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Asset-Backed Financing | 12 Months Ended
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Dec. 31, 2015
Secured Debt [Abstract] |
Asset-Backed Financing | 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 assets are either transferred to consolidated VIEs or the Company maintains effective control over the assets and does not meet the accounting sale requirements under ASC Topic 860. See Note 1 for more information on the Company's accounting for asset-backed financings and VIEs. The following table shows the assets and liabilities related to the Company's asset-backed financings that were included in its financial statements at December 31 (in thousands):
| 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 | $ | 1,611,624 |  |  | $ | (37,937 | ) |  | $ | 100,151 |  |  | $ | 4,383 |  |  | $ | 1,678,221 |  |  | $ | 1,463,154 |
Asset-backed U.S. commercial paper conduit facility | — |  |  | — |  |  | — |  |  | 323 |  |  | 323 |  |  | — |
Unconsolidated VIEs |  |  |  |  |  |  |  |  |  |  |
Asset-backed Canadian commercial paper conduit facility | 170,708 |  |  | (3,061 | ) |  | 10,491 |  |  | 393 |  |  | 178,531 |  |  | 153,839 |
Total | $ | 1,782,332 |  |  | $ | (40,998 | ) |  | $ | 110,642 |  |  | $ | 5,099 |  |  | $ | 1,857,075 |  |  | $ | 1,616,993 |
| 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 | $ | 1,643,701 |  |  | $ | (35,121 | ) |  | $ | 122,052 |  |  | $ | 3,671 |  |  | $ | 1,734,303 |  |  | $ | 1,438,445 |
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 transactions 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. 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. Restricted cash balances held by the SPEs are used only to support the securitizations. In 2015, the Company transferred a total of $1.31 billion of U.S. retail motorcycle finance receivables to two separate SPEs. The SPEs in turn issued $1.20 billion of secured notes. In 2014, the Company transferred $924.9 million of U.S. retail motorcycle finance receivables to one SPE. The SPE in turn issued $850.0 million of secured notes. At December 31, 2015, the Company's consolidated balance sheet included outstanding balances related to the following secured notes with the related maturity dates and interest rates (in thousands):
Issue Date |  | Principal Amount at Date of Issuance |  | Weighted-Average Rate at Date of Issuance |  | Contractual Maturity Date
May 2015 |  | $500,000 |  | 0.88% |  | May 2016 - December 2022
January 2015 |  | $700,000 |  | 0.89% |  | February 2016 - August 2022
April 2014 |  | $850,000 |  | 0.66% |  | April 2015 - October 2021
April 2013 |  | $650,000 |  | 0.57% |  | May 2014 - December 2020
July 2012 |  | $675,306 |  | 0.59% |  | August 2013 - June 2018
In addition to the above transactions, during 2012 the Company issued $89.5 million of secured notes through the sale of notes that had been previously retained as part of the December 2009, August 2011 and November 2011 term asset-backed securitization transactions. These notes were sold at a premium. During 2015, the notes related to the August 2011 and November 2011 term asset-backed securitization transactions were repaid. During 2013, the notes related to the December 2009 term asset-backed securitization transaction were repaid. Outstanding balances related to the following secured notes were included in the Company's consolidated balance sheet at December 31, 2014 and the Company completed repayment of those balances during 2015 (in thousands):
| Issue Date |  | Principal Amount at Date of Issuance |  | Weighted-Average Rate at Date of Issuance |  | Contractual Maturity Date
| November 2011 |  | $513,300 |  | 0.88% |  | November 2012 - February 2018
| August 2011 |  | $573,380 |  | 0.76% |  | September 2012 - August 2017
For the year ended December 31, 2015 and 2014, interest expense on the secured notes was $17.2 million and $13.5 million, respectively, which is included in financial services interest expense. The weighted average interest rate of the outstanding term asset-backed securitization transactions was 1.04% and 0.94% at December 31, 2015 and 2014, respectively. Asset-Backed U.S. Commercial Paper Conduit Facility VIE On December 14, 2015, the Company entered into a new revolving facility agreement (U.S. Conduit) with a third party bank-sponsored asset-backed U.S. commercial paper conduit, which provides for a total aggregate commitment of up to $600.0 million based on, among other things, the amount of eligible U.S. retail motorcycle finance receivables held by the SPE as collateral. The prior facility agreement expired on December 14, 2015 and had similar terms. 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 based on prevailing commercial paper rates or LIBOR to the extent the advance is not funded by a conduit lender through the issuance of commercial paper plus, in each case, a program fee based on outstanding principal. 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 will be 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 December 14, 2016. The SPE had no borrowings outstanding under the U.S. Conduit at December 31, 2015 or 2014; therefore, these assets are restricted as collateral for the payment of fees associated with the unused portion of the total aggregate commitment of $600.0 million. For both years ended December 31, 2015 and 2014, the interest expense was $1.1 million related to the unused portion of the total aggregate commitment of $600.0 million. Interest expense on the U.S. Conduit is included in financial services interest expense. There was no weighted average interest rate at December 31, 2015 or 2014 as the Company had no outstanding borrowings under the U.S. Conduit during 2015 or 2014. Asset-Backed Canadian Commercial Paper Conduit Facility In June 2015, 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 from the Company for proceeds up to C$240 million. The transferred assets are restricted as collateral for the payment of 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$240 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, the Canadian Conduit expires on June 30, 2016. The contractual maturity of the debt is approximately 5 years. During 2015 and 2014, the Company transferred $100.0 million and $97.1 million, respectively, of Canadian retail motorcycle finance receivables to the Canadian Conduit for proceeds of $87.5 million and $85.0 million, respectively. For the years ended December 31, 2015 and 2014, the Company recorded interest expense of $3.0 million and $3.5 million, respectively, on the secured notes. Interest expense on the Canadian Conduit is included in financial services interest expense. The weighted average interest rate of the outstanding Canadian Conduit was 1.80% and 2.03% at December 31, 2015 and 2014. 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, is $24.7 million at December 31, 2015. The maximum exposure is not an indication of the Company's expected loss exposure. Debt Debt with contractual terms less than one year is generally classified as short-term debt and consisted of the following as of December 31 (in thousands):
|  | 2015 |  | 2014
Unsecured commercial paper |  | $ | 1,201,380 |  |  | $ | 731,786 |
Debt with a contractual term greater than one year is generally classified as long-term debt and consisted of the following as of December 31 (in thousands):
|  | 2015 |  | 2014
Secured debt |  |  |  |
Asset-backed Canadian commercial paper conduit facility |  | $ | 153,839 |  |  | $ | 166,912 |
Term asset-backed securitization debt |  | 1,463,154 |  |  | 1,271,533 |
Unsecured notes |  |  |  |
1.15% Medium-term notes due in 2015 ($600.0 million par value) |  | — |  |  | 599,817 |
3.88% Medium-term notes due in 2016 ($450.0 million par value) |  | 449,991 |  |  | 449,937 |
2.70% Medium-term notes due in 2017 ($400.0 million par value) |  | 399,980 |  |  | 399,963 |
1.55% Medium-term notes due in 2017 ($400.0 million par value) |  | 399,650 |  |  | 399,464 |
6.80% Medium-term notes due in 2018 ($879.0 million par value) |  | 878,308 |  |  | 887,381 |
2.40% Medium-term notes due in 2019 ($600.0 million par value) |  | 598,296 |  |  | 597,836 |
2.15% Medium-term notes due in 2020 ($600.0 million par value) |  | 598,856 |  |  | — |
3.50% Senior unsecured notes due in 2025 ($450.0 million par value) |  | 447,608 |  |  | — |
4.625% Senior unsecured notes due in 2045 ($300.0 million par value) |  | 299,326 |  |  | — |
Gross long-term debt |  | 5,689,008 |  |  | 4,772,843 |
Less: current portion of long-term debt |  | (843,620 | ) |  | (1,011,315 | )
Long-term debt |  | $ | 4,845,388 |  |  | $ | 3,761,528 |
A summary of the Company’s expected principal payments for debt obligations as of December 31, 2015 is as follows (in thousands):
|  | 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | Thereafter |  | Total
Principal payments on debt |  | $ | 2,045,000 |  |  | $ | 1,177,493 |  |  | $ | 1,303,698 |  |  | $ | 934,386 |  |  | $ | 682,877 |  |  | $ | 746,934 |  |  | $ | 6,890,388 |
Commercial paper maturities may range up to 365 days from the issuance date. The weighted-average interest rate of outstanding commercial paper balances was 0.56% and 0.30% at December 31, 2015 and 2014, respectively. In April 2014, the Company entered into a new $675.0 million five-year credit facility to refinance and replace a $675 million four-year credit facility that was due to mature in April 2015. The new five-year credit facility matures in April 2019. The Company also has a $675.0 million five-year credit facility which matures in April 2017. The new five-year credit facility and the existing five-year credit facility (together, the Global Credit Facilities) bear interest at various variable interest rates, which may be adjusted upward or downward depending on certain criteria, such as credit ratings. The Global Credit Facilities also require the Company to pay a fee based upon the average daily unused portion of the aggregate commitments under the Global Credit Facilities. The Global Credit Facilities are committed facilities and primarily used to support the Company's unsecured commercial paper program. During July 2015, the Company borrowed C$20 million under the Global Credit Facilities and repaid the borrowings in August 2015. No borrowings were outstanding at December 31, 2015 and 2014. In December 2015, the Company entered into a new revolving facility agreement (U.S. Conduit) with a third party bank-sponsored asset-backed U.S. commercial paper conduit, which provides for a total aggregate commitment of $600.0 million. The prior facility agreement expired on December 14, 2015 and had similar terms. At December 31, 2015 and 2014, the Company had no outstanding borrowings under the U.S. Conduit. Refer to Note 6 for further discussion on the U.S. Conduit. In June 2015, the Company amended its revolving 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 from the Company eligible Canadian retail motorcycle financial receivables for proceeds up to C$240 million. During 2015 and 2014, the Company transferred $100.0 million and $97.1 million, respectively, of Canadian retail motorcycle finance receivables for proceeds of $87.5 million and $85.0 million, respectively. Approximately $40.3 million and $44.6 million of the debt was classified as current portion of long-term debt at December 31, 2015 and 2014. Refer to Note 6 for further discussion on the Canadian Conduit. During 2015, the Company issued $1.20 billion of secured notes through two term asset-backed securitization transactions. During 2014, the Company issued $850.0 million of secured notes through a term asset-backed securitization transaction. Approximately $353.4 million and $366.9 million of the obligations under the secured notes were classified as current at December 31, 2015 and 2014, respectively, based on the contractual maturities of the restricted finance receivables. The term-asset backed securitization transactions are further discussed in Note 6. In February 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%. In September 2014, the Company issued $600.0 million of medium-term notes which mature in September 2019 and have an annual interest rate of 2.40%. In November 2014, the Company issued $400.0 million of medium-term notes which mature in November 2017 and have an annual interest rate of 1.55%. All of the Company's medium-term notes (collectively, the Notes) provide for semi-annual interest payments and principal due at maturity. Unamortized discounts on the Notes reduced the balance by $3.6 million at December 31, 2015 and 2014. During 2015, 2014, and 2013, the Company repurchased an aggregate of $9.3 million, $22.6 million, and $23.0 million respectively, of its 6.80% medium-term notes which mature in June 2018. As a result, the Company recognized in financial services interest expense $1.1 million, $3.9 million, and $4.9 million of loss on extinguishment of debt, respectively, which included unamortized discounts and fees. During September 2015, $600.0 million of 1.15% medium-term notes matured, and the principal and accrued interest were paid in full. During December 2014, $500.0 million of the 5.75% medium-term notes matured, and the principal and accrued interest were paid in full. In July 2015, the Company issued $450.0 million of senior unsecured notes that mature in July 2025 that have an interest rate of 3.50% and $300.0 million of senior unsecured notes that mature in July 2045 that have an interest rate of 4.625% in an underwritten offering. The senior unsecured notes provide for semi-annual interest payments and principal due at maturity. The Company is using the proceeds from the issuance to repurchase shares of the Company's common stock. Unamortized discounts on the senior unsecured notes reduced the balance by $3.1 million at December 31, 2015. In February 2009, the Company issued $600.0 million of senior unsecured notes in an underwritten offering. The senior unsecured notes provided for semi-annual interest payments and principal due at maturity. The senior unsecured notes matured in February 2014 and had an annual interest rate of 15%. During the fourth quarter of 2010, the Company repurchased $297.0 million of the $600.0 million senior unsecured notes and the remaining $303.0 million was repaid at maturity in February 2014. HDFS and the Company are subject to various operating and financial covenants related to the Global Credit Facilities and various operating covenants under the Notes and the U.S. and Canadian asset-backed commercial paper conduit facilities. The more significant covenants are described below. The operating covenants limit the Company’s and HDFS’ ability to:
• | assume or incur certain liens;
• | participate in certain mergers, consolidations, liquidations or dissolutions; and
• | purchase or hold margin stock.
Under the current financial covenants of the Global Credit Facilities, the consolidated debt to equity ratio of HDFS cannot exceed 10.0 to 1.0 as of the end of any fiscal quarter. In addition, the ratio of the Company's consolidated debt to the Company's consolidated debt and equity, in each case excluding the debt of HDFS and its subsidiaries, cannot exceed 0.65 to 1.0 as of the end of any fiscal quarter. No financial covenants are required under the Notes or the U.S. or Canadian asset-backed commercial paper conduit facilities. At December 31, 2015 and 2014, HDFS and the Company remained in compliance with all of these covenants.

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- 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 + Details
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