Restructuring Expense and Other Impairments

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 (2011 New Castalloy Restructuring Plan). The Company expects the transition of supply from New Castalloy to be complete in 2013. The decision to close New Castalloy comes as part of the Company’s overall long term strategy to develop world-class manufacturing capability throughout the Company by restructuring and consolidating operations for greater competitiveness, efficiency and flexibility. In connection with this decision, the Company will reduce its workforce by approximately 200 employees by the end of 2013.

Under the 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 about $31 million in restructuring charges related to the transition through 2013. Approximately 35% of the $31 million will be non-cash charges. On a cumulative basis, the Company has incurred $22.2 million of restructuring expenses under the 2011 New Castalloy Restructuring Plan through 2012, of which $12.8 million were incurred in the year ended December 31, 2012.

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 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.

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 $6.9 million of restructuring expenses under the 2011 Kansas City Restructuring Plan through 2012, of which approximately10% are non-cash . During the year ended December 31, 2012, the Company released a portion of its Kansas City Restructuring Plan reserve related to severance costs as these costs are no longer expected to be incurred.

The following table summarizes the Motorcycle Segment’s 2011 Kansas City Restructuring Plan and 2011 New Castalloy Restructuring Plan reserve activity and balances as recorded in accrued liabilities for the year ended December 31 (in thousands):



	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	—			—		—			3,180			8,212			1,427			12,819			12,819
Utilized - cash	—			—		—			(2,302		)	—			(1,587		)	(3,889		)	(3,889		)
Utilized - noncash	—			—		—			—			(8,212		)	—			(8,212		)	(8,212		)
Non-cash reserve release	(1,864		)	—		(1,864		)	—			—			—			—			(1,864		)
Balance, end of period	$	2,259		$	—	$	2,259		$	9,306		$	—		$	145		$	9,451		$	11,710



	2011
	Kansas City									New Castalloy										Consolidated
	Employee Severance and Termination Costs			Other			Total			Employee Severance and Termination Costs		Accelerated Depreciation			Other		Total			Total
Restructuring expense	$	8,447		$	342		$	8,789		$	8,428	$	656		$	305	$	9,389		$	18,178
Utilized - cash	(4,088		)	(342		)	(4,430		)	—		—			—		—			(4,430		)
Utilized - noncash	(236		)	—			(236		)	—		(656		)	—		(656		)	(892		)
Balance, end of period	$	4,123		$	—		$	4,123		$	8,428	$	—		$	305	$	8,733		$	12,856

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 Company’s 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 be required under the previous contract and approximately 75 fewer full-time hourly unionized employees in its Tomahawk facility than would have been required under the previous contract.

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 $59.7 million of restructuring and impairment expenses under the 2010 Restructuring Plan as of December 31, 2012, of which approximately 45% are non-cash. During the year ended December 31, 2012, the Company released a portion of its 2010 Restructuring Plan reserve related to severance costs as these costs are no longer expected to be incurred.

The following table summarizes the Motorcycle Segment’s 2010 Restructuring Plan reserve activity and balances as recorded in accrued liabilities for the following years ended December 31 (in thousands):



	2012			2011			2010
	Employee Severance and Termination Costs			Employee Severance and Termination Costs			Employee Severance and Termination Costs


Balance, beginning of period	$	20,361		$	8,652		$	—
Restructuring expense	4,005			12,575			44,383
Utilized – cash	(12,898		)	(866		)	(7,557		)
Utilized – noncash	—			—			(28,174		)
Non-cash reserve release	(1,312		)	—			—
Balance, end of period	$	10,156		$	20,361		$	8,652

For the year ended December 31, 2010, restructuring expense included $28.2 million of noncash curtailment losses related to the Company’s pension and postretirement healthcare plans that cover employees of the affected facilities in Milwaukee and Tomahawk, Wisconsin.

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 that were expected to be completed at various dates between 2009 and 2012. The actions were designed to reduce administrative costs, eliminate excess capacity and exit non-core business operations. The Company’s announced actions included 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.

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 million, of which approximately 30% are expected to be non-cash. On a cumulative basis, the Company has incurred $395.4 million of restructuring and impairment expense under the 2009 Restructuring Plan as of December 31, 2012, of which $14.8 million was incurred during the year ended December 31, 2012.

The following tables summarize the Company’s 2009 Restructuring Plan reserve activity and balances as recorded in accrued liabilities for the following years ended December 31 (in thousands):



	2012
	Motorcycles & Related Products												Financial Services								Consolidated
	Employee Severance and Termination Costs			Accelerated Depreciation			Other			Total			Employee Severance and Termination Costs			Other		Total			Consolidated Total
Balance, beginning of period	$	10,089		$	—		$	—		$	10,089		$	—		$	—	$	—		$	10,089
Restructuring expense	4,099			—			13,154			17,253			—			—		—			17,253
Utilized – cash	(6,566		)	—			(12,993		)	(19,559		)	—			—		—			(19,559		)
Utilized – noncash	—			—			—			—			—			—		—			—
Noncash reserve release	(2,426		)	—			—			(2,426		)	—			—		—			(2,426		)
Balance, end of period	$	5,196		$	—		$	161		$	5,357		$	—		$	—	$	—		$	5,357
	2011
	Motorcycles & Related Products												Financial Services								Consolidated
	Employee Severance and Termination Costs			Accelerated Depreciation			Other			Total			Employee Severance and Termination Costs			Other		Total			Consolidated Total
Balance, beginning of period	$	23,818		$	—		$	2,764		$	26,582		$	—		$	—	$	—		$	26,582
Restructuring expense	5,062			—			34,470			39,532			—			—		—			39,532
Utilized – cash	(16,498		)	—			(37,234		)	(53,732		)	—			—		—			(53,732		)
Utilized – noncash	—			—			—			—			—			—		—			—
Noncash reserve release	(2,293		)	—			—			(2,293		)	—			—		—			(2,293		)
Balance, end of period	$	10,089		$	—		$	—		$	10,089		$	—		$	—	$	—		$	10,089
	2010
	Motorcycles & Related Products												Financial Services								Consolidated
	Employee Severance and Termination Costs			Accelerated Depreciation			Other			Total			Employee Severance and Termination Costs			Other		Total			Consolidated Total
Balance, beginning of period	$	36,070		$	—		$	31,422		$	67,492		$	219		$	—	$	219		$	67,711
Restructuring expense	31,119			47,923			40,083			119,125			—			—		—			119,125
Utilized – cash	(44,394		)	—			(61,514		)	(105,908		)	(44		)	—		(44		)	(105,952		)
Utilized – noncash	1,023			(47,923		)	(3,406		)	(50,306		)	(175		)	—		(175		)	(50,481		)
Noncash reserve release	—			—			(3,821		)	(3,821		)	—			—		—			(3,821		)
Balance, end of period	$	23,818		$	—		$	2,764		$	26,582		$	—		$	—	$	—		$	26,582

Other restructuring costs include items such as the exit costs for terminating supply contracts, lease termination costs and moving costs. During 2012 and 2011, the Company released $2.4 million and $2.3 million, respectively, of its 2009 Restructuring Plan reserve related to employee severance costs as these costs are no longer expected to be incurred. In addition, the Company released $3.8 million of its 2009 Restructuring Plan reserve related to exiting the Buell product line during 2010, as these costs are no longer expected to be incurred.