Harley Davidson 2015 Annual Report Download - page 39

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liabilities. In the ordinary course of the Company’s business, there are transactions and calculations where the ultimate tax
determination is uncertain. Accruals for unrecognized tax benefits are provided for in accordance with the requirements of ASC
Topic 740. An unrecognized tax benefit represents the difference between the recognition of benefits related to items for
income tax reporting purposes and financial reporting purposes. The unrecognized tax benefit is included within other long-
term liabilities in the Consolidated Balance Sheets. The Company has a reserve for interest and penalties on exposure items, if
applicable, which is recorded as a component of the overall income tax provision. The Company is regularly audited by tax
authorities as a normal course of business. Although the outcome of tax audits is always uncertain, management believes that it
has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to
pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing
authorities may differ materially from the amounts accrued for each year.
Contractual Obligations
A summary of the Company’s expected payments for significant contractual 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 $ 2,481,191 $ 1,617,263 $ 746,934 $ 6,890,388
Interest payments on debt 159,028 236,972 89,193 425,625 910,818
Operating lease payments 13,727 17,049 11,655 13,098 55,529
$ 2,217,755 $ 2,735,212 $ 1,718,111 $ 1,185,657 $ 7,856,735
Interest for floating rate instruments assumes December 31, 2015 rates remain constant.
As of December 31, 2015, the Company generally had no significant purchase obligations, other than those created in the
ordinary course of business. Purchase orders issued for inventory and supplies used in product manufacturing generally do not
become firm commitments until 90 days prior to expected delivery and can be modified to a certain extent until 30 days prior to
expected delivery.
The Company has long-term obligations related to its pension, SERPA and postretirement healthcare plans at
December 31, 2015. During 2015, the Company contributed $28.5 million to its pension, SERPA and postretirement healthcare
plans. No additional contributions were required during 2015 beyond current benefit payments for SERPA and postretirement
healthcare plans. In January 2016, the Company voluntarily contributed $25 million to its qualified pension plan to further fund
its pension plan and the Company expects that no additional qualified plan contributions will be required in 2016.(1) Also, the
Company expects it will continue to make on-going contributions related to current benefit payments for SERPA and
postretirement healthcare plans.(1) The Company’s expected future contributions to these plans are provided in Note 13 of Notes
to Consolidated Financial Statements.
As described in Note 12 of Notes to Consolidated Financial Statements, the Company has unrecognized tax benefits of
$73.1 million and accrued interest and penalties of $28.7 million as of December 31, 2015. However, the Company cannot
make a reasonably reliable estimate for the period of cash settlement for either the liability for unrecognized tax benefits or
accrued interest and penalties.
Commitments and Contingencies
The Company is subject to lawsuits and other claims related to environmental, product and other matters. In determining
required reserves related to these items, the Company carefully analyzes cases and considers the likelihood of adverse
judgments or outcomes, as well as the potential range of possible loss. The required reserves are monitored on an ongoing basis
and are updated based on new developments or new information in each matter.
Environmental Protection Agency Notice
In December 2009, the Company received formal, written requests for information from the United States Environmental
Protection Agency (EPA) regarding: (i) certificates of conformity for motorcycle emissions and related designations and labels,
(ii) aftermarket parts, and (iii) warranty claims on emissions related components. The Company promptly submitted written
responses to the EPA’s inquiry and has engaged in discussions with the EPA. Since that time, the EPA has delivered various
additional requests for information to which the Company has responded. It is probable that a result of the EPA’s investigation
will be some form of enforcement action by the EPA that will seek a fine and/or other relief. The Company has a reserve
associated with this matter which is included in accrued liabilities in the Consolidated Balance Sheet. However, given the
uncertainty that still exists concerning the resolution of this matter, there is a possibility that the actual loss incurred may be