Victory Motorcycles Wind Down

12 Months Ended

Dec. 31, 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 $59,792,000 for the year ended December 31, 2017 that are within the scope of ASC 420, Exit or Disposal Cost Obligations (ASC 420). These totals exclude the promotional pretax impact of $21,184,000 incurred for the year ended December 31, 2017, as well as the pretax impact of a $3,570,000 gain resulting from the sale of a cost method investment that was previously impaired. The total impact of wind down activities in 2017 was $77,406,000, inclusive of promotional activity and a gain resulting from the sale of Brammo. Substantially all costs related to wind down activities were incurred in 2017. The Company does expect to incur additional costs in 2018 in the range of $5,000,000 to $10,000,000 in order to complete wind down activities.

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 year ended December 31, 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, net, in the consolidated statements of income. Charges related to the wind down plan for the year ended December 31, 2017 within the scope of ASC 420 were as follows (in thousands):

	Year ended December 31, 2017
Contract termination charges	$	21,632
Asset impairment charges	18,760
Inventory charges	10,169
Other costs	9,231
Total	$	59,792

Total reserves related to the Victory Motorcycles wind down activities are $5,645,000 as of December 31, 2017. These reserves are included in other accrued expenses and inventory in the consolidated balance sheets. Changes to the reserves during the year ended December 31, 2017 were as follows (in thousands):

	Contract termination charges			Inventory charges			Other costs			Total
Reserves balance as of January 1, 2017	—			—			—			—
Expenses	$	21,632		$	10,169		$	9,231		$	41,032
Cash payments / scrapped inventory	(18,445		)	(9,392		)	(7,550		)	(35,387		)
Reserves balance as of December 31, 2017	$	3,187		$	777		$	1,681		$	5,645