Restructuring Expenses

In January 2018, the Company initiated a plan to further improve its manufacturing operations and cost structure by commencing a multi-year manufacturing optimization plan which includes the consolidation of its motorcycle assembly plant in Kansas City, Missouri, into its plant in York, Pennsylvania, and the closure of its wheel operations in Adelaide, Australia. As the U.S. operations are consolidated, the Company expects approximately 800 jobs will be eliminated with the closure of Kansas City operations and approximately 450 jobs will be added in York by 2019. Approximately 90 jobs will be eliminated in Adelaide.

The Company expects to incur restructuring and other consolidation costs of $170 million to $200 million in the Motorcycles segment related to this plan through 2019, of which approximately 70% will be cash charges. This includes $135 million to $155 million of restructuring expense and $35 million to $45 million of costs related to temporary inefficiencies. The Company expects restructuring expenses to include the cost of employee termination benefits, accelerated depreciation and other project implementation costs of $50 million to $60 million, $45 million to $50 million and $40 million to $45 million, respectively. Restructuring expense is recorded as a separate line item in the consolidated statement of income and the accrued restructuring liability is recorded in accrued liabilities in the consolidated balance sheet. The Company expects the plan to be completed by mid-2019. Changes in the accrued restructuring liability (in thousands) were as follows:



	Three months ended July 1, 2018
	Employee Termination Benefits			Accelerated Depreciation			Other			Total
Balance, beginning of period	$	38,287		$	—		$	63		$	38,350
Restructuring (benefit) expense	(1,186		)	9,746			3,810			12,370
Utilized - cash	(133		)	—			(3,793		)	(3,926		)
Utilized - non cash	—			(9,746		)	—			(9,746		)
Foreign currency changes	(210		)	—			(3		)	(213		)
Balance, end of period	$	36,758		$	—		$	77		$	36,835



	Six months ended July 1, 2018
	Employee Termination Benefits			Accelerated Depreciation			Other			Total
Balance, beginning of period	$	—		$	—		$	—		$	—
Restructuring expense	39,605			15,359			4,248			59,212
Utilized - cash	(2,433		)	—			(4,167		)	(6,600		)
Utilized - non cash	—			(15,359		)	—			(15,359		)
Foreign currency changes	(414		)	—			(4		)	(418		)
Balance, end of period	$	36,758		$	—		$	77		$	36,835

During the three months ended July 1, 2018, the Company adjusted its termination benefit liability to reflect updated assumptions resulting in a reversal of approximately $1.7 million of previously recognized restructuring expense.

During the three and six month periods ended July 1, 2018, the Company incurred $2.4 million and $3.1 million, respectively, of incremental cost of goods sold due to temporary inefficiencies resulting from implementing the manufacturing optimization plan.