Victory Motorcycles Wind Down

12 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

In January 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 $5,063,000 and $59,792,000 for the years ended December 31, 2018 and 2017, respectively, that are within the scope of ASC 420, Exit or Disposal Cost Obligations (ASC 420). There were no such charges recognized in 2019. These totals exclude the positive pretax impact of $2,680,000 and the negative pretax impact of $21,184,000 incurred for other wind-down activities for the years ended December 31, 2018 and 2017, respectively, as well as the pretax impact of a $3,570,000 gain in 2017 resulting from the sale of a cost method investment that was previously impaired. The total impact of wind down activities in 2018 was $2,383,000, inclusive of promotional activity. 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. All costs related to wind-down activities were recognized by the end of 2018.

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. 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 years ended December 31, 2018 and 2017 within the scope of ASC 420 were as follows (in thousands):



	For the years ended December 31,
	2018		2017
Contract termination charges	$	3,433	$	21,632
Asset impairment charges	—		18,760
Inventory charges	—		10,169
Other costs	1,630		9,231
Total	$	5,063	$	59,792

Total reserves related to the Victory Motorcycles wind down activities were $2,697,000 and $5,645,000 as of December 31, 2018 and 2017, respectively. Wind down activities in 2019 and the reserve balance at December 31, 2019 were immaterial. These reserves are included in other accrued expenses and inventory in the consolidated balance sheets. Changes to the reserves during the years ended December 31, 2018 and 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
Expenses	3,433			—			1,630			5,063
Cash payments / scrapped inventory	(5,155		)	(399		)	(2,457		)	(8,011		)
Reserves balance as of December 31, 2018	$	1,465		$	378		$	854		$	2,697