Polaris 2013 Annual Report Download - page 81

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employees of outstanding competence and ability with no cash payments required from the recipient. Awards
granted through 2011 are paid in cash and are based on certain Company performance measures that are
measured over a period of three consecutive calendar years. At the beginning of the plan cycle, participants
had the option to receive a cash value at the time of awards or a cash value tied to Polaris stock price
movement over the three year plan cycle. At December 31, 2013 and 2012, Polaris’ liability under the plan
totaled $57,166,000 and $66,586,000, respectively. Beginning in 2012, long term incentive program awards are
granted in restricted stock units and therefore treated as equity awards. All remaining conditions of the long
term incentive program remained the same as prior to 2012.
Share-based compensation expense. The amount of compensation cost for share-based awards to be recognized
during a period is based on the portion of the awards that are ultimately expected to vest. The Company
estimates stock option forfeitures at the time of grant and revises those estimates in subsequent periods if
actual forfeitures differ from those estimates. The Company analyzes historical data to estimate pre-vesting
forfeitures and records share compensation expense for those awards expected to vest.
Total share-based compensation expenses were as follows (in thousands):
For the Years Ended
December 31,
2013 2012 2011
Option plan .................................... $22,245 $16,497 $ 9,948
Other share-based awards .......................... 57,640 56,770 63,872
Total share-based compensation before tax .............. 79,885 73,267 73,820
Tax benefit ..................................... 29,835 27,401 27,929
Total share-based compensation expense included in net
income ...................................... $50,050 $45,866 $45,891
These share-based compensation expenses are reflected in cost of sales and operating expenses in the
accompanying consolidated statements of income. For purposes of determining the estimated fair value of
option awards on the date of grant under ASC Topic 718, Polaris has used the Black-Scholes option-pricing
model. Assumptions utilized in the model are evaluated and revised, as necessary, to reflect market conditions
and experience.
At December 31, 2013, there was $61,414,000 of total unrecognized share-based compensation expense related
to unvested share-based equity awards. Unrecognized share-based compensation expense is expected to be
recognized over a weighted-average period of 1.48 years. Included in unrecognized share-based compensation
is approximately $34,037,000 related to stock options and $27,377,000 for restricted stock.
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