HARLEY-DAVIDSON, INC.
For the period ended Mar 31, 2026. Filed May 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 6, 2026
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11. Fair Value
- Fair Value
The following tables present the fair values of certain of the Company's assets and liabilities within the fair value hierarchy as defined in Note 1.
Recurring Fair Value Measurements –The Company’s assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):
| March 31, 2026 | ||||
|---|---|---|---|---|
| Balance | Level 1 | Level 2 | Level 3 | |
| Assets: | ||||
| Cash equivalents | $1,445,096 | $1,150,474 | $294,622 | $— |
| Marketable securities | 30,434 | 30,434 | — | — |
| Derivative financial instruments | 49,503 | — | 49,503 | — |
| Investments in Retained Notes | 58,356 | — | 58,356 | — |
| Investments in Residual Interests | 9,540 | — | — | 9,540 |
| $1,592,929 | $1,180,908 | $402,481 | $9,540 | |
| Liabilities: | ||||
| Derivative financial instruments | $1,736 | $— | $1,736 | $— |
| LiveWire warrants | 1,518 | 993 | 525 | — |
| $3,254 | $993 | $2,261 | $— | |
| December 31, 2025 | ||||
| Balance | Level 1 | Level 2 | Level 3 | |
| Assets: | ||||
| Cash equivalents | $2,693,739 | $2,553,850 | $139,889 | $— |
| Marketable securities | 31,513 | 31,513 | — | — |
| Derivative financial instruments | 108,435 | — | 108,435 | — |
| Investments in Retained Notes | 68,130 | — | 68,130 | — |
| Investments in Residual Interests | 10,156 | — | — | 10,156 |
| $2,911,973 | $2,585,363 | $316,454 | $10,156 | |
| Liabilities: | ||||
| Derivative financial instruments | $6,494 | $— | $6,494 | $— |
| LiveWire warrants | 1,901 | 1,244 | 657 | — |
| $8,395 | $1,244 | $7,151 | $— | |
| March 31, 2025 | ||||
|---|---|---|---|---|
| Balance | Level 1 | Level 2 | Level 3 | |
| Assets: | ||||
| Cash equivalents | $1,626,758 | $1,377,048 | $249,710 | $— |
| Marketable securities | 30,496 | 30,496 | — | — |
| Derivative financial instruments | 7,692 | — | 7,692 | — |
| $1,664,946 | $1,407,544 | $257,402 | $— | |
| Liabilities: | ||||
| Derivative financial instruments | $9,644 | $— | $9,644 | $— |
| LiveWire warrants | 644 | 421 | 223 | — |
| $10,288 | $421 | $9,867 | $— | |
The following table presents the reconciliation for all Level 3 assets measured at fair value on a recurring basis (in thousands):
| Investments in Residual Interests | |
|---|---|
| Fair value at December 31, 2025 | $10,156 |
| Investment Proceeds | (357) |
| Unrealized loss included in Other Comprehensive Loss | (259) |
| Fair value at March 31, 2026 | $9,540 |
Investments in Retained Notes and Residual Interests –As discussed in Note 10 of the Notes to Consolidated financial statements, the Company recorded investments in Retained Notes and Residual Interests in off-balance sheet VIEs. The fair value of the Retained Notes was estimated based on pricing available for transactions with similar terms and maturities (Level 2 inputs). The fair value of the Residual Interests was based on a discounted cash flow calculation using the key assumptions below (Level 3 inputs). Both investments are classified as available-for-sale (AFS) securities and, accordingly, are held at fair value remeasured through OCI in the Statement of comprehensive income.
The fair values of the Residual Interests were calculated using the following ranges of key assumptions:
| March 31,2026 | December 31,2025 | |
|---|---|---|
| Recovery rate on defaulted receivables | 50.00% | 50.00% |
| Prepayment speed | 1.40% | 1.40% |
| Expected cumulative lifetime losses | 2.06% - 3.38% | 2.01% - 3.21% |
| Weighted-average life (in years) | 0.81 - 2.35 | 0.96 - 2.46 |
| Residual cash flows discount rate | 15.00% | 15.00% |
The weighted average of the key assumptions utilized in calculating the current and prior period fair values of the Residual Interests were as follows:
| March 31,2026 | December 31,2025 | |
|---|---|---|
| Recovery rate on defaulted receivables | 50.00% | 50.00% |
| Prepayment speed | 1.40% | 1.40% |
| Expected cumulative lifetime losses | 2.77% | 2.47% |
| Weighted-average life (in years) | 1.81 | 1.87 |
| Residual cash flows discount rate | 15.00% | 15.00% |
Additionally, the fair value assumes that the Company, as servicer, does not exercise its option to purchase the underlying receivables at the earliest distribution date on which it is permitted to do so.
The sensitivities of the fair value to immediate adverse changes in the key assumptions for the investment in Residual Interests at March 31, 2026 and December 31, 2025 were as follows (dollars in thousands):
| March 31, 2026 | December 31, 2025 | |
|---|---|---|
| Fair value of Residual Interests | $9,540 | $10,156 |
| Prepayment speed | ||
| Impact on fair value of a 1.5% absolute prepayment speed adverse change | $(77) | $(94) |
| Impact on fair value of a 1.6% absolute prepayment speed adverse change | $(150) | $(186) |
| Expected cumulative lifetime losses | ||
| Impact on fair value of a 25 bps adverse change | $(160) | $(183) |
| Impact on fair value of a 50 bps adverse change | $(319) | $(365) |
| Residual cash flows discount rate | ||
| Impact on fair value of a 25 bps adverse change | $(40) | $(44) |
| Impact on fair value of a 50 bps adverse change | $(80) | $(88) |
The sensitivities of the fair value to immediate adverse changes in the key assumptions for the investment in Retained Notes at March 31, 2026 and December 31, 2025 were as follows (dollars in thousands):
| March 31, 2026 | December 31, 2025 | |
|---|---|---|
| Fair value of Retained Notes | $58,356 | $68,130 |
| Weighted-average life (in years) | 1.7 | 1.86 |
| Discount rate | ||
| Impact on fair value of a 50 bps adverse change | $(494) | $(300) |
| Impact on fair value of a 100 bps adverse change | $(754) | $(613) |
These sensitivities are hypothetical and should not be considered to be predictive of future performance. Changes in fair value generally cannot be extrapolated because the relationship of change in assumption to change in fair value may not be linear. Also, in these tables, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated independently from any change in another assumption. In reality, changes in one factor may contribute to changes in another, which may magnify or counteract the sensitivities. Furthermore, the estimated fair values as disclosed should not be considered indicative of future earnings on these assets.
The table below summarizes the unrealized positions for Residual Interests and Retained Notes (in thousands):
| Amortized Cost | Unrealized Losses | Fair Value | |
|---|---|---|---|
| Residual Interests | $9,715 | $(175) | $9,540 |
| Retained Notes | 58,397 | (41) | 58,356 |
| Total Beneficial Interests | $68,112 | $(216) | $67,896 |
| Amortized Cost | Unrealized Gains | Fair Value | |
|---|---|---|---|
| Residual Interests | $10,109 | $47 | $10,156 |
| Retained Notes | 68,001 | 129 | 68,130 |
| Total Beneficial Interests | $78,110 | $176 | $78,286 |
The table below provides information regarding certain cash flows received from and paid to all motorcycle loan off-balance sheet securitized trusts during the three months ended March 31, 2026 (in thousands):
| Servicing, late, and ancillary fees received | $4,390 |
|---|---|
| Collection of retained securitization beneficial interests | $10,261 |
Nonrecurring Fair Value Measurements –Repossessed inventory was $5.2 million, $4.2 million and $28.5 million as of March 31, 2026, December 31, 2025 and March 31, 2025, respectively. The fair value adjustment of the repossessed inventory was an increase of $1.5 million, an increase of $2.5 million and a decrease of $15.4 million as of March 31, 2026, December 31, 2025 and March 31, 2025, respectively. Fair value is estimated using Level 2 inputs based on the recent market values of repossessed inventory.
Fair Value of Financial Instruments Measured at Cost –The carrying value of the Company's Cash and cash equivalents and Restricted cash approximates their fair values. The fair value and carrying value of the Company’s remaining financial instruments that are measured at cost or amortized cost were as follows (in thousands):
| March 31, 2026 | December 31, 2025 | March 31, 2025 | ||||
|---|---|---|---|---|---|---|
| Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | |
| Assets: | ||||||
| Finance receivables held for sale, net | $426,237 | $426,792 | $268,111 | $264,238 | $— | $— |
| Finance receivables held for investment, net (a) | $1,991,436 | $1,977,191 | $1,665,453 | $1,653,372 | $7,428,722 | $7,399,607 |
| Liabilities: | ||||||
| Deposits, net | $478,777 | $477,638 | $537,136 | $536,644 | $517,576 | $513,330 |
| Debt: | ||||||
| Unsecured commercial paper | $498,685 | $498,685 | $497,776 | $497,776 | $498,500 | $498,500 |
| Asset-backed U.S. commercial paper conduit facility | $— | $— | $— | $— | $531,260 | $531,260 |
| Asset-backed Canadian commercial paper conduit facility | $— | $— | $— | $— | $68,275 | $68,275 |
| Asset-backed securitization debt | $— | $— | $— | $— | $1,668,698 | $1,658,745 |
| Medium-term notes | $1,333,548 | $1,335,802 | $2,195,390 | $2,171,963 | $3,837,976 | $3,797,100 |
| Senior notes | $232,324 | $297,309 | $241,057 | $297,278 | $690,824 | $746,981 |
(a)Excludes the $37.4 million and $47.6 million estimated recovery balances included in the allowance for credit losses as of March 31, 2026 and December 31, 2025, respectively.
Finance Receivables held for sale, net - The carrying value of retail finance receivables held for sale is the lower of amortized cost or fair value. The fair value of finance receivables held for sale was based on the estimated selling price of the receivables (Level 2 inputs).
Finance Receivables held for investment, net – The carrying value of retail and wholesale finance receivables held for investment is amortized cost less an allowance for credit losses. The fair value of retail finance receivables is generally calculated by discounting future cash flows using an estimated discount rate that reflects current credit, interest rate and prepayment risks associated with similar types of instruments. Fair value is determined based on Level 3 inputs. The amortized cost basis of wholesale finance receivables approximates fair value because they are generally either short-term or have interest rates that adjust with changes in market interest rates.
Deposits, net – The carrying value of deposits is amortized cost, net of fees. The fair value of deposits is estimated based upon rates currently available for deposits with similar terms and maturities. Fair value is calculated using Level 3 inputs.
Debt – The carrying value of debt is generally cost, net of unamortized discounts and debt issuance costs. The fair value of unsecured commercial paper is calculated using Level 2 inputs and approximates carrying value due to its short maturity. The fair value of debt provided under the U.S. Conduit Facility and the Canadian Conduit Facility is calculated using Level 2 inputs and approximates carrying value since the interest rates charged under the facilities are tied directly to market rates and fluctuate as market rates change. The fair values of the medium-term notes and senior notes are estimated based upon rates currently available for debt with similar terms and remaining maturities (Level 2 inputs). The fair value of the fixed-rate debt related to on-balance sheet asset-backed securitization transactions is estimated based on pricing currently available for transactions with similar terms and maturities (Level 2 inputs). The fair value of the floating-rate debt related to on-balance sheet asset-backed securitization transactions is calculated using Level 2 inputs and approximates carrying value since the interest rates charged are tied directly to market rates and fluctuate as market rates change.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.