XML 84 R10.htm IDEA: XBRL DOCUMENT
v3.2.0.727

Asset-Backed Financing | 6 Months Ended
--- | ---
Jun. 28, 2015
Secured Debt [Abstract] |
Debt Disclosure [Text Block] | Asset-Backed Financing The Company participates in asset-backed financing through both term asset-backed securitization transactions and through asset-backed commercial paper conduit facilities. The Company treats these transactions as secured borrowings because either they are transferred to consolidated variable interest entities (VIEs) or the Company maintains effective control over the assets and does not meet the accounting sale requirements under ASC Topic 860, "Transfers and Servicing" (ASC Topic 860). In the Company's asset-backed financing programs, the Company transfers retail motorcycle finance receivables to special purpose entities (SPE), which are considered VIEs under U.S. GAAP. Each SPE then converts those assets into cash, through the issuance of debt. The Company is required to consolidate any VIE in which it is deemed to be the primary beneficiary through having power over the significant activities of the entity and having an obligation to absorb losses or the right to receive benefits from the VIE which are potentially significant to the VIE. The Company is considered to have the power over the significant activities of its term asset-backed securitization and asset-backed U.S. commercial paper conduit facility VIEs due to its role as servicer. Servicing fees are typically not considered potentially significant variable interests in a VIE. However, the Company retains a residual interest in the VIEs in the form of a debt security, which gives the Company the right to receive benefits that could be potentially significant to the VIE. Therefore, the Company is the primary beneficiary and consolidates all of these VIEs within its consolidated financial statements. The Company is not the primary beneficiary of the asset-backed Canadian commercial paper conduit facility VIE; therefore, the Company does not consolidate this VIE. However, the Company treats the conduit facility as a secured borrowing as it maintains effective control over the assets transferred to the VIE and therefore does not meet the requirements for sale accounting under ASC Topic 860. As such, the Company retains the transferred assets and the related debt within its Consolidated Balance Sheet. Servicing fees paid by VIEs to the Company are eliminated in consolidation and therefore are not recorded on a consolidated basis. The Company is not required, and does not currently intend, to provide any additional financial support to its VIEs. Investors and creditors only have recourse to the assets held by the VIEs. The following table shows the assets and liabilities related to the asset-backed financings that were included in the financial statements (in thousands):
| June 28, 2015
| Finance receivables |  | Allowance for credit losses |  | Restricted cash |  | Other assets |  | Total assets |  | Asset-backed debt
On-balance sheet assets and liabilities |  |  |  |  |  |  |  |  |  |  |
Consolidated VIEs |  |  |  |  |  |  |  |  |  |  |
Term asset-backed securitizations | $ | 2,199,018 |  |  | $ | (49,400 | ) |  | $ | 149,418 |  |  | $ | 2,857 |  |  | $ | 2,301,893 |  |  | $ | 2,017,079 |
Asset-backed U.S. commercial paper conduit facility | — |  |  | — |  |  | — |  |  | 210 |  |  | 210 |  |  | — |
Unconsolidated VIEs |  |  |  |  |  |  |  |  |  |  |
Asset-backed Canadian commercial paper conduit facility | 176,730 |  |  | (2,657 | ) |  | 12,793 |  |  | 340 |  |  | 187,206 |  |  | 160,940 |
Total on-balance sheet assets and liabilities | $ | 2,375,748 |  |  | $ | (52,057 | ) |  | $ | 162,211 |  |  | $ | 3,407 |  |  | $ | 2,489,309 |  |  | $ | 2,178,019 |
| December 31, 2014
| Finance receivables |  | Allowance for credit losses |  | Restricted cash |  | Other assets |  | Total assets |  | Asset-backed debt
On-balance sheet assets and liabilities |  |  |  |  |  |  |  |  |  |  |
Consolidated VIEs |  |  |  |  |  |  |  |  |  |  |
Term asset-backed securitizations | $ | 1,458,602 |  |  | $ | (32,156 | ) |  | $ | 110,017 |  |  | $ | 2,987 |  |  | $ | 1,539,450 |  |  | $ | 1,271,533 |
Asset-backed U.S. commercial paper conduit facility | — |  |  | — |  |  | — |  |  | 422 |  |  | 422 |  |  | — |
Unconsolidated VIEs |  |  |  |  |  |  |  |  |  |  |
Asset-backed Canadian commercial paper conduit facility | 185,099 |  |  | (2,965 | ) |  | 12,035 |  |  | 262 |  |  | 194,431 |  |  | 166,912 |
Total on-balance sheet assets and liabilities | $ | 1,643,701 |  |  | $ | (35,121 | ) |  | $ | 122,052 |  |  | $ | 3,671 |  |  | $ | 1,734,303 |  |  | $ | 1,438,445 |
| June 29, 2014
| Finance receivables |  | Allowance for credit losses |  | Restricted cash |  | Other assets |  | Total assets |  | Asset-backed debt
On-balance sheet assets and liabilities |  |  |  |  |  |  |  |  |  |  |
Consolidated VIEs |  |  |  |  |  |  |  |  |  |  |
Term asset-backed securitizations | $ | 1,893,585 |  |  | $ | (39,329 | ) |  | $ | 141,146 |  |  | $ | 2,342 |  |  | $ | 1,997,744 |  |  | $ | 1,712,855 |
Asset-backed U.S. commercial paper conduit facility | — |  |  | — |  |  | — |  |  | 179 |  |  | 179 |  |  | — |
Unconsolidated VIEs |  |  |  |  |  |  |  |  |  |  |
Asset-backed Canadian commercial paper conduit facility | 203,800 |  |  | (3,235 | ) |  | 13,535 |  |  | 240 |  |  | 214,340 |  |  | 173,224 |
Total on-balance sheet assets and liabilities | $ | 2,097,385 |  |  | $ | (42,564 | ) |  | $ | 154,681 |  |  | $ | 2,761 |  |  | $ | 2,212,263 |  |  | $ | 1,886,079 |
Term Asset-Backed Securitization VIEs The Company transfers U.S. retail motorcycle finance receivables to SPEs which in turn issue secured notes to investors, with various maturities and interest rates, secured by future collections of the purchased U.S. retail motorcycle finance receivables. Each term asset-backed securitization SPE is a separate legal entity and the U.S. retail motorcycle finance receivables included in the term asset-backed securitizations are only available for payment of the secured debt and other obligations arising from the term asset-backed securitization transaction and are not available to pay other obligations or claims of the Company’s creditors until the associated secured debt and other obligations are satisfied. Restricted cash balances held by the SPEs are used only to support the securitizations. There are no amortization schedules for the secured notes; however, the debt is reduced monthly as available collections on the related U.S. retail motorcycle finance receivables are applied to outstanding principal. The secured notes’ contractual lives have various maturities ranging from 2015 to 2022. During the second quarter of 2015, the Company issued $500.0 million of secured notes through one term asset-backed securitization transaction. The Company also issued $700.0 million of secured notes through one term asset-backed securitization transaction during the first quarter of 2015. During the second quarter of 2014, the Company issued $850.0 million of secured notes through one term asset-backed securitization transaction. There were no other term asset-backed securitization transactions during the six months ended June 29, 2014. Asset-Backed U.S. Commercial Paper Conduit Facility VIE In September 2014, the Company amended and restated its facility (U.S. Conduit) with a third-party bank sponsored asset-backed commercial paper conduit, which provides for a total aggregate commitment of $600.0 million based on, among other things, the amount of eligible U.S. retail motorcycle loans held by a SPE as collateral. Under the facility, the Company may transfer U.S. retail motorcycle finance receivables to a SPE, which in turn may issue debt to third-party bank-sponsored asset-backed commercial paper conduits. The assets of the SPE are restricted as collateral for the payment of the debt or other obligations arising in the transaction and are not available to pay other obligations or claims of the Company’s creditors. The terms for this debt provide for interest on the outstanding principal generally based on prevailing commercial paper rates plus a program fee based on outstanding principal, or LIBOR plus a specified margin to the extent the advance is not funded by a conduit lender through the issuance of commercial paper. The U.S. Conduit also provides for an unused commitment fee based on the unused portion of the total aggregate commitment of $600.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the U.S. Conduit, any outstanding principal will continue to be reduced monthly through available collections. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, the U.S. Conduit has an expiration date of October 30, 2015. The SPE had no borrowings outstanding under the U.S. Conduit at June 28, 2015, December 31, 2014 or June 29, 2014; therefore, U.S. Conduit assets are restricted as collateral for the payment of fees associated with the unused portion of the total aggregate commitment. Asset-Backed Canadian Commercial Paper Conduit Facility In June 2014, the Company amended its facility agreement (Canadian Conduit) with a Canadian bank-sponsored asset-backed commercial paper conduit. Under the agreement, the Canadian Conduit is contractually committed, at the Company's option, to purchase eligible Canadian retail motorcycle finance receivables for proceeds up to C$200.0 million. The transferred assets are restricted as collateral for the payment of the debt. The terms for this debt provide for interest on the outstanding principal based on prevailing market interest rates plus a specified margin. The Canadian Conduit also provides for a program fee and an unused commitment fee based on the unused portion of the total aggregate commitment of C$200.0 million. There is no amortization schedule; however, the debt is reduced monthly as available collections on the related finance receivables are applied to outstanding principal. Upon expiration of the Canadian Conduit, any outstanding principal will continue to be reduced monthly through available collections. Unless earlier terminated or extended by mutual agreement of the Company and the lenders, as of June 28, 2015, the Canadian Conduit had an expiration date of June 30, 2015. The Canadian Conduit was renewed on June 30, 2015 with similar terms and a borrowing amount of up to C$240.0 million with an expiration date of June 30, 2016. The contractual maturity of the debt is approximately 5 years. As the Company participates in and does not consolidate the Canadian bank-sponsored, multi-seller conduit VIE, the maximum exposure to loss associated with this VIE, which would only be incurred in the unlikely event that all the finance receivables and underlying collateral have no residual value, was $26.3 million at June 28, 2015. The maximum exposure is not an indication of the Company's expected loss exposure. During the second and first quarters of 2015, the Company transferred $26.8 million and $19.2 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $23.4 million and $16.8 million, respectively. During the second and first quarters of 2014, HDFS transferred $26.4 million and $15.7 million of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $23.1 million and $13.8 million, respectively. The transferred assets are restricted as collateral for the payment of the debt. Debt Debt with contractual terms less than one year is generally classified as short-term debt and consisted of the following (in thousands):
|  | June 28, 2015 |  | December 31, 2014 |  | June 29, 2014
Unsecured commercial paper |  | $ | 114,983 |  |  | $ | 731,786 |  |  | $ | 619,622 |
Debt with a contractual term greater than one year is generally classified as long-term debt and consisted of the following (in thousands):
|  | June 28, 2015 |  | December 31, 2014 |  | June 29, 2014
Secured debt |  |  |  |  |  |
Asset-backed Canadian commercial paper conduit facility |  | $ | 160,940 |  |  | $ | 166,912 |  |  | $ | 173,224 |
Term asset-backed securitization debt |  | 2,017,079 |  |  | 1,271,533 |  |  | 1,712,855 |
Unsecured notes |  |  |  |  |  |
5.75% Medium-term notes due in 2014 ($500.0 million par value) |  | — |  |  | — |  |  | 499,946 |
1.15% Medium-term notes due in 2015 ($600.0 million par value) |  | 599,954 |  |  | 599,817 |  |  | 599,680 |
3.88% Medium-term notes due in 2016 ($450.0 million par value) |  | 449,964 |  |  | 449,937 |  |  | 449,910 |
2.70% Medium-term notes due in 2017 ($400.0 million par value) |  | 399,972 |  |  | 399,963 |  |  | 399,955 |
1.55% Medium-term notes due in 2017 ($400.0 million par value) |  | 399,557 |  |  | 399,464 |  |  | — |
6.80% Medium-term notes due in 2018 ($888.0 million par value) |  | 887,467 |  |  | 887,381 |  |  | 903,741 |
2.40% Medium-term notes due in 2019 ($600.0 million par value) |  | 598,066 |  |  | 597,836 |  |  | — |
2.15% Medium-term notes due in 2020 ($600.0 million par value) |  | 598,718 |  |  | — |  |  | — |
Gross long-term debt |  | 6,111,717 |  |  | 4,772,843 |  |  | 4,739,311 |
Less: current portion of long-term debt |  | (1,551,368 | ) |  | (1,011,315 | ) |  | (944,915 | )
Long-term debt |  | $ | 4,560,349 |  |  | $ | 3,761,528 |  |  | $ | 3,794,396 |
During the first and second quarters of 2015, the Company issued $700.0 million and $500.0 million, respectively, of secured notes through term asset-backed securitization transactions. During the second quarter of 2014, the Company issued $850.0 million of secured notes through one term asset-backed securitization transaction. There were no other term asset-backed securitization transactions during the six months ended June 29, 2014. The term asset-backed securitization transactions are further discussed in Note 5. There were no medium-term notes issued or repurchased during the second quarter of 2015. During the first quarter of 2015, the Company issued $600.0 million of medium-term notes which mature in February 2020 and have an annual interest rate of 2.15%. There were no medium-term notes issued during the six months ended June 29, 2014. During the second quarter of 2014, HDFS repurchased an aggregate of $6.1 million of its 6.80% medium-term notes which mature in June 2018. As a result, HDFS recognized in financial services interest expense $1.1 million of loss on the extinguishment of debt, which included unamortized discounts and fees.

X
- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 + Details
Name: | us-gaap_DebtDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_SecuredLongtermDebtCurrentAndNoncurrentAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration