Restructuring Expenses

In January 2018, the Company initiated a plan to further improve its manufacturing operations and cost structure by commencing a multi-year manufacturing optimization plan which includes the consolidation of its motorcycle assembly plant in Kansas City, Missouri, into its plant in York, Pennsylvania, and the closure of its wheel operations in Adelaide, Australia (Manufacturing Optimization Plan). As the U.S. operations are consolidated, the Company expects approximately 800 jobs will be eliminated with the closure of Kansas City operations and approximately 450 jobs will be added in York through 2019. Approximately 90 jobs will be eliminated in Adelaide.

The Company expects to incur restructuring and other consolidation costs of $152 million to $162 million in the Motorcycles segment related to the Manufacturing Optimization Plan through 2019, of which approximately 70% will be cash charges.

The current estimate includes $129 million to $134 million of restructuring expense and $23 million to $28 million of costs related to temporary inefficiencies. The Company expects restructuring expenses to include the cost of employee termination benefits, accelerated depreciation, and other project implementation costs of $40 million to $41 million, $51 million to $53 million, and $38 million to $40 million, respectively.

In November 2018, the Company implemented a reorganization of its workforce (Reorganization Plan). As a result, approximately 70 employees left the Company on an involuntary basis.

Restructuring expense related to these plans is recorded as a separate line item in the consolidated statements of income and the accrued restructuring liability is recorded in Accrued liabilities on the consolidated balance sheet. The Company expects the plans to be completed by mid-2019. Changes in the accrued restructuring liability (in thousands) were as follows:



	Three months ended March 31, 2019
	Manufacturing Optimization Plan												Reorganization Plan
	Employee Termination Benefits			Accelerated Depreciation			Other			Total			Employee Termination Benefits			Total
Balance, beginning of period	$	24,958		$	—		$	79		$	25,037		$	3,461		$	28,498
Restructuring expense (benefit)	9			8,379			5,636			14,024			(394		)	13,630
Utilized - cash	(2,600		)	—			(5,528		)	(8,128		)	(2,014		)	(10,142		)
Utilized - non cash	—			(8,379		)	—			(8,379		)	—			(8,379		)
Foreign currency changes	34			—			—			34			(2		)	32
Balance, end of period	$	22,401		$	—		$	187		$	22,588		$	1,051		$	23,639



	Three months ended April 1, 2018
	Manufacturing Optimization Plan												Reorganization Plan
	Employee Termination Benefits			Accelerated Depreciation			Other			Total			Employee Termination Benefits		Total
Balance, beginning of period	$	—		$	—		$	—		$	—		$	—	$	—
Restructuring expense	40,791			5,613			438			46,842			—		46,842
Utilized - cash	(2,300		)	—			(374		)	(2,674		)	—		(2,674		)
Utilized - non cash	—			(5,613		)	—			(5,613		)	—		(5,613		)
Foreign currency changes	(204		)	—			(1		)	(205		)	—		(205		)
Balance, end of period	$	38,287		$	—		$	63		$	38,350		$	—	$	38,350

During the three months ended March 31, 2019, the restructuring liability was adjusted to reflect updated assumptions resulting in a reversal of approximately $0.4 million of previously recognized restructuring expense.

During the three months ended March 31, 2019 and April 1, 2018, the Company incurred $3.6 million and $0.7 million, respectively, of incremental cost of goods sold due to temporary inefficiencies resulting from implementing the Manufacturing Optimization Plan.