Restructuring Expense

2011 Restructuring Plans

In December 2011, the Company made a decision to cease operations at New Castalloy, its Australian subsidiary and producer of cast motorcycle wheels and wheel hubs, and source those components through other existing suppliers by the end of 2013 (2011 New Castalloy Restructuring Plan). Since 2011, the Company has successfully transitioned a significant amount of wheel production to other existing suppliers. However, during the second quarter of 2013, the Company made a decision to retain limited operations at New Castalloy focused on the production of certain complex, high-finish wheels in a cost-effective and competitive manner. The Company also entered into a new agreement with the unionized labor force at New Castalloy.

In connection with the modified 2011 New Castalloy Restructuring Plan, the New Castalloy workforce will be reduced by approximately 100 employees, leaving approximately 100 remaining employees to support the ongoing operations. The original plan would have resulted in a workforce reduction of approximately 200 employees.

Under the modified 2011 New Castalloy Restructuring Plan, restructuring expenses consist of employee severance and termination costs, accelerated depreciation and other related costs. The Company expects to incur approximately $21.3 million in restructuring charges related to the transition through 2013. Approximately 35% of the $21.3 million will be non-cash charges. On a cumulative basis, the Company has incurred $20.5 million of restructuring expense under the modified 2011 New Castalloy Restructuring Plan as of June 30, 2013. This includes a benefit related to restructuring reserves released in the second quarter of 2013 in connection with the decision to retain a limited operation at the New Castalloy facility, as described above.

In February 2011, the Company’s unionized employees at its facility in Kansas City, Missouri ratified a new seven-year labor agreement. The new agreement took effect on August 1, 2011. The new contract is similar to the labor agreements ratified at the Company’s Wisconsin facilities in September 2010 and its York, Pennsylvania (York) production facility in December 2009, and allows for similar flexibility, increased production efficiency and the addition of a flexible workforce component.

The actions to implement the new ratified labor agreement (2011 Kansas City Restructuring Plan) result in approximately 145 fewer full-time hourly unionized employees in its Kansas City facility than would have been required under the previous contract. The Company expects all actions related to the 2011 Kansas City Restructuring Plan to be completed by the end of 2013.

Under the 2011 Kansas City Restructuring Plan, restructuring expenses consist of employee severance and termination costs and other related costs. On a cumulative basis, the Company has incurred $6.5 million of restructuring expense under the 2011 Kansas City Restructuring Plan as of June 30, 2013 of which approximately 10% is non-cash.

The following table summarizes the Motorcycles segment’s 2011 Kansas City Restructuring Plan and modified 2011 New Castalloy Restructuring Plan reserve activity and balances as recorded in accrued liabilities (in thousands):



	Six months ended June 30, 2013
	Kansas City								New Castalloy												Consolidated
	Employee Severance and Termination Costs			Other		Total			Employee Severance and Termination Costs			Accelerated Depreciation			Other			Total			Total
Balance, beginning of period	$	2,259		$	—	$	2,259		$	9,306		$	—		$	145		$	9,451		$	11,710
Restructuring expense	—			—		—			860			2,093			577			3,530			3,530
Utilized—cash	(1,283		)	—		(1,283		)	(4,019		)	—			(589		)	(4,608		)	(5,891		)
Utilized—non-cash	—			—		—			—			(2,093		)	—			(2,093		)	(2,093		)
Non-cash reserve release	(376		)	—		(376		)	(5,250		)	—			—			(5,250		)	(5,626		)
Balance, end of period	$	600		$	—	$	600		$	897		$	—		$	133		$	1,030		$	1,630



	Six months ended July 1, 2012
	Kansas City								New Castalloy												Consolidated
	Employee Severance and Termination Costs			Other		Total			Employee Severance and Termination Costs			Accelerated Depreciation			Other			Total			Total
Balance, beginning of period	$	4,123		$	—	$	4,123		$	8,428		$	—		$	305		$	8,733		$	12,856
Restructuring expense	—			—		—			1,141			4,093			755			5,989			5,989
Utilized—cash	—			—		—			(312		)	—			(722		)	(1,034		)	(1,034		)
Utilized—non-cash	—			—		—			—			(4,093		)	—			(4,093		)	(4,093		)
Non-cash reserve release	(967		)	—		(967		)	—			—			—			—			(967		)
Balance, end of period	$	3,156		$	—	$	3,156		$	9,257		$	—		$	338		$	9,595		$	12,751

2010 Restructuring Plan

In September 2010, the Company’s unionized employees in Wisconsin ratified three separate new seven-year labor agreements which took effect in April 2012 when the prior contracts expired. The new contracts are similar to the labor agreement ratified at the York, Pennsylvania facility in December 2009 and allow for similar flexibility and increased production efficiency and the addition of a flexible workforce component.

The actions to implement the new ratified labor agreements (2010 Restructuring Plan) result in approximately 250 fewer full-time hourly unionized employees in its Milwaukee-area facilities than would have been required under the previous contracts and approximately 75 fewer full-time hourly unionized employees in its Tomahawk, Wisconsin facility than would have been required under the previous contract. The Company expects all actions related to the 2010 Restructuring Plan to be completed by the end of 2013.

Under the 2010 Restructuring Plan, restructuring expenses consist of employee severance and termination costs and other related costs. On a cumulative basis, the Company has incurred $59.3 million of restructuring expense under the 2010 Restructuring Plan as of June 30, 2013, of which approximately 45% is non-cash.

The following table summarizes the Motorcycles segment’s 2010 Restructuring Plan reserve activity and balances as recorded in accrued liabilities (in thousands):



	Six months ended
	June 30, 2013			July 1, 2012
	Employee Severance and Termination Costs			Employee Severance and Termination Costs
Balance, beginning of period	$	10,156		$	20,361
Restructuring expense	—			3,457
Utilized—cash	(9,710		)	(10,053		)
Non-cash reserve release	(336		)	—
Balance, end of period	$	110		$	13,765

2009 Restructuring Plan

During 2009, in response to the U.S. economic recession and worldwide slowdown in consumer demand, the Company committed to a volume reduction and a combination of restructuring actions (2009 Restructuring Plan) expected to be completed at various dates between 2009 and 2013. The actions were designed to reduce administrative costs, eliminate excess capacity and exit non-core business operations. The Company’s announced actions include the restructuring and transformation of its York, Pennsylvania production facility including the implementation of a new more flexible unionized labor agreement which allows for the addition of a flexible workforce component; consolidation of facilities related to engine and transmission production; outsourcing of certain distribution and transportation activities and exiting the Buell product line. In addition, the Company implemented projects under this plan involving the outsourcing of select information technology activities and the consolidation of an administrative office in Michigan into its corporate headquarters in Milwaukee, Wisconsin.

The 2009 Restructuring Plan results in a reduction of approximately 2,700 to 2,900 hourly production positions and approximately 800 non-production, primarily salaried positions within the Motorcycles segment and approximately 100 salaried positions in the Financial Services segment. The Company expects all actions related to the 2009 Restructuring Plan to be completed by the end of 2013.

Under the 2009 Restructuring Plan, restructuring expenses consist of employee severance and termination costs, accelerated depreciation on the long-lived assets that will be exited as part of the 2009 Restructuring Plan and other related costs. The Company expects total costs related to the 2009 Restructuring Plan to result in restructuring and impairment expenses of approximately $397.9 million, of which approximately 30% are expected to be non-cash. On a cumulative basis, the Company has incurred $395.5 million of restructuring and impairment expense under the 2009 Restructuring Plan as of June 30, 2013.

The following table summarizes the Company’s 2009 Restructuring Plan reserve activity and balances recorded in accrued liabilities (in thousands):



	Six months ended June 30, 2013
	Motorcycles & Related Products
	Employee Severance and Termination Costs			Accelerated Depreciation		Other			Total
Balance, beginning of period	$	5,196		$	—	$	161		$	5,357
Restructuring expense	—			—		1,606			1,606
Utilized—cash	(1,613		)	—		(1,591		)	(3,204		)
Utilized—non-cash	—			—		—			—
Non-cash reserve release	(1,533		)	—		—			(1,533		)
Balance, end of period	$	2,050		$	—	$	176		$	2,226

	Six months ended July 1, 2012
	Motorcycles & Related Products
	Employee Severance and Termination Costs			Accelerated Depreciation		Other			Total
Balance, beginning of period	$	10,089		$	—	$	—		$	10,089
Restructuring expense	331			—		10,888			11,219
Utilized—cash	(1,878		)	—		(10,888		)	(12,766		)
Utilized—non-cash	—			—		—			—
Non-cash reserve release	(2,027		)	—		—			(2,027		)
Balance, end of period	$	6,515		$	—	$	—		$	6,515

Other restructuring costs under the 2009 Restructuring Plan include items such as the exit costs for terminating supply contracts, lease termination costs and moving costs. During the first six months of 2013, the Company released a portion of its 2009 Restructuring Plan reserve related to employee severance costs as these costs are no longer expected to be incurred.