moody’s P3 Baa3 Stable Standard & Poor’s A3 BBB- Stable Fitch F2 BBB+ Stable The Company recognizes that it must continue to monitor and adjust its business to changes in the lending environment.
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.
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 15 of the Notes to Consolidated financial statements for a discussion of the Company's commitments and contingencies.
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.
Refer to Note 5 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.
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.
Unsecured Commercial Paper – Subject to limitations, the Company could issue unsecured commercial paper of up to $1.42 billion as of December 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'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 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, 2023 relate to leases, retirement plan obligations and income taxes.
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.
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 3 of the Notes to Consolidated financial statements for further discussion regarding the Company's income taxes.
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.
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 and the Red Sea conflict, or other factors.
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.
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 2023, the Company renewed its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit.
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).
In the U.S., retail transaction prices for new motorcycles on average were within the Company's targeted range of plus or minus 2% of Manufacturer's Suggested Retail Prices 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).
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.
Conduit Facility also provides for an unused commitment fee based on the unused portion of the total aggregate commitment. Prior to November 2022, when calculating the unused fee, the aggregate commitment did not include any unused portion of the $300.0 million uncommitted additional borrowings allowed.
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.
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 $14.0 million or 0.3 million shares and $14.2 million or 0.4 million shares during the years ended December 31, 2023 and 2022, respectively.
LiveWire Segment Segment Results Condensed statements of operations for the LiveWire segment were as follows (in thousands, except unit shipments): 2022 2021 (Decrease) Increase % Change Revenue 46,833 35,806 11,027 30.8 Cost of goods sold 43,929 38,380 5,549 14.5 Gross profit 2,904 (2,574) 5,478 (212.8) Selling, administrative and engineering expense 88,219 65,608 22,611 34.5 Operating loss $ (85,315) $ (68,182) $ (17,133) 25.1 % LiveWire motorcycle unit shipments 597 461 136 29.5 % During 2022, revenue increased by $11.0 million, or 30.8%, compared to 2021.
These cost increases were partially offset by the Company's ongoing effort to prudently manage spending. 42 LiveWire Segment Segment Results Condensed statements of operations for the LiveWire segment were as follows (in thousands, except unit shipments): 2022 2021 (Decrease) Increase % Change Revenue 46,833 35,806 11,027 30.8 Cost of goods sold 43,929 38,380 5,549 14.5 Gross profit 2,904 (2,574) 5,478 (212.8) Selling, administrative and engineering expense 88,219 65,608 22,611 34.5 Operating loss (85,315) (68,182) $ (17,133) 25.1 % LiveWire motorcycle unit shipments 597 461 136 29.5 % During 2022, revenue increased by $11.0 million, or 30.8%, compared to 2021.
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.
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, or other factors. In recent years, HDFS experienced historically low levels of retail credit losses, but credit losses have been normalizing to higher levels in recent quarters.
This third-party data is subject to revision and update. 33 HDMC Segment Harley-Davidson Motorcycle Unit Shipments Wholesale motorcycle unit shipments were as follows: 2022 2021 Unit Unit Units Mix % Units Mix % Increase (Decrease) % Change Motorcycle Units: United States 118,836 61.4 % 119,761 63.7 % (925) (0.8) % International 74,691 38.6 % 68,272 36.3 % 6,419 9.4 193,527 100.0 % 188,033 100.0 % 5,494 2.9 % Motorcycle Units: Grand American Touring (a) 89,849 46.4 % 93,961 49.9 % (4,112) (4.4) % Cruiser 59,010 30.5 % 59,033 31.4 % (23) — Sportster® / Street 33,894 17.5 % 25,123 13.4 % 8,771 34.9 Adventure Touring 10,774 5.6 % 9,916 5.3 % 858 8.7 193,527 100.0 % 188,033 100.0 % 5,494 2.9 % (a) Includes CVO TM and Trike HDMC shipped 193,527 motorcycles worldwide during 2022, which was 2.9% higher than during 2021.
HDMC Segment Harley-Davidson Motorcycle Unit Shipments Wholesale motorcycle unit shipments were as follows: 2022 2021 Unit Unit Units Mix % Units Mix % Increase (Decrease) % Change Motorcycle Units: United States 118,836 61.4 % 119,761 63.7 % (925) (0.8) % International 74,691 38.6 % 68,272 36.3 % 6,419 9.4 193,527 100.0 % 188,033 100.0 % 5,494 2.9 % Motorcycle Units: Grand American Touring (a) 89,849 46.4 % 93,961 49.9 % (4,112) (4.4) % Cruiser 59,010 30.5 % 59,033 31.4 % (23) — Sport and Lightweight 33,894 17.5 % 25,123 13.4 % 8,771 34.9 Adventure Touring 10,774 5.6 % 9,916 5.3 % 858 8.7 193,527 100.0 % 188,033 100.0 % 5,494 2.9 % (a) Includes CVO TM and Trike HDMC shipped 193,527 motorcycles worldwide during 2022, which was 2.9% higher than during 2021.
Diluted weighted average shares outstanding decreased from 155.0 million in 2021 to 149.4 million in 2022. 32 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: 2022 2021 Increase (Decrease) % Change United States 109,190 125,713 (16,523) (13.1) % Canada 7,924 8,005 (81) (1.0) North America 117,114 133,718 (16,604) (12.4) Europe/Middle East/Africa (EMEA) 30,510 30,907 (397) (1.3) Asia Pacific 27,905 25,020 2,885 11.5 Latin America 2,922 3,652 (730) (20.0) 178,451 193,297 (14,846) (7.7) % (a) Data source for retail sales figures shown above is new sales warranty and registration information provided by dealers and compiled by the Company.
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: 2022 2021 Increase (Decrease) % Change United States 109,190 125,713 (16,523) (13.1) % Canada 7,924 8,005 (81) (1.0) North America 117,114 133,718 (16,604) (12.4) Europe/Middle East/Africa (EMEA) 30,510 30,907 (397) (1.3) Asia Pacific 27,905 25,020 2,885 11.5 Latin America 2,922 3,652 (730) (20.0) 178,451 193,297 (14,846) (7.7) % (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'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 .
The Company's long-term lease obligations and future payments are discussed further in Note 9 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 14 of the Notes to Consolidated financial statements .
The Company's capital allocation priorities are to fund growth through The Hardwire initiatives, to pay dividends, and to execute discretionary share repurchases. 31 Results of Operations 2022 Compared to 2021 Consolidated Results (in thousands, except earnings per share) 2022 2021 Increase (Decrease) Operating income - HDMC $ 677,087 $ 476,807 $ 200,280 Operating loss - LiveWire (85,315) (68,182) (17,133) Operating income - HDFS 317,506 414,814 (97,308) Operating income 909,278 823,439 85,839 Other income, net 48,652 20,076 28,576 Investment income 4,538 6,694 (2,156) Interest expense 31,235 30,972 263 Income before income taxes 931,233 819,237 111,996 Income tax provision 192,019 169,213 22,806 Net income 739,214 650,024 89,190 Less: Loss attributable to noncontrolling interests 2,194 — 2,194 Net income attributable to Harley-Davidson, Inc. $ 741,408 $ 650,024 $ 91,384 Diluted earnings per share $ 4.96 $ 4.19 $ 0.77 The Company reported operating income of $909.3 million in 2022 compared to $823.4 million in 2021.
Results of Operations 2022 Compared to 2021 Consolidated Results (in thousands, except earnings per share) 2022 2021 Increase (Decrease) Operating income - HDMC $ 677,087 $ 476,807 $ 200,280 Operating loss - LiveWire (85,315) (68,182) (17,133) Operating income - HDFS 317,506 414,814 (97,308) Operating income 909,278 823,439 85,839 Other income, net 48,652 20,076 28,576 Investment income 4,538 6,694 (2,156) Interest expense 31,235 30,972 263 Income before income taxes 931,233 819,237 111,996 Income tax provision 192,019 169,213 22,806 Net income 739,214 650,024 89,190 Less: Loss attributable to noncontrolling interests 2,194 — 2,194 Net income attributable to Harley-Davidson, Inc. $ 741,408 $ 650,024 $ 91,384 Diluted earnings per share $ 4.96 $ 4.19 $ 0.77 The Company reported operating income of $909.3 million in 2022 compared to $823.4 million in 2021.
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.
Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of December 31, 2023, the U.S. Conduit Facility has an expiration date of November 20, 2024.
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.
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 $15.7 million and $8.5 million at December 31, 2023 and 2022, respectively. 49 Senior Notes – In July 2015, the Company issued $750.0 million of unsecured senior notes in an underwritten offering.
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.
The Company had $447.8 million and $317.4 million , net of fees, of interest-bearing brokered certificates of deposit outstanding as of December 31, 2023 and 2022, respectively. The deposits are classified as short- and long-term liabilities based upon the term of each brokered certificate of deposit issued.
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.
Refer to Note 3 of the Notes to Consolidated financial statements for further discussion regarding the Company’s effective tax rate. Diluted earnings per share was $4.87 in 2023 compared to $4.96 in 2022.
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.
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.
(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.
(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.
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.
Based on the Company’s assessment of this data as of December 31, 2023, the Company set its healthcare cost trend rate for the upcoming year at 7.50% as of December 31, 2023. The Company expects the healthcare cost trend rate to reach its ultimate rate of 5.00% by 2032.
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 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.
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. 46 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 funds its finance receivables net lending activity through the issuance of debt and brokered certificates of deposit as discussed in the Financing Activities section. Financing Activities The Company’s financing activities consist primarily of dividend payments, share repurchases and debt activities.
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.
Based on this analysis, the Company decreased the weighted-average discount rate for pension and SERPA obligations from 5.45% as of December 31, 2022 to 5.31% as of December 31, 2023. The Company decreased the weighted-average discount rate for postretirement healthcare obligations from 5.42% as of December 31, 2022 to 5.36% as of December 31, 2023.
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. 35 HDFS Segment Segment Results Condensed statements of operations for the HDFS segment were as follows (in thousands): 2022 2021 (Decrease) Increase % Change HDFS revenue: Interest income $ 693,615 $ 671,708 $ 21,907 3.3 % Other income 127,010 124,360 2,650 2.1 820,625 796,068 24,557 3.1 HDFS expenses: Interest expense 217,653 192,944 24,709 12.8 Provision for credit losses 145,133 25,049 120,084 479.4 Operating expenses 140,333 162,587 (22,254) (13.7) Restructuring expense — 674 (674) (100.0) 503,119 381,254 121,865 32.0 Operating income $ 317,506 $ 414,814 $ (97,308) (23.5) % Interest income was higher in 2022 compared to 2021, primarily due to higher average outstanding finance receivables, partially offset by a lower average yield.
HDFS Segment Segment Results Condensed statements of operations for the HDFS segment were as follows (in thousands): 2022 2021 (Decrease) Increase % Change HDFS revenue: Interest income $ 693,615 $ 671,708 $ 21,907 3.3 % Other income 127,010 124,360 2,650 2.1 820,625 796,068 24,557 3.1 HDFS expenses: Interest expense 217,653 192,944 24,709 12.8 Provision for credit losses 145,133 25,049 120,084 479.4 Operating expenses 140,333 162,587 (22,254) (13.7) Restructuring expense — 674 (674) (100.0) 503,119 381,254 121,865 32.0 Operating income $ 317,506 $ 414,814 $ (97,308) (23.5) % Interest income was higher in 2022 compared to 2021, primarily due to higher average outstanding finance receivables, partially offset by a lower average yield.
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.
Unless earlier terminated or extended by mutual agreement between the Company and the lenders, as of December 31, 2023, the Canadian Conduit has an expiration date of June 28, 2024. In 2023, the Company transferred $51.4 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $42.4 million.
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 .
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.
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 48 on the Secured Overnight Financing Rate (SOFR), with provisions for a transition to other benchmark rates in the future, if necessary.
The interest rate on all 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. In addition to interest, a program fee is assessed based on the outstanding debt principal balance. The U.S.
(1) Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at December 31, 2022 (in thousands): Principal Amount Rate Issue Date Maturity Date $350,000 3.35% February 2018 February 2023 $695,727 (a) 4.94% May 2020 May 2023 $642,210 (b) 3.14% November 2019 November 2024 $700,000 3.35% June 2020 June 2025 $500,000 3.05% February 2022 February 2027 (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.
(1) Medium-Term Notes – The Company had the following unsecured medium-term notes issued and outstanding at December 31, 2023 (in thousands): Principal Amount Rate Issue Date Maturity Date $662,238 (a) 3.14% November 2019 November 2024 $700,000 3.35% June 2020 June 2025 $772,610 (b) 6.36% April 2023 April 2026 $500,000 3.05% February 2022 February 2027 $700,000 6.50% March 2023 March 2028 (a) €600.0 million par value remeasured to U.S. dollar at December 31, 2023 (b) €700.0 million par value remeasured to U.S. dollar at December 31, 2023 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.
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.
In 2023, there were no finance receivable transfers under the U.S. Conduit Facility. 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.
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.
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.
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.
As described in Note 3 of the Notes to Consolidated financial statements , the Company has a liability for unrecognized tax benefits of $18.2 million and related accrued interest and penalties of $8.6 million as of December 31, 2023.
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 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.
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.
At December 31, 2022, $125.8 million remained outstanding under the uncommitted additional borrowings previously allowed. During 2023, the remaining balance of these uncommitted additional borrowings was paid in full. 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 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.
The Company paid dividends of $0.66 per share totaling $96.3 million during 2023 and $0.63 per share totaling $93.2 million during 2022. Cash outflows for discretionary share repurchases were $350.0 million in 2023 and $324.5 million in 2022.
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 Company’s expectations surrounding its economic forecasts may change in future periods as additional information becomes available. 43 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.
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.
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.
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.
Worldwide retail inventory of new motorcycles at Harley-Davidson dealers was up approximately 14,700 units at the end of the fourth quarter of 2022 compared to the prior year but remained at historically low levels.
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.
The Company’s recall liabilities are discussed further in Note 13 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.
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.
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 Sport and Lightweight and Adventure Touring motorcycles.
The Company’s total outstanding debt and liability for brokered certificates of deposit consisted of the following as of December 31 (in thousands): 2022 2021 Outstanding debt: Unsecured commercial paper $ 770,468 $ 751,286 Asset-backed Canadian commercial paper conduit facility 71,785 85,054 Asset-backed U.S. commercial paper conduit facility 425,794 272,589 Asset-backed securitization debt, net 2,019,414 1,627,142 Medium-term notes, net 2,879,473 3,408,660 Senior notes, net 745,368 744,668 $ 6,912,302 $ 6,889,399 Deposits, net $ 317,375 $ 290,326 Refer to Note 11 of the Notes to Consolidated financial statements for a summary of future principal payments on the Company's debt obligations.
The Company’s total outstanding debt and liability for brokered certificates of deposit consisted of the following as of December 31 (in thousands): 2023 2022 Outstanding debt: Unsecured commercial paper $ 878,935 $ 770,468 Asset-backed Canadian commercial paper conduit facility 70,742 71,785 Asset-backed U.S. commercial paper conduit facility 233,258 425,794 Asset-backed securitization debt, net 1,877,368 2,019,414 Medium-term notes, net 3,319,138 2,879,473 Senior notes, net 746,079 745,368 $ 7,125,520 $ 6,912,302 Deposits, net $ 447,782 $ 317,375 Refer to Note 10 of the Notes to Consolidated financial statements for a summary of future principal payments on the Company's debt obligations.
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.
The secured notes currently have various contractual maturities ranging from 2024 to 2031. In 2023, the Company transferred $1.20 billion of U.S. retail motorcycle finance receivables to two separate SPEs which, in turn, issued $1.05 billion, or $1.04 billion net of discount and issuance costs, of secured notes through two separate on-balance sheet asset-backed securitization transactions.
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.
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's ongoing operating cash requirements include those related to existing contractual commitments which it expects to fund with cash inflows from operating activities.
(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.
(1) Net cash outflows for finance receivables in 2023, which consisted primarily of retail finance receivables, were $321.1 million lower than in 2022 primarily due to lower retail finance receivable originations, partially offset by slower collections of finance receivables, during 2023.
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.
At December 31, 2023 and 2022, Harley-Davidson Financial Services Inc. and the Company remained in compliance with all of the then existing covenants. 51 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.
Motorcycle Registration Data - 601+cc (a) Industry retail registration data for new motorcycles was as follows: 2022 2021 Increase % Change United States (b) 264,367 281,502 (17,135) (6.1) % Europe (c) 406,223 431,127 (24,904) (5.8) % (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).
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). 40 Motorcycle Registration Data - 601+cc (a) Industry retail registration data for new motorcycles was as follows: 2022 2021 Increase % Change United States (b) 264,367 281,502 (17,135) (6.1) % Europe (c) 406,145 431,127 (24,982) (5.8) % (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).
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.
Credit Facilities – The Company has a $710.0 million five-year credit facility that matures in April 2025 and a $710.0 million five-year credit facility that matures in April 2027. 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.
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, 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 6 of the Notes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.
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.
In addition, HDFS’s efforts to adjust underwriting criteria based on market and economic conditions and the actions that the Company has taken and could take that impact motorcycle values may impact HDFS's retail credit losses.
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) 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.
As of February 24, 2023, Harley-Davidson Financial Services, Inc. had no outstanding borrowings owed to Harley-Davidson, Inc. under this agreement.
Harley-Davidson Financial Services, Inc. did not borrow on the line of credit during 2023 and had no outstanding borrowings owed to Harley-Davidson, Inc. under this agreement as of February 23, 2024.
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.
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 8.8% during 2023 compared to 2022 driven primarily by a decline in North America.
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.
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. From November 2020 through November 2022, the U.S. Conduit Facility allowed for uncommitted additional borrowings of up to $300.0 million at the lenders' discretion.
Segment Results Condensed statements of operations for the HDMC segment were as follows (in thousands): 2022 2021 Increase (Decrease) % Change Revenue: Motorcycles $ 3,787,484 $ 3,468,689 $ 318,795 9.2 % Parts and accessories 731,645 740,893 (9,248) (1.2) Apparel 271,107 228,011 43,096 18.9 Licensing 39,423 37,790 1,633 4.3 Other 58,013 29,051 28,962 99.7 4,887,672 4,504,434 383,238 8.5 Cost of goods sold 3,359,799 3,204,907 154,892 4.8 Gross profit 1,527,873 1,299,527 228,346 17.6 Operating expenses: Selling & administrative expense 719,800 686,753 33,047 4.8 Engineering expense 131,530 133,226 (1,696) (1.3) Restructuring expense (544) 2,741 (3,285) (119.8) 850,786 822,720 28,066 3.4 % Operating income (loss) $ 677,087 $ 476,807 $ 200,280 42.0 % Operating margin 13.9 % 10.6 % 3.3 pts. 34 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): Revenue Cost of Goods Sold Gross Profit 2021 $ 4,504.4 $ 3,204.9 $ 1,299.5 Volume 152.9 94.8 58.1 Price, net of related costs 330.4 — 330.4 Foreign currency exchange rates and hedging (148.8) (83.3) (65.5) Shipment mix 48.8 48.0 0.8 Raw material prices — 30.0 (30.0) Manufacturing and other costs — 65.4 (65.4) 383.3 154.9 228.4 2022 $ 4,887.7 $ 3,359.8 $ 1,527.9 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.
The estimated impacts of the significant factors affecting the change in revenue, cost of goods sold and gross profit from 2021 to 2022 were as follows (in millions): Revenue Cost of Goods Sold Gross Profit 2021 $ 4,504.4 $ 3,204.9 $ 1,299.5 Volume 152.9 94.8 58.1 Price, net of related costs 330.4 — 330.4 Foreign currency exchange rates and hedging (148.8) (83.3) (65.5) Shipment mix 48.8 48.0 0.8 Raw material prices — 30.0 (30.0) Manufacturing and other costs — 65.4 (65.4) 383.3 154.9 228.4 2022 $ 4,887.7 $ 3,359.8 $ 1,527.9 The following factors affected the change in 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.
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.
Refer to the HDMC Segment, LiveWire Segment and HDFS Segment discussions for a more detailed analysis of the factors affecting operating results. Other income, net in 2023 was impacted by higher non-operating income related to the Company's defined benefit plans, partially offset by a loss related to an increase in the fair value of LiveWire's warrants.
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.
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. Refer to Note 6 of the Notes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables.
Sensitivity to changes in major assumptions used in the pension and postretirement healthcare obligations and costs was as follows (in thousands): Amounts based on current assumptions Impact of a 1% decrease in the discount rate Impact of a 1% increase in the healthcare cost trend rate Impact of a 1% decrease in the expected return on assets 2022 Net periodic benefit cost: Pension and SERPA $ (14,362) $ 28,587 n/a $ 22,488 Postretirement healthcare $ (4,813) $ (935) $ 490 $ 2,253 2022 Benefit obligations: Pension and SERPA $ 1,553,912 $ 182,298 n/a n/a Postretirement healthcare $ 210,811 $ 15,245 $ 4,573 n/a The amounts based on current assumptions above exclude the impact of settlements and curtailments.
Sensitivity to changes in major assumptions used in the pension and postretirement healthcare obligations and costs was as follows (in thousands): Amounts based on current assumptions Impact of a 1% decrease in the discount rate Impact of a 1% increase in the healthcare cost trend rate Impact of a 1% decrease in the expected return on assets 2023 Net periodic benefit cost: Pension and SERPA $ (58,962) $ (5,484) n/a $ 21,489 Postretirement healthcare $ (7,904) $ 14 $ 639 $ 2,290 2023 Benefit obligations: Pension and SERPA $ 1,568,278 $ 181,979 n/a n/a Postretirement healthcare $ 206,506 $ 15,614 $ 4,629 n/a The amounts based on current assumptions above exclude the impact of settlements and curtailments.
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.
The HDMC segment reported operating income of $661.2 million compared to $677.1 million in 2022. Operating loss from the LiveWire segment increased $31.5 million compared to 2022. Operating income from the HDFS segment decreased $82.8 million compared to 2022.
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.
In 2022, the Company transferred $53.1 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $44.2 million. On-Balance Sheet Asset-Backed U.S. Commercial Paper Conduit Facilities VIE – In November 2023, the Company renewed its $1.50 billion revolving facility agreement (the U.S. Conduit Facility) with third-party banks and their asset-backed U.S. commercial paper conduits.
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.
Investing Activities The Company’s most significant investing activities consist of capital expenditures and retail finance receivable originations and collections. Capital expenditures were $207.4 million and $151.7 million during 2023 and 2022, respectively. The Company's 2024 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.
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.
On-road 601+cc models include dual purpose models, three-wheeled motorcycles and autocycles. (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.
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.
No financial covenants are required under the medium-term or senior notes or the U.S. or Canadian asset-backed commercial paper conduit facilities.
(1) 44 The Company’s cash and cash equivalents and availability under its credit and conduit facilities at December 31, 2022 were as follows (in thousands): Cash and cash equivalents (a) $ 1,433,175 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 125,794 Borrowings against uncommitted facility (125,794) 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) 92,283 Borrowings against committed facility (71,785) Net asset-backed Canadian commercial paper conduit facility 20,498 Availability under credit and conduit facilities: Credit facilities 1,420,000 Commercial paper outstanding (770,468) Net credit facility availability 649,532 $ 3,303,205 (a) Includes $265.2 million of cash and cash equivalents held by LiveWire Group, Inc.
(1) 46 The Company’s cash and cash equivalents and availability under its credit and conduit facilities at December 31, 2023 were as follows (in thousands): Cash and cash equivalents (a) $ 1,533,806 U.S. commercial paper conduit facility: Committed asset-backed U.S. commercial paper conduit facility (b) 1,500,000 Borrowings against committed facility (233,258) Net asset-backed U.S. commercial paper conduit committed facility availability 1,266,742 Asset-backed Canadian commercial paper conduit facility (b)(c) 94,328 Borrowings against committed facility (70,742) Net asset-backed Canadian commercial paper conduit facility 23,586 Availability under credit and conduit facilities: Credit facilities 1,420,000 Commercial paper outstanding (878,935) Net credit facility availability 541,065 $ 3,365,199 (a) Includes $167.9 million of cash and cash equivalents held by LiveWire Group, Inc.
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 actual experience becomes available it is used to update the accruals. 44 The factors affecting actual recall costs can be volatile. As a result, actual recall costs may differ from estimates, which could lead to material changes in the Company’s accrued recall costs.
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. 40 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.
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 to support future products and growth and incurred higher operating costs associated with standing up a stand-alone public company.
(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. 45 Cash Flow Activity Cash flow activities for the years ended December 31, were as follows (in thousands): 2022 2021 Net cash provided by operating activities $ 548,461 $ 975,701 Net cash used by investing activities (773,011) (459,447) Net cash used by financing activities (201,967) (1,884,931) Effect of exchange rate changes on cash, cash equivalents and restricted cash (19,525) (15,272) Net decrease in cash, cash equivalents and restricted cash $ (446,042) $ (1,383,949) 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.
Cash Flow Activity Cash flow activities for the years ended December 31, were as follows (in thousands): 2023 2022 Net cash provided by operating activities $ 754,887 $ 548,461 Net cash used by investing activities (512,304) (773,011) Net cash used by financing activities (174,646) (201,967) Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,697 (19,525) Net decrease in cash, cash equivalents and restricted cash $ 69,634 $ (446,042) Operating Activities 47 The increase in operating cash flow in 2023 compared to 2022 was primarily due to favorable changes in working capital, partially offset by an increase in wholesale financing activity.
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.
Refer to Note 6 of the Notes to Consolidated financial statements for further discussion regarding the Company’s allowance for credit losses on finance receivables. Product Recalls – The estimated costs associated with voluntary recalls are recorded when the liability is both probable and estimable.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties A summary of the principal operating properties of the Company as of December 31, 2022 is as follows: Type of Facility Location Status HDMC: Corporate office Milwaukee, WI Owned Product development center Wauwatosa, WI Owned Manufacturing - Motorcycle powertrain production Menomonee Falls, WI Owned Manufacturing - Motorcycle components parts production and painting Tomahawk, WI Owned Manufacturing - Motorcycle parts fabrication, painting and assembly York, PA Owned Manufacturing - Motorcycle production for Asian and European markets Rayong, Thailand Owned Manufacturing - Motorcycle assembly for Brazilian market Manaus, Brazil Leased HDFS: Corporate office Chicago, IL Leased Wholesale and retail operations office Plano, TX Leased Retail operations office Reno, NV Leased LiveWire has a virtual headquarters to access talent from across the globe.
Biggest changeProperties A summary of the principal operating properties of the Company as of December 31, 2023 is as follows: Type of Facility Location Status HDMC: Corporate office Milwaukee, WI Owned Product development center Wauwatosa, WI Owned Manufacturing - Motorcycle powertrain production Menomonee Falls, WI Owned Manufacturing - Motorcycle components parts production and painting Tomahawk, WI Owned Manufacturing - Motorcycle parts fabrication, painting and assembly York, PA Owned Manufacturing - Motorcycle production for Asian and European markets Rayong, Thailand Owned Manufacturing - Motorcycle assembly for Brazilian market Manaus, Brazil Leased HDFS: Corporate office Chicago, IL Leased Wholesale and retail operations office Plano, TX Leased Retail operations office Reno, NV Leased LiveWire: Corporate office Milwaukee, WI Owned Product development center Wauwatosa, WI Owned LiveWire Labs - Research and development activities Mountain View, CA Leased LiveWire Labs - Customer experience center Malibu, CA Leased LiveWire Labs - Retail operations Canoga Park, CA Leased LiveWire Labs - Marketing displays and test rides Los Angeles, CA Leased The Company has one Corporate office and one Product development center which include separate spaces for HDMC and LiveWire operations.
Removed
As of December 31, 2022, LiveWire leased office facilities in multiple locations in the United States.
Added
LiveWire motorcycles and components are manufactured at the HDMC U.S. manufacturing locations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+2 added−40 removed7 unchanged
Biggest changeThe 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.
Biggest changeThe specific number of shares repurchased, if any, and the timing of repurchases are determined by the Company management from time to time and 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 Company has chosen to use the Standard & Poor’s (S&P) MidCap 400 Index as the broad-based index and the S&P MidCap 400 Consumer Discretionary Index as its peer index.
The Company has chosen to use the Standard & Poor’s (S&P) MidCap 400 Index as the broad-based 29 index and the S&P MidCap 400 Consumer Discretionary Index as its peer index.
In February 2020, the Company's Board of Directors authorized the Company to repurchase up to 10.0 million additional shares of its common stock on a discretionary basis with no dollar limit or expiration date.
In August 2023, the Company's Board of Directors authorized the Company to repurchase up to 10.0 million additional shares of its common stock on a discretionary basis with no dollar limit or expiration date.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Harley-Davidson, Inc. common stock is traded on the New York Stock Exchange under the trading symbol HOG. As of January 27, 2023, there were 64,116 shareholders of record of Harley-Davidson, Inc. common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Harley-Davidson, Inc. common stock is traded on the New York Stock Exchange under the trading symbol HOG. As of January 31, 2024, there were 62,630 shareholders of record of Harley-Davidson, Inc. common stock.
Under the share repurchase authorization, 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.
Under the share repurchase authorization, 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 repurchase authority has no expiration date but may be suspended, modified or discontinued at any time.
During the fourth quarter of 2022, the Company acquired 2,939 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.
During the fourth quarter of 2023, the Company acquired 9,479 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. Item 12.
As of December 31, 2022, 9.9 million shares remained under the 2020 authorization, as the Company exhausted all remaining shares under the 2018 authorization during the quarter ended September 25, 2022. The Company repurchased no shares on a discretionary basis during the quarter ended December 31, 2022.
As of December 31, 2023, 9.7 million shares remained under the 2023 authorization, as the Company exhausted all remaining shares under the 2020 authorization during the quarter ended December 31, 2023. The Company repurchased 4.1 million shares on a discretionary basis during the quarter ended December 31, 2023.
The Company’s share repurchases, which consisted of shares of common stock that employees surrendered to satisfy withholding taxes in connection with the vesting of restricted stock units and performance shares were as follows during the quarter ended December 31, 2022: 2022 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 September 27 to October 31 447 $ 43 447 9,872,167 November 1 to November 28 2,313 $ 44 2,313 9,872,167 November 29 to December 31 179 $ 47 179 9,872,167 2,939 $ 44 2,939 In February 2018, the Company's Board of Directors authorized the Company to repurchase up to 15.0 million shares of its common stock on a discretionary basis with no dollar limit or expiration date.
The Company’s share repurchases, which consisted of discretionary share repurchases 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 December 31, 2023: 2022 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 October 1 to October 31 1,347,314 $ 30 1,347,314 12,403,597 November 1 to November 30 1,401,932 $ 29 1,401,932 11,005,081 December 1 to December 31 1,324,864 $ 33 1,324,864 9,683,221 4,074,110 $ 31 4,074,110 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.
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.
Certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report, including in
The graph assumes a beginning investment of $100 on December 31, 2017 and that all dividends are reinvested. 27 2017 2018 2019 2020 2021 2022 Harley-Davidson, Inc. $ 100 $ 69 $ 79 $ 79 $ 82 $ 92 S&P MidCap 400 Index $ 100 $ 89 $ 112 $ 127 $ 159 $ 138 S&P MidCap 400 Consumer Discretionary Index $ 100 $ 82 $ 104 $ 136 $ 174 $ 137 Item 6. [Reserved] Item 7.
The graph assumes a beginning investment of $100 on December 31, 2018 and that all dividends are reinvested. 2018 2019 2020 2021 2022 2023 Harley-Davidson, Inc. $ 100 $ 114 $ 114 $ 119 $ 133 $ 120 S&P MidCap 400 Index $ 100 $ 126 $ 143 $ 179 $ 155 $ 181 S&P MidCap 400 Consumer Discretionary Index $ 100 $ 127 $ 166 $ 212 $ 167 $ 208 Item 6. [Reserved] Item 7.
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 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters within Part III of this Annual Report contains certain information relating to the Company’s equity compensation plans.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters within Part III of this Annual Report contains certain information relating to the Company’s equity compensation plans.
Removed
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.
Added
The Company maintains a capital allocation policy to (i) fund The Hardwire strategic initiatives, including the associated capital expenditures, (ii) pay dividends and (iii) exercise discretionary share repurchases. This policy is designed to support the investment required to enhance the long-term value of the Company and to return any excess cash to shareholders.
Removed
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.
Added
The amount of capital to be allocated to share repurchases is approved periodically by the Company’s Board of Directors, taking into account the Company’s expected cash flow over time.
Removed
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. 28 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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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 29 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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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%.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
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").
Removed
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.
Removed
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.
Removed
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%.
Removed
As the controlling shareholder, the Company continues to consolidate LiveWire Group, Inc. results, with additional adjustments to recognize non-controlling shareholder interests. 30 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.
Removed
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.
Removed
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 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

156 edited+36 added−36 removed131 unchanged
Biggest changeThe Company continues to focus on managing its healthcare costs through education and wellness activities and in 2022 did not pass any additional costs on to its workforce while continuing to provide above market medical, dental and vision benefits. • The Company continued its strong health and safety performance through 2022 with its best performance since it started tracking health and safety metrics, ending the year with a 0.4 recordable rate, 0.2 restricted time (DART) rate and 0.2 lost time (DAFWII) rate for the Company. • With respect to training and development in 2022, the Company had six employees selected to participate in a new mentoring initiative for diverse, rising leaders through its partnership with PwC CEO Action.
Biggest changeIn addition, a pay equity evaluation was conducted by an external party. • The Company continued its strong health and safety performance, ending the year with a 0.4 recordable rate, 0.3 restricted time (DART) rate and 0.2 lost time (DAFWII) rate for the Company. • With respect to training and development, the Company had three employees selected to participate in a mentoring initiative for diverse, rising leaders through its partnership with PwC CEO Action.
The Company believes that the Harley-Davidson brand has significantly contributed to the success of its business and that maintaining and enhancing the brand is critical to expanding its customer base.
The Company believes that the Harley-Davidson brand has significantly contributed to the success of its business and that maintaining and enhancing the brand is critical to maintaining and expanding its customer base.
These negative consequences may in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital and reduced funds available through its HDFS segment operations to provide loans to dealers and their retail customers.
These negative consequences may in turn adversely affect the Company’s business and results of operations in various ways, including through higher costs of capital and reduced funds available through its HDFS segment to provide loans to dealers and their retail customers.
Changes in regulations, changes in interpretations of regulations by governmental agencies, or the imposition of additional regulations may have a material adverse effect on the Company’s business and results of operations. The Company's LiveWire segment operations, its third-party outsourcing partners, and its suppliers are or may be subject to substantial regulation under foreign, federal, state, and local laws.
Changes in regulations, changes in interpretations of regulations by governmental agencies, or the imposition of additional regulations may have a material adverse effect on the Company’s business and results of operations. The Company's LiveWire segment, its third-party outsourcing partners, and its suppliers are or may be subject to substantial regulation under foreign, federal, state, and local laws.
If the Company’s LiveWire segment operations, its third-party outsourcing partners or its suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other governmental authorizations necessary to carry out operations in the jurisdictions in which LiveWire or they currently operate, or those jurisdictions in which LiveWire or they plan to operate in the future, the Company’s business, prospects, financial condition and operating results could be materially adversely affected.
If the Company’s LiveWire segment, its third-party outsourcing partners or its suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other governmental authorizations necessary to carry out operations in the jurisdictions in which LiveWire or they currently operate, or those jurisdictions in which LiveWire or they plan to operate in the future, the Company’s business, prospects, financial condition and operating results could be materially adversely affected.
The Company’s ability to realize the expected business benefits from LiveWire as a separate business will be affected by, among other factors: (i) the status of LiveWire as a separate business as an early stage company with a history of losses that is expected to incur significant expenses and continuing losses for several years until it begins significant deliveries of its electric vehicles, which may occur later than expected or not at all; (ii) the ability of LiveWire as a separate business to 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; (iii) that LiveWire as a separate business will be a new entrant into a new space and it may not be able to adequately control the costs of its operations; (iv) the rapidly growing electric vehicle sector and products and services of LiveWire as a separate business are and will be subject to strong competition from a growing list of competitors; (v) the business and prospects of LiveWire as a separate business are heavily dependent on its ability to develop, maintain and strengthen its brand, and it may lose the opportunity to build a critical mass of customers; (vi) the ability of LiveWire as a separate business to execute on its plans to develop, produce, market and sell its electric vehicles; and (vii) the willingness and ability of the retail partners of LiveWire as a separate business, largely drawn from the Company’s traditional motorcycle dealer network, to be able to effectively establish or maintain relationships with customers for electric vehicles.
The Company’s ability to realize the expected business benefits from LiveWire will be affected by, among other factors: (i) the status of LiveWire as an early stage company with a history of losses that is expected to incur significant expenses and continuing losses for several years until it begins significant deliveries of its electric vehicles, which may occur later than expected or not at all; (ii) the ability of LiveWire to 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; (iii) that LiveWire will be a new entrant into a new space and it may not be able to adequately control the costs of its operations; (iv) the rapidly growing electric vehicle sector and products and services of LiveWire are and will be subject to strong competition from a growing list of competitors; (v) the business and prospects of LiveWire are heavily dependent on its ability to develop, maintain and strengthen its brand, and it may lose the opportunity to build a critical mass of customers; (vi) the ability of LiveWire to execute on its plans to develop, produce, market and sell its electric vehicles; and (vii) the willingness and ability of the retail partners of LiveWire, largely drawn from the Company’s traditional motorcycle dealer network, to be able to effectively establish and maintain relationships with customers for electric vehicles.
The Bureau also has supervisory authority over certain non-bank larger participants in the vehicle financing market, which includes a non-bank subsidiary of HDFS, allowing the Bureau to conduct comprehensive and rigorous on-site examinations that could result in enforcement actions, fines, changes to processes and procedures, product-related changes or consumer refunds, or other actions. • The Company’s operations may be affected by greenhouse emissions and climate change and related regulations .
The Bureau also has supervisory authority over certain non-bank larger participants in the vehicle financing market, which includes a non-bank subsidiary of HDFS, allowing the Bureau to conduct comprehensive and rigorous on-site examinations that could result in enforcement actions, fines, changes to processes and procedures, product-related changes or consumer refunds or other actions. • The Company’s operations may be affected by greenhouse gas emissions and climate change and related regulations .
There can be no assurance that in the future the Company will successfully manage these risks. • The HDFS segment operations are highly dependent on accessing capital markets to fund operations at competitive interest rates, the Company’s access to capital and its cost of capital are highly dependent upon its credit ratings, and any negative credit rating actions may adversely affect its earnings and results of operations.
There can be no assurance that in the future the Company will successfully manage these risks. • The HDFS segment is highly dependent on accessing capital markets to fund operations at competitive interest rates, the Company’s access to capital and its cost of capital are highly dependent upon its credit ratings, and any negative credit rating actions may adversely affect its earnings and results of operations.
Further, international operations and sales are subject to various risks, including political and economic instability, local labor market conditions, the imposition of foreign tariffs (including rebalancing tariffs in response to tariffs the U.S. imposes) and other trade barriers, the impact of foreign government laws and regulations and U.S. laws and 18 regulations that apply to international operations, the effects of income and withholding taxes, governmental expropriation and differences in business practices.
Further, international operations and sales are subject to various risks, including political and economic instability, local labor market conditions, the imposition of foreign tariffs (including rebalancing tariffs in response to tariffs the U.S. imposes) and other trade barriers, the impact of foreign government laws and regulations and U.S. laws and regulations that apply to international operations, the effects of income and withholding taxes, governmental expropriation and differences in business practices.
Climate change is receiving increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. The U.S. Congress has previously considered and may in the future implement restrictions on greenhouse gas emissions.
Climate change is receiving increasing attention worldwide. Many scientists, legislators and others 22 attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. The U.S. Congress has previously considered and may in the future implement restrictions on greenhouse gas emissions.
This protection, including 7 enforcement, is important as LiveWire moves forward with investments in new products, designs and technologies. While the Company believes patents are important to LiveWire's business operations and in the aggregate constitute a valuable asset, the success of the business is not dependent on any one patent or group of patents.
This protection, including enforcement, is important as LiveWire moves forward with investments in new products, designs and technologies. While the Company believes patents are important to LiveWire's business operations and in the aggregate constitute a valuable asset, the success of the business is not dependent on any one patent or group of patents.
The Company's Board of Directors has authorized the Company’s discretionary repurchase of outstanding common stock to be systematically completed in the open market or through privately negotiated transactions. The amount and timing of share repurchases are based on a variety of factors that could cause the Company to limit, suspend, or delay future stock repurchases.
The Company's Board of Directors has authorized the Company’s discretionary repurchase of outstanding common stock to be completed in the open market or through privately negotiated transactions. The amount and timing of share repurchases are based on a variety of factors that could cause the Company to limit, suspend or delay future stock repurchases.
The HARLEY-DAVIDSON trademark has been used since 1903 and the Bar and Shield trademark since at least 1910. Substantially all of HDMC's trademarks are owned by Harley-Davidson Motor Company, Inc., which manages HDMC's global trademark strategy and portfolio. Marketing – The Harley-Davidson brand, products and consumer experiences are marketed to riders and enthusiasts worldwide.
The HARLEY-DAVIDSON trademark has been used since 1903 and the Bar and Shield trademark since at least 1910. Substantially all of HDMC's trademarks are owned by Harley-Davidson Motor Company, Inc., which manages HDMC's global trademark strategy and portfolio. 6 Marketing – The Harley-Davidson brand, products and consumer experiences are marketed to riders and enthusiasts worldwide.
While LiveWire expects environmental regulations to contribute to its growth, it is possible for certain regulations to result in margin pressures. 8 Harley-Davidson Financial Services Segment (HDFS) HDFS is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans, primarily for the purchase of Harley-Davidson and LiveWire motorcycles.
While LiveWire expects environmental regulations to contribute to its growth, it is possible for certain regulations to result in margin pressures. Harley-Davidson Financial Services Segment (HDFS) HDFS is engaged in the business of financing and servicing wholesale inventory receivables and retail consumer loans, primarily for the purchase of Harley-Davidson and LiveWire motorcycles.
Additionally, HDMC operates facilities in Thailand and Brazil. HDMC's Thailand facility manufactures motorcycles for certain Asian and European markets. In Brazil, HDMC operates a facility that assembles motorcycles from component kits sourced from HDMC’s U.S. facilities and 6 suppliers. HDMC's global manufacturing operations are focused on driving world-class quality and performance.
Additionally, HDMC operates facilities in Thailand and Brazil. HDMC's Thailand facility manufactures motorcycles for certain Asian and European markets. In Brazil, HDMC operates a facility that assembles motorcycles from component kits sourced from HDMC’s U.S. facilities and suppliers. HDMC's global manufacturing operations are focused on driving world-class quality and performance.
In addition, the Harley-Davidson Financial Services segment operations faces competition from various banks, insurance companies and other financial institutions that may have access to additional sources of capital at more competitive rates and terms, particularly for borrowers in higher credit tiers.
In addition, the Harley-Davidson Financial Services segment faces competition from various banks, insurance companies and other financial institutions that may have access to additional sources of capital at more competitive rates and terms, particularly for borrowers in higher credit tiers.
Liquidity is essential to the Company’s financial services business. Disruptions in financial markets may cause lenders and institutional investors to reduce or cease to loan money to borrowers, including financial institutions. The Company’s HDFS segment operations may be negatively affected by difficulty in raising capital in the long-term and short-term capital markets.
Liquidity is essential to the Company’s financial services business. Disruptions in financial markets may cause lenders and institutional investors to reduce or cease to loan money to borrowers, including financial institutions. The Company’s HDFS segment may be negatively affected by difficulty in raising capital in the long-term and short-term capital markets.
Regulations related to the electric vehicle industry and alternative energy are currently evolving and the Company’s LiveWire segment operations face risks associated with changes to these regulations, such as: (i) the imposition of a carbon tax or the introduction of a cap-and-trade system on electric utilities, either of which could increase the cost of electricity and thereby the cost of operating an electric vehicle; (ii) new state regulations of electric vehicles fees could discourage consumer demand for electric vehicles; (iii) the increase of subsidies for alternative fuels such as corn and ethanol could reduce the operating cost of vehicles that use such alternative fuels and gasoline, and thereby reduce the appeal of electric vehicles; (iv) changes to the regulations governing the assembly and transportation of battery cells could increase the cost of battery cells or make such commodities more difficult to obtain; (v) changes in regulation, for example relating to the noise required to be emitted by electric vehicles, may impact the design or function of electric vehicles, and thereby lead to decreased consumer appeal; (vi) changes in regulations governing the range and miles per gallon of gasoline-equivalent calculations could lower LiveWire’s electric vehicles’ ratings, making electric vehicles less appealing to consumers; and (vii) the amendment or rescission of the CAFE standards could reduce new business opportunities for the LiveWire business.
Regulations related to the electric vehicle industry and alternative energy are currently evolving and the Company’s LiveWire segment faces risks associated with changes to these regulations, such as: (i) the imposition of a carbon tax or the introduction of a cap-and-trade system on electric utilities, either of which could increase the cost of electricity and thereby the cost of operating an electric vehicle; (ii) new state regulations of electric vehicles fees could discourage consumer demand for electric vehicles; (iii) the increase of subsidies for alternative fuels such as corn and ethanol could reduce the operating cost of vehicles that use such alternative fuels and gasoline, and thereby reduce the appeal of electric vehicles; (iv) changes to the regulations governing the assembly and transportation of battery cells could increase the cost of battery cells or make such commodities more difficult to obtain; (v) changes in regulation, for example relating to the noise required to be emitted by electric vehicles, may impact the design or function of electric vehicles, and thereby lead to decreased consumer appeal; (vi) changes in regulations governing the range and miles per gallon of gasoline equivalent calculations could lower LiveWire’s electric vehicles’ ratings, making electric vehicles less appealing to consumers; and (vii) the amendment or rescission of the CAFE standards could reduce new business opportunities for the LiveWire business.
If product designs or manufacturing processes are defective, the Company could experience delays in new model launches, field actions such as product programs and product recalls, inquiries or investigations from 13 regulatory agencies, and warranty claims and product liability claims, which may involve purported class actions.
If product designs or manufacturing processes are defective, the Company could experience delays in new model launches, field actions such as product programs and product recalls, inquiries or investigations from regulatory agencies, and warranty claims and product liability claims, which may involve purported class actions.
The Company is subject to anti-corruption, anti-bribery, anti-money laundering and similar laws and regulations in various jurisdictions in which 23 it conducts or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“ FCPA ”), the U.K. Bribery Act 2010 (the “ U.K. Bribery Act ”), and other anti-corruption laws and regulations.
The Company is subject to anti-corruption, anti-bribery, anti-money laundering and similar laws and regulations in various jurisdictions in which it conducts or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“ FCPA ”), the U.K. Bribery Act 2010 (the “ U.K. Bribery Act ”), and other anti-corruption laws and regulations.
The Company’s future success depends on its continuing ability to 17 identify, hire, develop, motivate, retain and promote skilled personnel for all areas of its organization and to effectively execute reorganization actions within expected costs and realize the expected benefits of those actions.
The Company’s future success depends on its continuing ability to identify, hire, develop, motivate, retain and promote skilled personnel for all areas of its organization and to effectively execute reorganization actions within expected costs and realize the expected benefits of those actions.
Tax – The Company is subject to income and non-income based taxes in the U.S. federal and state jurisdictions and in various foreign jurisdictions. Significant judgment is required in determining the Company's worldwide income tax 21 liabilities and other tax liabilities. The Company believes that it complies with applicable tax laws.
Tax – The Company is subject to income and non-income based taxes in the U.S. federal and state jurisdictions and in various foreign jurisdictions. Significant judgment is required in determining the Company's worldwide income tax liabilities and other tax liabilities. The Company believes that it complies with applicable tax laws.
Unfavorable changes to, or failure to comply with, current or future regulations could substantially harm the Company’s business and its operating results. Increased environmental, safety, emissions or other regulations may result in higher costs, cash expenditures and/or sales restrictions.
Unfavorable changes to, or failure to comply with, current or future regulations could substantially harm the Company’s business and its operating results. Increased environmental, safety, emissions or other regulations may result in higher costs, cash 21 expenditures and/or sales restrictions.
These factors include funding requirements of the Pension Protection Act of 2006, the rate used to discount the future estimated liabilities, the rate of return on plan assets, current and projected healthcare costs, healthcare reform or legislation, retirement age and mortality.
These factors include funding requirements of the Pension Protection Act of 2006, the rate used to discount the future estimated liabilities, the rate of return on plan assets, current and projected healthcare costs, healthcare reform or legislation, 16 retirement age and mortality.
The Company’s LiveWire segment operations may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell, deploy or service its electric vehicles in any of these jurisdictions.
The Company’s LiveWire segment may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, sell, deploy or service its electric vehicles in any of these jurisdictions.
The Company's supply chain is complex, and if it is not able to fully understand its supply chain and effectively mitigate any issues, then the Company may face reputational challenges with customers, investors or others and other adverse consequences.
The Company's supply chain is complex, and if it is not able to fully understand its supply chain and effectively mitigate any issues, then the Company may face reputational challenges with customers, investors, regulators or others and other adverse consequences.
The Company assumes no obligation, and specifically disclaims any such obligation, to update these risk factors or any other 25 forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements. Item 1B. Unresolved Staff Comments None.
The Company assumes no obligation, and specifically disclaims any such obligation, to update these risk factors or any other forward-looking statements to reflect actual results, changes in assumptions or other factors affecting such forward-looking statements. Item 1B. Unresolved Staff Comments None.
The Company has a number of suppliers in China and a Long-Term Collaboration Agreement (LTCA) with Zhejiang Qianjiang Motorcycle Co., Ltd. and a conflict between China and Taiwan may impact the Company's supply chain and projects related to the LCTA.
The Company has a number of suppliers in China and a Long-Term Collaboration Agreement (LTCA) with Zhejiang Qianjiang Motorcycle Co., Ltd. and a conflict between China and Taiwan may impact the Company's supply chain and projects related to the LTCA.
The motorcycle market and electric vehicle market are highly competitive and continue to change in terms of styling preferences and advances in new technologies and, at the same time, are subject to increasing regulations, including related to safety and emissions.
The motorcycle market and electric vehicle market are highly competitive and continue to change in terms of styling preferences and advances in new technologies and, at the same time, are subject to increasing regulations, including those related to safety and emissions.
Any product recall in the future, whether initiated by the Company or a supplier, may result in adverse publicity, damage the Company’s brand image, and adversely affect the Company’s business, prospects, financial condition and operating results.
Any product recall in the future, whether initiated by the Company or a supplier, may result in adverse publicity, damage the Company’s brand image, and adversely affect the Company’s business, 14 prospects, financial condition and operating results.
Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect the business, prospects, financial condition and operating results of the LiveWire segment operations.
Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect the business, prospects, financial condition and operating results of the LiveWire segment.
The Company 12 must also be able to design and manufacture these products and deliver them to a global marketplace in an efficient and timely manner and at prices that are attractive to customers.
The Company must also be able to design and manufacture these products and deliver them to a global marketplace in an efficient and timely manner and at prices that are attractive to customers.
Tariffs and/or other developments with respect to trade policies, trade agreements and government regulations could have a 20 material adverse impact on the Company's business, financial condition and results of operations.
Tariffs and/or other developments with respect to trade policies, trade agreements and government regulations could have a material adverse impact on the Company's business, financial condition and results of operations.
Compliance may be costly and could affect operating results as the implementation of new forms, processes, procedures and controls and infrastructure may be required. 22 Compliance may create operational constraints and place limits on pricing.
Compliance may be costly and could affect operating results as the implementation of new forms, processes, procedures and controls and infrastructure may be required. Compliance may create operational constraints and place limits on pricing.
In certain circumstances, the Company relies on a single supplier to provide component parts, and a change in this established supply relationship may cause disruption in the Company’s production schedule.
In certain circumstances, the Company relies on a single supplier to provide component parts, and a change or disruption in this established supply relationship may cause disruption in the Company’s production schedule.
Failure to protect the brand from infringers or to grow or maintain the value of the Harley-Davidson brand may have a material adverse effect on the Company’s business and results of operations.
Failure to protect the brand from 18 infringers or to grow or maintain the value of the Harley-Davidson brand may have a material adverse effect on the Company’s business and results of operations.
LiveWire’s design patents have a term of 15 years from the date of issuance and LiveWire's utility patents have a term of 20 years from priority application date. Trademarks are important to LiveWire’s business and licensing activities.
LiveWire’s design patents have a term of 15 years from the date of issuance and LiveWire's utility patents have a term of 20 years from their priority application date. Trademarks are important to LiveWire’s business and licensing activities.
Additionally, the ability of the Company and its HDFS segment operations to access unsecured capital markets is influenced by their short-term and long-term credit ratings.
Additionally, the ability of the Company and its HDFS segment to access unsecured capital markets is influenced by their short-term and long-term credit ratings.
Internationally, HDFS licenses the Harley-Davidson brand to local third-party financial institutions that offer products to retail customers of HDMC such as financing and insurance. Funding – The Company believes a diversified and cost-effective funding strategy is important to meet HDFS's goal of providing credit while delivering appropriate returns and profitability.
Internationally, HDFS licenses the Harley-Davidson brand to local third-party financial institutions that offer products to retail customers of HDMC such as financing, insurance, and voluntary protection products. Funding – The Company believes a diversified and cost-effective funding strategy is important to meet HDFS's goal of providing credit while delivering appropriate returns and profitability.
To the extent compliance with new regulations is cost prohibitive, the Company’s business, prospects, financial condition and operating results could be materially and adversely affected. Financial Services – HDFS segment operations are governed by a wide range of U.S. federal and state and foreign laws that regulate financial and lending institutions, and financial services activities.
To the extent compliance with new regulations is cost prohibitive, the Company’s business, prospects, financial condition and operating results could be materially and adversely affected. Financial Services – The HDFS segment is governed by a wide range of U.S. federal and state and foreign laws that regulate financial and lending institutions, and financial services activities.
Further, selling products with quality issues, the announcement of recalls and the filing of product liability claims (whether or not successful), may also adversely affect the Company’s reputation and brand strength with a resulting adverse impact on sales. • A significant cybersecurity incident or data privacy breach may adversely affect the Company’s reputation, revenue and earnings.
Further, selling products with quality issues, the announcement of recalls and the filing of product liability claims (whether or not successful), may also adversely affect the reputation and brand strength of the Company or LiveWire with a resulting adverse impact on sales. • A significant cybersecurity incident or data privacy breach may adversely affect the Company’s reputation, revenue and earnings.
HDFS operations in 2022 were funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations, and brokered certificates of deposit that HDFS offers to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary.
HDFS operations in 2023 were funded with unsecured debt, unsecured commercial paper, asset-backed commercial paper conduit facilities, committed unsecured bank facilities, asset-backed securitizations, and brokered certificates of deposit that HDFS offers to customers indirectly through contractual arrangements with third-party banks and/or securities brokerage firms through its bank subsidiary.
On October 30, 2021, the U.S. agreed not to apply Section 232 duties and allow duty-free importation of steel and aluminum from the EU at a historical-based volume and the EU agreed to suspend related tariffs on U.S. products, including the incremental tariff on motorcycles imported into the EU from the U.S. (Tariff Resolution).
On October 30, 2021, the U.S. agreed 20 not to apply Section 232 duties and allow duty-free importation of steel and aluminum from the EU at a historical-based volume and the EU agreed to suspend related tariffs on U.S. products, including the incremental tariff on motorcycles imported into the EU from the U.S.
The Company's reputation may also be adversely affected by inappropriate use of its marks or name, including potential negative publicity, loss of confidence, or other damage to the Company's image due to licensed use. • The timing and amount of the Company's share repurchase strategy is subject to a number of uncertainties.
The Company's reputation may also be adversely affected by inappropriate use of its marks or name, including potential negative publicity, loss of confidence or other damage to the Company's image due to licensed use. • The timing and amount of the Company's share repurchase strategy are subject to a number of uncertainties.
In addition, the Company makes available, through its investor relations website, the following corporate governance materials: (i) the Company’s Corporate Governance Policy; (ii) Committee Charters approved by the Company’s Board of Directors for the Audit and Finance Committee, Human Resources Committee, Nominating and Corporate Governance Committee and Brand and Sustainability Committee; (iii) the Company’s Financial Code of Ethics; (iv) the Company’s Code of Business Conduct (the Code of Conduct); (v) the Conflict of Interest Process for Directors, Executive Officers and Other Employees (the Conflict Process); (vi) a list of the Company’s Board of Directors; (vii) the Company’s Bylaws; (viii) the Company’s Environmental and Energy Policy; (ix) the Company’s Policy for Managing Disclosure of Material Information; (x) the Company’s Supplier Code of Conduct; (xi) the Inclusive Stakeholder Management Report; (xii) the California Transparency in Supply Chain Act Disclosure; (xiii) the Statement on Conflict Minerals; (xiv) the Political Engagement and Contributions 2017-2021; and (xv) the Company's Clawback Policy.
In addition, the Company makes available, through its investor relations website, the following corporate governance materials: (i) the Company’s Corporate Governance Policy; (ii) Committee Charters approved by the Company’s Board of Directors for the Audit and Finance Committee, Human Resources Committee, Nominating and Corporate Governance Committee and Brand and Sustainability Committee; (iii) the Company’s Financial Code of Ethics; (iv) the Company’s Code of Business Conduct (the Code of Conduct); (v) the Conflict of Interest Process for Directors, Executive Officers and Other Employees (the Conflict Process); (vi) a list of the Company’s Board of Directors; (vii) the Company’s Bylaws; (viii) the Company’s Environmental and Energy Policy; (ix) the Company’s Policy for Managing Disclosure of Material Information; 12 (x) the Company’s Supplier Code of Conduct; (xi) the Inclusive Stakeholder Management Report; (xii) the California Transparency in Supply Chain Act Disclosure; (xiii) the Statement on Conflict Minerals; (xiv) the Political Engagement and Contributions 2019-2023; and (xv) the Company's Clawback Policy.
The failure of LiveWire as a separate business to successfully manage these risks may adversely affect the business and results of the Company’s operations. • International sales and operations subject the Company to risks that may have a material adverse effect on its business. International operations and sales remain an important part of the Company’s strategy.
The failure of LiveWire to successfully manage these risks may adversely affect the business and results of the Company’s operations. • International sales and operations subject the Company to risks that may have a material adverse effect on its business. International operations and sales remain an important part of the Company’s strategy.
Wholesale Financial Services – HDFS provides wholesale financial services to the U.S. and Canadian independent dealers of HDMC and LiveWire, including floorplan and open account financing of motorcycles and parts and accessories. All of the U.S. and Canadian independent dealers of HDMC and all U.S. independent dealers of LiveWire utilized HDFS financing program s at some point during 2022.
Wholesale Financial Services – HDFS provides wholesale financial services to the U.S. and Canadian independent dealers of HDMC and LiveWire, including floorplan and open account financing of motorcycles and parts and accessories. All of the U.S. and Canadian independent dealers of HDMC and all U.S. independent dealers of LiveWire utilized HDFS financing program s at some point during 2023.
For example, introduction of new motorcycle models with significantly different functionality, technology or other customer satisfiers can result in increased supply of used motorcycles, which could result in declining prices for used motorcycles and prior model-year new motorcycles.
For example, introduction of new motorcycle models with significantly different styling, design, functionality, technology or other customer satisfiers can result in increased supply of used motorcycles, which could result in declining prices for used motorcycles and prior model-year new motorcycles.
The Company also faces pricing pressure from international competitors who may have the advantage of manufacturing and marketing products in their respective countries, allowing them to sell products at lower prices within their respective countries.
The Company also faces pricing pressure from international competitors who may have the advantage of manufacturing and marketing products in their respective countries, allowing them to sell products at lower prices within or outside their respective countries.
Finally, while the Company may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures are based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, 24 including the costs associated therewith.
While the Company may create and publish voluntary disclosures regarding ESG matters from time to time, many of the statements in those voluntary disclosures are based on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the associated costs.
HDFS competes on convenience, service, brand association, dealer relations, industry experience, terms, and price. In the U.S. and Canada, HDFS financed 64.9% and 31.5% of new Harley-Davidson motorcycles retailed by dealers during 2022, respectively, compared to 64.8% and 33.3%, respectively, during 2021. Competitors for retail motorcycle finance business are primarily banks, credit unions and other financial institutions.
HDFS competes on convenience, service, brand association, dealer relations, industry experience, terms, and price. 9 In the U.S. and Canada, HDFS financed 67.5% and 33.3% of new Harley-Davidson motorcycles retailed by dealers during 2023, respectively, compared to 64.9% and 31.5%, respectively, during 2022. Competitors for retail motorcycle finance business are primarily banks, credit unions and other financial institutions.
Further, in the near term, the Company will not be primarily focused on electric vehicles but will be channeling its focus in this area through its majority investment in LiveWire Group, Inc.
Additionally, in the near term, the Company will not be primarily focused on electric vehicles but will be channeling its focus in this area through its majority investment in LiveWire Group, Inc.
As benchmark interest rates rise, rates available to consumers for new vehicle financing have risen as well, which may make the Company’s motorcycles less affordable to customers or steer customers to less expensive motorcycles that would be less profitable for the Company, adversely affecting the Company’s financial condition and operating results.
When benchmark interest rates rise, rates available to consumers for new vehicle financing rise as well, which may make the Company’s motorcycles less affordable to customers or steer customers to less expensive motorcycles that would be less profitable for the Company, adversely affecting the Company’s financial condition and operating results.
The revocation of the BOI decsions effectively classified all motorcycles the Company imports into the EU as U.S. origin products, subjecting them to the incremental tariff.
The revocation of the BOI decisions effectively classified all motorcycles the Company imports into the EU as U.S. origin products, subjecting them to the incremental tariff.
For example, both the United Kingdom (UK) and EU passed legislation in 2022 to end fossil fuel car sales in 2030 and 2040, respectively.
For example, both the United Kingdom (UK) and EU passed legislation in 2022 to end fossil fuel car sales in 2035 and 2040, respectively.
In addition, HDFS markets a comprehensive package of business insurance coverages and services to owners of independent HDMC and LiveWire dealerships. Licensing – HDFS has licensing arrangements with third-party financial institutions that issue credit cards bearing the Harley-Davidson brand in the U.S. and certain international markets.
In addition, HDFS markets a comprehensive package of business insurance coverages and services provided by unaffiliated third parties to owners of independent HDMC and LiveWire dealerships. Licensing – HDFS has licensing arrangements with third-party financial institutions that issue credit cards bearing the Harley-Davidson brand in the U.S. and certain international markets.
Such recalls, whether caused by systems or components engineered or manufactured by the Company or its suppliers, may involve significant expense, the possibility of lawsuits, and diversion of management’s attention and other resources, which could adversely affect the Company’s brand image and the Company’s business, prospects, financial condition and operating results.
Such recalls, whether caused by systems or components engineered or manufactured by the Company, LiveWire or the suppliers of either of them, may involve significant expense, the possibility of lawsuits and diversion of management’s attention and other resources, which could adversely affect the Company’s brand image and the Company’s business, prospects, financial condition and operating results.
In light of investors’ increased focus on ESG matters, there can be no certainty that the Company will manage such issues successfully, or that it will successfully meet investors' or society’s ESG expectations, which could have a material adverse affect on its business and financial conditions and operating results.
In light of investors’ increased focus on ESG matters, there can be no certainty that the Company will manage such issues successfully, or that it will successfully meet investors' or society’s ESG expectations, which could have a material adverse effect on its business and financial condition and operating results.
If the Company fails to meet existing or new requirements, then the Company may be unable to produce and sell certain products or may be subject to fines or penalties. Electric Vehicles - The Company's LiveWire segment operations are subject to substantial regulation.
If the Company fails to meet existing or new requirements, then the Company may be unable to produce and sell certain products or may be subject to fines or penalties. Electric Vehicles - The Company's LiveWire segment is subject to substantial regulation.
This process allows HDFS to offer retail products with many common characteristics across the U.S. and to similarly service loans to U.S. retail customers. Human Capital Management Workforce Composition – As of December 31, 2022, the Company’s global workforce was comprised of approximately 6,300 employees, including approximately 5,500, 200 and 600 employees within the HDMC, LiveWire, and HDFS segments, respectively.
This process allows HDFS to offer retail products with many common characteristics across the U.S. and to similarly service loans to U.S. retail customers. Human Capital Management Workforce Composition – As of December 31, 2023, the Company’s global workforce was comprised of approximately 6,400 employees, including approximately 5,600, 200 and 600 employees within the HDMC, LiveWire, and HDFS segments, respectively.
In addition, the COVID-19 pandemic has disrupted the Company’s supply chain, operations, and ability to carry out its business as usual, including through: (i) a rapid increase in demand; (ii) supply shortages; (iii) significant global shipment delays, including longer shipping times and increased expedited freight costs; (iv) limiting the ability of the Company’s distributors and dealers to operate; (v) delays to some customer purchase decisions; (vi) adversely impacting the ability of the Company’s retail credit customers to meet their loan obligations on a timely basis and making collection efforts more difficult; (vii) disruption to global capital markets impacting the Company’s access to capital, cost of capital, and overall liquidity levels; and (viii) the cancellation or adjustments to the scope of riding and similar events that are important to the Company’s marketing efforts.
In addition, any such events would likely disrupt the Company’s supply chain, operations and ability to carry out its business as usual, including through: (i) a rapid increase in demand; (ii) supply shortages; (iii) significant global shipment delays, including longer shipping times and increased expedited freight costs; (iv) limiting the ability of the Company’s distributors and dealers to operate; (v) delays to some customer purchase decisions; (vi) adversely impacting the ability of the Company’s retail credit customers to meet their loan obligations on a timely basis and making collection efforts more difficult; (vii) disruption to global capital markets impacting the Company’s access to capital, cost of capital and overall liquidity levels; and (viii) the cancellation or adjustments to the scope of riding and similar events that are important to the Company’s marketing efforts.
Without limitation, (i) tariffs currently in place, (ii) the imposition by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition by foreign countries of tariffs on U.S. origin products could materially increase: (a) the cost of Harley-Davidson products that the Company is offering for sale in relevant countries, (b) the cost of certain products that the Company sources from foreign manufacturers and (c) the prices of certain raw materials that the Company utilizes.
Without limitation, (i) tariffs currently in place or prior tariffs that have been suspended could be reinstated, (ii) the imposition by the U.S. government of new tariffs on imports to the U.S. and/or (iii) the imposition by foreign countries of tariffs on U.S. origin products could materially increase: (a) the cost of Harley-Davidson products that the Company is offering for sale in relevant countries, (b) the cost of certain products that the Company sources from foreign manufacturers and (c) the prices of certain raw materials that the Company utilizes.
While the Company has not experienced any material interruptions to its infrastructure, supplies, technology systems or networks needed to support its operations or significant costs due to the conflict, the Company cannot provide assurance that will remain the case.
The Company has ceased its operations in Russia and while the Company has not experienced any material interruptions to its infrastructure, supplies, technology systems or networks needed to support its operations or significant costs due to the conflict, the Company cannot provide assurance that will remain the case.
Further, third-parties with whom the Company has business relationships, including its brand ambassadors and influencer network, may fail to represent the brand in a manner consistent with the Company’s brand image or act in a manner that harms the Company’s reputation, which could cause immediate harm to the Company’s reputation and brand.
Further, third-parties with whom the Company has business relationships or that have, or are perceived to have, close ties to the brand, including its brand ambassadors and influencer network, may fail to represent the brand in a manner consistent with the Company’s brand image or act in a manner that harms the Company’s reputation, which could cause immediate harm to the Company’s reputation and brand.
The ongoing conflict has led to an unprecedented expansion of sanctions programs imposed by the United States, European Union, United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic. The Company has suspended its business in Russia.
The ongoing conflict has led to an unprecedented expansion of sanctions programs imposed by the United States, European Union, United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic.
The Company’s ability to meet the strategic priorities in The Hardwire depends upon, among other factors, the Company’s ability to: (i) realize the anticipated business benefits of LiveWire as a separate business; (ii) 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, larger Cruiser, and Trike, focusing on opportunities in profitable segments, and growing its complementary businesses, including HDFS, parts and accessories, and apparel and licensing, and membership and experiences; (iii) successfully carry out its global manufacturing and assembly operations; (iv) effectively implement changes relating to its dealers and distribution methods, which include the creation of an innovative go-to-market model blending digital and physical retail formats to create an experience tailored to the local market; (v) accurately analyze, predict and react to changing market conditions; (vi) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; (vii) optimize long-term value for all stakeholders; and (viii) avoid adverse impacts to its operations and/or demand for its products that may result due to the COVID-19 pandemic. • The Company may not realize the expected business benefits from LiveWire as a separate business of the Company.
The Company’s ability to meet the strategic priorities in The Hardwire depends upon, among other factors, the Company’s ability to: (i) accurately analyze, predict and react to changing market conditions; (ii) realize the anticipated business benefits of LiveWire as a separate business; (iii) 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, larger Cruiser, and Trike, focusing on opportunities in profitable segments, and growing its complementary businesses, including HDFS, parts and accessories, apparel and licensing, and membership and experiences; (iv) effectively implement changes relating to its dealers and distribution methods, which include the creation of an innovative go-to-market model blending digital and physical retail formats to create an experience tailored to the local market; (v) perform in a manner that enables the Company to benefit from market opportunities while competing against existing and new competitors; and (vi) optimize long-term value for all stakeholders. • The Company may not realize the expected business benefits from LiveWire as a separate business of the Company.
Experiences that build community and connect people with the Harley-Davidson brand and with one another are at the center of much of HDMC's marketing efforts. To develop, engage and retain committed riders, HDMC participates in and sponsors motorcycle rallies, tours, racing activities, music festivals and other special events, including programs that build new riders like the Harley-Davidson Riding Academy.
Experiences that build community and connect people with the Harley-Davidson brand and with one another are at the center of much of HDMC's marketing efforts. To develop, engage and retain committed riders, HDMC participates in and sponsors motorcycle rallies, tours, racing activities, music festivals and other special events.
HDMC has a vigorous worldwide program of trademark registration and enforcement to maintain and strengthen the value of the trademarks and prevent the unauthorized use of those trademarks. The HARLEY-DAVIDSON trademark and the Bar and Shield trademark are each highly recognizable to the public and are very valuable assets.
Trademarks are important to HDMC's businesses and licensing activities. HDMC has a vigorous worldwide program of trademark registration and enforcement to maintain and strengthen the value of the trademarks and prevent the unauthorized use of those trademarks. The HARLEY-DAVIDSON trademark and the Bar and Shield trademark are each highly recognizable to the public and are very valuable assets.
The Company’s LiveWire segment operations are dependent on the continued supply of battery cells for the battery packs used in LiveWire’s electric vehicles.
The Company’s LiveWire segment is dependent on the continued supply of battery cells for the battery packs used in LiveWire’s electric vehicles.
Further, in response to concerns about global climate changes and related changes in consumer preferences, the Company is likely to face greater regulatory, customer and investor pressure to develop products that generate less emissions.
Further, in response to concerns about global climate changes and related changes in consumer preferences, the Company is likely to face greater regulatory, customer and investor pressure to develop products that generate less emissions and to generate less emissions in all phases of its operations.
HDFS also works with certain unaffiliated insurance companies to provide motorcycle insurance and protection products to motorcycle owners. HDFS conducts business principally in the U.S. and Canada.
HDFS also works with certain unaffiliated third parties to provide motorcycle insurance and voluntary protection products to motorcycle owners. HDFS conducts business principally in the U.S. and Canada.
Strategic Risks • The Company may not be able to successfully execute its business plans and strategies. There is no assurance that the Company will be able to execute its business plans and strategies, including the Company’s strategic plan, The Hardwire.
There is no assurance that the Company will be able to execute its business plans and strategies, including the Company’s strategic plan, The Hardwire.
LiveWire has certified to NHTSA that certain of its motorcycle products comply fully with all applicable federal motor vehicle safety standards and related regulations. LiveWire may from time to time initiated certain voluntary recalls. As of December 31, 2022, LiveWire does not have any liability associated with voluntary recalls.
LiveWire has certified to NHTSA that certain of its motorcycle products comply fully with all applicable federal motor vehicle safety standards and related regulations. LiveWire may from time to time initiate voluntary recalls or field actions. As of December 31, 2023, LiveWire does not have any liability associated with voluntary recalls.
The prices for these raw materials and components may fluctuate depending on market conditions, which include inflation of raw material costs and the current inflationary environment in the U.S., exchange rate fluctuations, commodity market volatility, tariffs, embargoes, sanctions, trade policies, and other trade restrictions.
The prices for these raw materials and components may fluctuate depending on market conditions, which include inflation of raw material costs, exchange rate fluctuations, commodity market volatility, tariffs, embargoes, sanctions, trade policies, and other trade restrictions.
The dissemination of information via social media has given users the ability to organize collective actions such as boycotts and other brand -damaging behaviors more effectively and could harm the Company’s brand or business, regardless of the information’s accuracy.
The speed and reach of information dissemination have drastically increased with the use of social media. The dissemination of information via social media has given users the ability to organize collective actions such as boycotts and other brand -damaging behaviors more effectively and could harm the Company’s brand or business, regardless of the information’s accuracy.
HDMC strives to ensure that its facilities and products comply with all applicable environmental regulations and standards. HDMC’s motorcycles and certain other products that are sold in the U.S. are subject to certification by the United States Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) for compliance with applicable emissions and noise standards.
HDMC’s motorcycles and certain other products that are sold in the U.S. are subject to certification by the United States Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) for compliance with applicable emissions and noise standards.
Management and Above Total Workforce Employees New Hires Employees New Hires 2022 2021 2022 2021 2022 2021 2022 2021 Global Gender Identity: Male 68.0 % 70.5 % 66.7 % 65.9 % 71.2 % 71.8 % 70.6 % 73.9 % Female 32.0 % 29.5 % 33.3 % 34.1 % 28.8 % 28.2 % 29.4 % 26.1 % Diversity (U.S.): White 84.3 % 87.4 % 74.0 % 64.1 % 76.2 % 78.4 % 61.4 % 64.2 % Of global majority 15.7 % 12.6 % 26.0 % 35.9 % 23.8 % 21.6 % 38.6 % 35.8 % Female & Diverse: U.S. white male 44.3 % 48.9 % 38.9 % 29.5 % 46.2 % 49.2 % 35.7 % 42.9 % Global females & U.S. males of global majority 39.7 % 35.7 % 50.0 % 51.1 % 42.4 % 40.9 % 51.7 % 50.2 % 10 Employee Wellbeing – Inclusive Stakeholder Management continues to be one of six key priorities under The Hardwire, and the Company believes that the success of The Hardwire will be realized through the engagement and empowerment of its employees.
Management and Above Total Workforce Employees New Hires Employees New Hires 2023 2022 2023 2022 2023 2022 2023 2022 Global Gender Identity: Male 69.5 % 68.0 % 66.7 % 66.7 % 70.6 % 71.2 % 65.1 % 70.6 % Female 30.5 % 32.0 % 33.3 % 33.3 % 29.4 % 28.8 % 34.9 % 29.4 % Diversity (U.S.): White 84.3 % 84.3 % 70.8 % 74.0 % 75.7 % 76.2 % 64.1 % 61.4 % Of global majority 13.9 % 15.7 % 26.4 % 26.0 % 23.2 % 23.8 % 34.8 % 38.6 % Female & Diverse: U.S. white male 47.1 % 44.3 % 42.0 % 38.9 % 45.2 % 46.2 % 33.7 % 35.7 % Global females & U.S. males of global majority 37.8 % 39.7 % 50.6 % 50.0 % 42.3 % 42.4 % 54.0 % 51.7 % Employee Wellbeing – Inclusive Stakeholder Management continues to be one of six key priorities under The Hardwire, and the Company believes that the success of The Hardwire will be realized through the engagement and empowerment of its employees.
In the motorcycle insurance business, competition primarily comes from national insurance companies and from insurance agencies serving local or regional markets. For insurance-related products such as extended service contracts, HDFS faces competition from certain regional and national industry participants as well as dealer in-house programs.
In the motorcycle insurance business, competition primarily comes from national insurance companies and from insurance agencies serving local or regional markets. For insurance and voluntary protection products, HDFS faces competition from certain regional and national industry participants as well as dealer in-house programs.
There has been increased focus, including by consumers, investors, employees and other stakeholders, as well as by governmental and non-governmental organizations, on environmental, social and governance matters generally and with regard to the motorcycle industry specifically. The Company has undertaken, and plans to continue undertaking, ESG initiatives.
There has been increased focus, including by consumers, investors, employees and other stakeholders, as well as by governmental and non-governmental organizations, on environmental, social and governance matters generally and with regard to the motorcycle industry specifically. The Company has undertaken, and plans to continue undertaking, ESG initiatives. For example, the Company aims to achieve net zero carbon emissions by 2050.
Of all employees, 84.7% are based in the U.S., 55.6% are salaried, and 39.1%, or approximately 2,500 hourly unionized employees at the Company's U.S. manufacturing facilities, are represented as follows with collective bargaining agreements: • York, Pennsylvania – International Association of Machinist and Aerospace Workers (IAM); agreement will expire on October 15, 2027 • Milwaukee, Wisconsin – United Steelworkers of America (USW) and IAM; agreements will expire on March 31, 2024 • Tomahawk, Wisconsin – USW, agreement will expire on March 31, 2024 Based on employee-provided identity information, 71.2% of the Company’s global workforce was male and 76.2% of the U.S. workforce was white at the end of 2022.
Of all employees, 83.9% are based in the U.S., 57.1% are salaried, and 36.8%, or approximately 2,400 hourly unionized employees at the Company's U.S. manufacturing facilities, are represented as follows with collective bargaining agreements: • York, Pennsylvania – International Association of Machinist and Aerospace Workers (IAM); agreement will expire on October 15, 2027 • Milwaukee, Wisconsin – United Steelworkers of America (USW) and IAM; agreements will expire on March 31, 2024 • Tomahawk, Wisconsin – USW, agreement will expire on March 31, 2024 10 Based on employee-provided identity information, 70.6% of the Company’s global workforce was male and 75.7% of the U.S. workforce was white at the end of 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFurther, in the event of a change in interest rates, the Company may take actions to mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis does not account for these impacts.
Biggest changeThis analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change in interest rates, the Company may take actions to mitigate its exposure to the change.
The Company 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.
The Company also has short-term commercial paper and debt issued through the commercial paper conduit facilities that is subject to changes in interest rates that it does not hedge.
At December 31, 2022 and 2021, HDFS estimated that a 10% decrease in interest rates would not result in a material change to the fair value of the interest rate cap agreements.
At December 31, 2023 and 2022, HDFS estimated that a 10% decrease in interest rates would not result in a material change to the fair value of the interest rate cap agreements.
Further disclosure relating to the fair value of the Company's derivative financial instruments is included in Note 9 of the Notes to Consolidated financial statements . HDMC Segment 51 The Company sells its motorcycles and related products internationally and in most markets those sales are made in the foreign country’s local currency.
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.
The foreign currency contracts are entered into with banks and allow the Company to exchange currencies at a future date, based on a fixed exchange rate. At December 31, 2022 and 2021, the notional U.S. dollar value of outstanding foreign currency contracts was $550.2 million and $804.2 million, respectively.
The foreign currency contracts are entered into with banks and allow the Company to exchange currencies at a future date, based on a fixed exchange rate. At December 31, 2023 and 2022, the notional U.S. dollar value of outstanding foreign currency contracts was $540.1 million and $550.2 million, respectively.
The Company utilizes interest rate caps to reduce the impact of fluctuations in interest rates on its floating-rate asset-backed securitization transactions. HDFS had an interest rate cap with a notional value of $1.10 billion outstanding at December 31, 2022 and interest rate caps with a notional value of $504.5 million outstanding at December 31, 2021.
The Company periodically utilizes interest rate caps to reduce the impact of fluctuations in interest rates on its floating-rate asset-backed securitization transactions. HDFS had an interest rate cap with a notional value of $617.9 million outstanding at December 31, 2023 and interest rate caps with a notional value of $1.10 billion outstanding at December 31, 2022.
The Company estimates that a 10% adverse change in the underlying foreign currency exchange rate and interest rate would result in a $130.0 million and $149.8 million decrease in the fair value of the swap agreements as of December 31, 2022 and 2021, respectively. 52
The Company estimates that a 10% adverse change in the underlying foreign currency exchange rate and interest rate would result in a $144.6 million and $130.0 million decrease in the fair value of the swap agreements as of December 31, 2023 and 2022, respectively. 54
The Company estimates that a uniform 10% weakening in the value of the U.S. dollar relative to the currencies underlying these contracts would result in a decrease in the fair value of the contracts of approximately $55.8 million and $78.6 million as of December 31, 2022 and 2021, respectively. The Company purchases commodities for use in the production of motorcycles.
The Company estimates that a uniform 10% weakening in the value of the U.S. 53 dollar relative to the currencies underlying these contracts would result in a decrease in the fair value of the contracts of approximately $54.6 million and $55.8 million as of December 31, 2023 and 2022, respectively.
The Company estimates that a one-percentage point increase in the interest rate on commercial paper and debt issued through the commercial paper conduit facilities would increase Financial services interest expense in 2023 by approximately $11.1 mi llion. This analysis does not consider the effects of the reduced level of overall economic activity that could exist in such an environment.
The Company estimates that a one-percentage point increase in the interest rate on commercial paper and debt issued through the commercial paper conduit facilities as of December 31, 2023 would increase Financial services interest expense by approximately $11.9 mi llion.
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. The Company had cross-currency swaps outstanding with a notional value of $1.40 billion at December 31, 2022 and 2021.
At December 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.
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. At December 31, 2022, the notional value of these instruments was $12.2 million and the fair value was a net liability of $0.4 million.
The Company purchases commodities for 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.
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 December 31, 2022, this exposure related to the Euro.
However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis does not account for these impacts. 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.
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.
The potential decrease in fair value of these contracts from a 10% adverse change in the underlying commodity prices would not be significant. LiveWire Segment LiveWire sells 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 of December 31, 2021, the notional value of these instruments was $11.6 million and the fair value was a net asset of $0.6 million. The potential decrease in fair value of these contracts from a 10% adverse change in the underlying commodity prices would not be significant.
At December 31, 2023, the notional value of these instruments was $6.3 million and the fair value was a net liability of $0.5 million. As of December 31, 2022, the notional value of these instruments was $12.2 million and the fair value was a net asset of $0.4 million.
Added
The Company had cross-currency swaps outstanding with a notional value of $1.42 billion at December 31, 2023 and cross-currency swaps outstanding with a notional value of $1.4 billion at December 31, 2022.

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