Victory Motorcycles Wind Down (Notes)

9 Months Ended

Sep. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Victory Motorcycles Wind Down

Victory Motorcycles Wind Down

On January 9, 2017, the Company’s Board of Directors approved a strategic plan to wind down the Victory Motorcycles brand. The Company began wind down activities during the first quarter of 2017. As a result of the activities, the Company recognized total pretax charges of $2,666,000 and $59,131,000, respectively, for the three and nine month periods ended September 30, 2017 that are within the scope of ASC 420, Exit or Disposal Cost Obligations (ASC 420). These totals exclude the promotional pretax impacts of $6,143,000 and $18,109,000, respectively, incurred for the three and nine month periods ended September 30, 2017. The Company estimates that the total impact of wind down activities in 2017 will be in the range of $80,000,000 to $90,000,000, inclusive of promotional activity. Substantially all costs related to wind down activities are expected to be recognized by the end of 2017.

As a result of the wind down activities, the Company has incurred expenses within the scope of ASC 420 consisting of dealer termination, supplier termination, dealer litigation, employee separation, asset impairment charges, including the impairment of a cost method investment, inventory write-down charges and other costs. There were no wind down expenses related to this initiative during the three and nine month periods ended September 30, 2016. The wind down expenses have been included as components of cost of sales, selling and administrative expenses, general and administrative expenses or other expense (income), net, in the consolidated statements of income. Charges related to the wind down plan for the three and nine months ended September 30, 2017 within the scope of ASC 420 were as follows (in thousands):

	Three months ended September 30,		Nine months ended September 30,
	2017		2017
Contract termination charges	$	1,501	$	19,196
Asset impairment charges	—		18,760
Inventory charges	—		12,680
Other costs	1,165		8,495
Total	$	2,666	$	59,131

Total reserves related to the Victory Motorcycles wind down activities are $8,058,000 as of September 30, 2017. These reserves are included in other accrued expenses and inventory in the consolidated balance sheets. Changes to the reserves during the nine months ended September 30, 2017 were as follows (in thousands):

	Contract termination charges			Inventory charges			Other costs			Total
Reserves balance as of January 1, 2017	—			—			—			—
Expenses	$	19,196		$	12,680		$	8,495		$	40,371
Cash payments / scrapped inventory	(16,616		)	(8,892		)	(6,805		)	(32,313		)
Reserves balance as of September 30, 2017	$	2,580		$	3,788		$	1,690		$	8,058