3. Additional Balance Sheet and Cash Flow Information

Marketable Securities

The Company’s marketable securities consisted of the following (in thousands):


	July 1,		December 31,		June 26,
	2012		2011		2011
Available-for-sale:
Corporate bonds	$	135,848	$	153,380	$	194,556
U.S. Treasuries		—		—		49,999

	$	135,848	$	153,380	$	244,555

The Company’s available-for-sale securities are carried at fair value with any unrealized gains or losses reported in other comprehensive income. During the first half of 2012 and 2011, the Company recognized gross unrealized gains in other comprehensive income of $0.5 million and $1.7 million, respectively, or $0.3 million and $1.1 million net of taxes, respectively, to adjust amortized cost to fair value. The marketable securities have contractual maturities that generally come due over the next 12 to 48 months.

Inventories

Inventories are valued at the lower of cost or market. Substantially all inventories located in the United States are valued using the last-in, first-out (LIFO) method. Other inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventories consist of the following (in thousands):


	July 1,			December 31,			June 26,
	2012			2011			2011
Components at the lower of FIFO cost or market
Raw materials and work in process	$	116,166		$	113,932		$	108,518
Motorcycle finished goods		120,199			226,261			147,787
Parts and accessories and general merchandise		131,040			121,340			115,202

Inventory at lower of FIFO cost or market		367,405			461,533			371,507
Excess of FIFO over LIFO cost		(44,359	)		(43,527	)		(34,035	)

	$	323,046		$	418,006		$	337,472

Operating Cash Flow

The reconciliation of net income to net cash provided by operating activities is as follows (in thousands):


	Six months ended
	July 1,			June 26,
	2012			2011
Cash flows from operating activities:
Net income	$	419,285		$	309,840
Loss from discontinued operations		—			—

Income from continuing operations		419,285			309,840

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation		85,997			89,543
Amortization of deferred loan origination costs		38,075			39,054
Amortization of financing origination fees		5,021			5,833
Provision for employee long-term benefits		34,263			34,456
Contributions to pension and postretirement plans		(213,648	)		(205,498	)
Stock compensation expense		22,119			20,537
Net change in wholesale finance receivables related to sales		(124,919	)		11,909
Provision for credit losses		3,754			(1,184	)
Pension and postretirement healthcare plan curtailment and settlement expense		—			236
Foreign currency adjustments		8,143			(2,813	)
Other, net		5,567			27,226
Changes in current assets and liabilities:
Accounts receivable, net		(34,977	)		8,301
Finance receivables—accrued interest and other		2,912			5,553
Inventories		89,162			(530	)
Accounts payable and accrued liabilities		(12,286	)		133,838
Restructuring reserves		(9,915	)		3,195
Derivative instruments		(1,420	)		1,195
Other		(28,891	)		(7,729	)

Total adjustments		(131,043	)		163,122

Net cash provided by operating activities of continuing operations	$	288,242		$	472,962