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Derivative Instruments and Hedging Activities | 6 Months Ended
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Jun. 28, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company is exposed to certain risks such as foreign currency exchange rate risk, interest rate risk and commodity price risk. To reduce its exposure to such risks, the Company selectively uses derivative financial instruments. All derivative transactions are authorized and executed pursuant to regularly reviewed policies and procedures, which prohibit the use of financial instruments for speculative trading purposes. All derivative instruments are recognized on the balance sheet at fair value (see Note 6). In accordance with ASC Topic 815, “Derivatives and Hedging,” the accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Changes in the fair value of derivatives that are designated as fair value hedges, along with the gain or loss on the hedged item, are recorded in current period earnings. For derivative instruments that are designated as cash flow hedges, the effective portion of gains and losses that result from changes in the fair value of derivative instruments is initially recorded in other comprehensive income (OCI) and subsequently reclassified into earnings when the hedged item affects income. The Company assesses, both at the inception of each hedge and on an on-going basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Any ineffective portion is immediately recognized in earnings. No component of a hedging derivative instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivative instruments that do not qualify for hedge accounting are recorded at fair value, and any changes in fair value are recorded in current period earnings. The Company sells its products internationally and in most markets those sales are made in the foreign country’s local currency. As a result, the Company’s earnings can be affected by fluctuations in the value of the U.S. dollar relative to foreign currency. The Company’s most significant foreign currency risk relates to the Euro, the Australian dollar, the Japanese yen and the Brazilian real. The Company utilizes foreign currency exchange contracts to mitigate the effects of these currencies’ fluctuations on earnings. The foreign currency exchange contracts are entered into with banks and allow the Company to exchange a specified amount of foreign currency for U.S. dollars at a future date, based on a fixed exchange rate. The Company utilizes commodity contracts to hedge portions of the cost of certain commodities consumed in the Company’s motorcycle production and distribution operations. The Company’s foreign currency exchange contracts and commodity contracts generally have maturities of less than one year. During the second quarter of 2015, the Company entered into treasury rate locks to hedge the underlying U.S. treasury rate related to its anticipated issuance of senior unsecured debt during the third quarter of 2015. To the extent effective, gains and losses on the fair value of the treasury rate locks will be deferred until the forecasted debt is issued and will be amortized to earnings over the life of the debt. The following table summarizes the fair value of the Company’s derivative financial instruments (in thousands):
| June 28, 2015 |  | December 31, 2014 |  | June 29, 2014
Derivatives Designated As Hedging Instruments Under ASC Topic 815 | Notional Value |  | Asset Fair Value(a) |  | Liability Fair Value(b) |  | Notional Value |  | Asset Fair Value(a) |  | Liability Fair Value(b) |  | Notional Value |  | Asset Fair Value(a) |  | Liability Fair Value(b)
Foreign currency contracts(c) | $ | 367,309 |  |  | $ | 23,136 |  |  | $ | — |  |  | $ | 339,077 |  |  | $ | 32,244 |  |  | $ | — |  |  | $ | 398,338 |  |  | $ | 3,091 |  |  | $ | 1,461 |
Commodity contracts(c) | 1,166 |  |  | — |  |  | 98 |  |  | 1,728 |  |  | — |  |  | 414 |  |  | 1,411 |  |  | — |  |  | 17 |
Treasury rate locks(c) | 300,000 |  |  | 3,365 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 668,475 |  |  | $ | 26,501 |  |  | $ | 98 |  |  | $ | 340,805 |  |  | $ | 32,244 |  |  | $ | 414 |  |  | $ | 399,749 |  |  | $ | 3,091 |  |  | $ | 1,478 |
| June 28, 2015 |  | December 31, 2014 |  | June 29, 2014
Derivatives Not Designated As Hedging Instruments Under ASC Topic 815 | Notional Value |  | Asset Fair Value(a) |  | Liability Fair Value(b) |  | Notional Value |  | Asset Fair Value(a) |  | Liability Fair Value(b) |  | Notional Value |  | Asset Fair Value(a) |  | Liability Fair Value(b)
Commodity contracts | $ | 8,218 |  |  | $ | — |  |  | $ | 888 |  |  | $ | 11,804 |  |  | $ | — |  |  | $ | 1,613 |  |  | $ | 7,754 |  |  | $ | 68 |  |  | $ | — |
| $ | 8,218 |  |  | $ | — |  |  | $ | 888 |  |  | $ | 11,804 |  |  | $ | — |  |  | $ | 1,613 |  |  | $ | 7,754 |  |  | $ | 68 |  |  | $ | — |
(a) | Foreign currency and commodity contract fair value included in other current assets and Treasury rate lock fair value included in other long-term assets
(b) | Included in accrued liabilities
(c) | Derivative designated as a cash flow hedge
The following tables summarize the amount of gains and losses related to derivative financial instruments designated as cash flow hedges (in thousands):
| Amount of Gain/(Loss) Recognized in OCI, before tax
| Three months ended |  | Six months ended
Cash Flow Hedges | June 28, 2015 |  | June 29, 2014 |  | June 28, 2015 |  | June 29, 2014
Foreign currency contracts | $ | (4,458 | ) |  | $ | 3,931 |  |  | $ | 28,210 |  |  | $ | 2,493 |
Commodity contracts | (3 | ) |  | (24 | ) |  | (123 | ) |  | 191 |
Treasury rate locks | 3,365 |  |  | — |  |  | 3,365 |  |  | — |
Total | $ | (1,096 | ) |  | $ | 3,907 |  |  | $ | 31,452 |  |  | $ | 2,684 |
| Amount of Gain/(Loss) Reclassified from AOCL into Income |  |
| Three months ended |  | Six months ended |  | Expected to be Reclassified
Cash Flow Hedges | June 28, 2015 |  | June 29, 2014 |  | June 28, 2015 |  | June 29, 2014 |  | Over the Next Twelve Months
Foreign currency contracts(a) | $ | 20,131 |  |  | $ | (1,183 | ) |  | $ | 35,407 |  |  | $ | (2,241 | ) |  | $ | 23,461 |
Commodity contracts(a) | (125 | ) |  | 87 |  |  | (439 | ) |  | 283 |  |  | (98 | )
Treasury rate locks(b) | — |  |  | — |  |  | — |  |  | — |  |  | 191 |
Total | $ | 20,006 |  |  | $ | (1,096 | ) |  | $ | 34,968 |  |  | $ | (1,958 | ) |  | $ | 23,554 |
(a) | Gain/(loss) reclassified from accumulated other comprehensive loss (AOCL) to income is included in cost of goods sold
(b) | Gain/(loss) reclassified from accumulated other comprehensive loss (AOCL) to income will be included in interest expense
For the three and six months ended June 28, 2015 and June 29, 2014, the cash flow hedges were highly effective and, as a result, the amount of hedge ineffectiveness was not material. No amounts were excluded from effectiveness testing. The following tables summarize the amount of gains and losses related to derivative financial instruments not designated as hedging instruments (in thousands):
| Amount of Gain/(Loss) Recognized in Income on Derivative
| Three months ended |  | Six months ended
Derivatives Not Designated As Hedges | June 28, 2015 |  | June 29, 2014 |  | June 28, 2015 |  | June 29, 2014
Commodity contracts(a) | $ | 14 |  |  | $ | 184 |  |  | $ | (526 | ) |  | $ | (144 | )
Total | $ | 14 |  |  | $ | 184 |  |  | $ | (526 | ) |  | $ | (144 | )
(a) | Gain/(loss) recognized in income is included in cost of goods sold.
The Company is exposed to credit loss risk in the event of non-performance by counterparties to these derivative financial instruments. Although no assurances can be given, the Company does not expect any of the counterparties to these derivative financial instruments to fail to meet its obligations. To manage credit loss risk, the Company evaluates counterparties based on credit ratings and, on a quarterly basis, evaluates each hedge’s net position relative to the counterparty’s ability to cover its position.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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