Polaris 2015 Annual Report Download - page 82

Note 2. Share-Based Compensation
Share-based plans. The Company grants long-term equity-based incentives and rewards for the benefit of its
employees and directors under the shareholder approved Polaris Industries Inc. 2007 Omnibus Incentive Plan
(as amended) (the ‘‘Omnibus Plan’’), which were previously provided under several separate incentive and
compensatory plans. Upon approval by the shareholders of the Omnibus Plan in April 2007, the Polaris
Industries Inc. 1995 Stock Option Plan (‘‘Option Plan’’), the 1999 Broad Based Stock Option Plan, the
Restricted Stock Plan and the 2003 Non-Employee Director Stock Option Plan (‘‘Director Stock Option Plan’’
and collectively the ‘‘Prior Plans’’) were frozen and no further grants or awards have since been or will be
made under such plans. A maximum of 21,000,000 shares of common stock are available for issuance under
the Omnibus Plan, together with additional shares canceled or forfeited under the Prior Plans.
Stock option awards granted to date under the Omnibus Plan generally vest two to four years from the award
date and expire after ten years. In addition, since 2007, the Company has granted a total of 146,000 deferred
stock units to its non-employee directors under the Omnibus Plan (8,000, 9,000 and 12,000 in 2015, 2014 and
2013, respectively) which will be converted into common stock when the director’s board service ends or upon
a change in control. Restricted shares awarded under the Omnibus Plan to date generally contain restrictions,
which lapse after a two to four year period if Polaris achieves certain performance measures.
The Option Plan, which is frozen, was used to issue incentive and nonqualified stock options to certain
employees. Options granted to date generally vest three years from the award date and expire after ten years.
The Director Stock Option Plan, which is frozen and contains no unexercised awards as of December 31,
2015, was used to issue nonqualified stock options to non-employee directors.
Under the Polaris Industries Inc. Deferred Compensation Plan for Directors (‘‘Director Plan’’), members of
the Board of Directors who are not Polaris officers or employees may annually elect to receive common stock
equivalents in lieu of director fees, which will be converted into common stock when board service ends. A
maximum of 500,000 shares of common stock has been authorized under this plan of which 107,000
equivalents have been earned and an additional 383,000 shares have been issued to retired directors as of
December 31, 2015. As of December 31, 2015 and 2014, Polaris’ liability under the plan totaled $9,167,000
and $15,217,000, respectively.
Polaris maintains a long term incentive program under which awards are issued to provide incentives for
certain employees to attain and maintain the highest standards of performance and to attract and retain
employees of outstanding competence and ability with no cash payments required from the recipient. Awards
granted through 2011 were paid in cash and were 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, 2015, Polaris’ liability under the plan totaled $0,
and the final cash payout was made in 2014. 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.
58