XML 29 R17.htm IDEA: XBRL DOCUMENT
v3.19.2

Derivative Instruments and Hedging Activities | 6 Months Ended
--- | ---
Jun. 30, 2019
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. The Company sells products in foreign currencies and utilizes foreign currency exchange contracts to mitigate the effects of foreign currency exchange rate fluctuations related to the Euro, Australian dollar, Japanese yen, Brazilian real, Canadian dollar, Mexican peso, Indian rupee, and Pound sterling. The foreign currency exchange contracts generally have maturities of less than one year. The Company utilizes commodity contracts to mitigate the effects of commodity price fluctuations related to metals and fuel consumed in the Company’s motorcycle production and distribution processes. The commodity contracts generally have maturities of less than one year. The Company periodically utilizes treasury rate lock contracts to fix the interest rate on a portion of the principal related to the anticipated issuance of long-term debt as well as interest rate swaps to reduce the impact of fluctuations in interest rates on floating rate medium-term notes. The Company also utilizes interest rate caps to facilitate certain asset-backed securitization transactions. All derivative instruments are recognized on the balance sheet at fair value. 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 cash flow hedges are 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 cash flow hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. No component of a hedging derivative instrument’s gain or loss is excluded from the assessment of hedge effectiveness. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign currency, commodity risks, and interest rate risks. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. The following tables summarize the notional and recorded fair values of the Company’s derivative financial instruments (in thousands):
|  | Derivatives Designated as Cash Flow Hedging Instruments Under ASC Topic 815
|  | June 30, 2019 |  | December 31, 2018 |  | July 1, 2018
Derivative |  | Notional Value |  | Other Current Assets |  | Accrued Liabil-ities |  | Notional Value |  | Other Current Assets |  | Accrued Liabil-ities |  | Notional Value |  | Other Current Assets |  | Accrued Liabil-ities
Foreign currency contracts |  | $ | 495,736 |  |  | $ | 6,638 |  |  | $ | 3,490 |  |  | $ | 442,976 |  |  | $ | 15,071 |  |  | $ | 313 |  |  | $ | 591,901 |  |  | $ | 13,238 |  |  | $ | — |
Commodity contracts |  | 627 |  |  | — |  |  | 69 |  |  | 827 |  |  | — |  |  | 46 |  |  | 803 |  |  | 4 |  |  | — |
Interest rate swaps |  | 900,000 |  |  | — |  |  | 11,920 |  |  | 900,000 |  |  | — |  |  | 4,494 |  |  | 450,000 |  |  | — |  |  | 597 |
Total |  | $ | 1,396,363 |  |  | $ | 6,638 |  |  | $ | 15,479 |  |  | $ | 1,343,803 |  |  | $ | 15,071 |  |  | $ | 4,853 |  |  | $ | 1,042,704 |  |  | $ | 13,242 |  |  | $ | 597 |
|  | Derivatives Not Designated as Hedging Instruments Under ASC Topic 815
|  | June 30, 2019 |  | December 31, 2018 |  | July 1, 2018
Derivative |  | Notional Value |  | Other Current Assets |  | Accrued Liabil-ities |  | Notional Value |  | Other Current Assets |  | Accrued Liabil-ities |  | Notional Value |  | Other Current Assets |  | Accrued Liabil-ities
Foreign currency contracts |  | $ | 317,344 |  |  | $ | 273 |  |  | $ | 1,816 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commodity contracts |  | 7,710 |  |  | 5 |  |  | 260 |  |  | 5,239 |  |  | — |  |  | 463 |  |  | 4,421 |  |  | 204 |  |  | 28 |
Interest rate cap |  | 481,509 |  |  | 4 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 806,563 |  |  | $ | 282 |  |  | $ | 2,076 |  |  | $ | 5,239 |  |  | $ | — |  |  | $ | 463 |  |  | $ | 4,421 |  |  | $ | 204 |  |  | $ | 28 |
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 |  | Amount of Gain/(Loss) Reclassified from AOCL into Income |  | Location of Gain/(Loss) Reclassified from AOCL into Income |  | Total Statement of Income Amount for Line Items in which the Effects of Cash Flow Hedges are Recorded
|  | Three months ended |  |  |  | Three months ended
Cash Flow Hedges |  | June 30, 2019 |  | July 1, 2018 |  | June 30, 2019 |  | July 1, 2018 |  | Statement of Income line item |  | June 30, 2019 |  | July 1, 2018
Foreign currency contracts |  | $ | (2,865 | ) |  | $ | 32,635 |  |  | $ | 7,668 |  |  | $ | 956 |  |  | Motorcycles cost of goods sold |  | $ | 979,266 |  |  | $ | 993,036 |
Commodity contracts |  | (70 | ) |  | 4 |  |  | (7 | ) |  | (12 | ) |  | Motorcycles cost of goods sold |  | $ | 979,266 |  |  | $ | 993,036 |
Treasury rate locks |  | — |  |  | — |  |  | (91 | ) |  | (91 | ) |  | Interest expense |  | $ | 7,784 |  |  | $ | 7,728 |
Treasury rate locks |  | — |  |  | 41 |  |  | (32 | ) |  | (34 | ) |  | Financial Services interest expense |  | $ | 52,673 |  |  | $ | 51,943 |
Interest rate swaps |  | (5,856 | ) |  | (886 | ) |  | (830 | ) |  | (289 | ) |  | Financial Services interest expense |  | $ | 52,673 |  |  | $ | 51,943 |
Total |  | $ | (8,791 | ) |  | $ | 31,794 |  |  | $ | 6,708 |  |  | $ | 530 |  |  |  |  |  |  |
|  | Amount of Gain/(Loss) Recognized in OCI, before tax |  | Amount of Gain/(Loss) Reclassified from AOCL into Income |  | Location of Gain/(Loss) Reclassified from AOCL into Income |  | Total Statement of Income Amount for Line Items in which the Effects of Cash Flow Hedges are Recorded
|  | Six months ended |  |  |  | Six months ended
Cash Flow Hedges |  | June 30, 2019 |  | July 1, 2018 |  | June 30, 2019 |  | July 1, 2018 |  | Statement of Income line item |  | June 30, 2019 |  | July 1, 2018
Foreign currency contracts |  | $ | 1,287 |  |  | $ | 26,745 |  |  | $ | 10,121 |  |  | $ | (5,753 | ) |  | Motorcycles cost of goods sold |  | $ | 1,827,464 |  |  | $ | 1,883,210 |
Commodity contracts |  | (40 | ) |  | (12 | ) |  | (17 | ) |  | (85 | ) |  | Motorcycles cost of goods sold |  | $ | 1,827,464 |  |  | $ | 1,883,210 |
Treasury rate locks |  | — |  |  | — |  |  | (181 | ) |  | (181 | ) |  | Interest expense |  | $ | 15,515 |  |  | $ | 15,418 |
Treasury rate locks |  | — |  |  | 41 |  |  | (64 | ) |  | (70 | ) |  | Financial Services interest expense |  | $ | 104,997 |  |  | $ | 100,393 |
Interest rate swaps |  | (8,861 | ) |  | (886 | ) |  | (1,436 | ) |  | (289 | ) |  | Financial Services Interest expense |  | $ | 104,997 |  |  | $ | 100,393 |
Total |  | $ | (7,614 | ) |  | $ | 25,888 |  |  | $ | 8,423 |  |  | $ | (6,378 | ) |  |  |  |  |  |
The amount of net loss included in Accumulated other comprehensive loss (AOCL) at June 30, 2019, estimated to be reclassified into income over the next twelve months was $3.2 million. The following table summarizes the amount of gains and losses recognized in income related to derivative financial instruments not designated as hedging instruments (in thousands). Foreign currency contracts and commodity contracts were recorded in Motorcycles cost of goods sold and the interest rate cap was recorded in Financial services interest expense.
|  | Amount of Gain (Loss) Recognized in Income on Derivative
|  | Three months ended |  | Six months ended
Derivatives Not Designated as Hedges |  | June 30, 2019 |  | July 1, 2018 |  | June 30, 2019 |  | July 1, 2018
Foreign currency contracts |  | $ | (1,004 | ) |  | $ | — |  |  | $ | (117 | ) |  | $ | — |
Commodity contracts |  | (310 | ) |  | 195 |  |  | 7 |  |  | 201 |
Interest rate cap |  | (141 | ) |  | — |  |  | (141 | ) |  | — |
Total |  | $ | (1,455 | ) |  | $ | 195 |  |  | $ | (251 | ) |  | $ | 201 |
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.

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

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration