Polaris 2013 Annual Report Download - page 84

date is also the redemption date, with any difference from stock-based compensation recorded in retained
earnings. At December 31, 2013, 57,821 shares are recorded at a fair value of $8,421,000 in temporary equity,
which includes $4,358,000 of compensation cost and $4,063,000 of cumulative fair value adjustment recorded
through retained earnings.
Note 4. Financing Agreement
Bank financing. In August 2011, Polaris entered into a $350,000,000 unsecured revolving loan facility. In
January 2013, Polaris amended the loan facility to provide more beneficial covenant and interest rate terms
and extend the expiration date from August 2016 to January 2018. Interest is charged at rates based on
LIBOR or ‘‘prime.’’ At December 31, 2013, borrowings under the revolving loan facility totaled $80,500,000.
There were no borrowings under the revolving loan facility at December 31, 2012.
In December 2010, the Company entered into a Master Note Purchase Agreement to issue $25,000,000 of
3.81 percent unsecured senior notes due May 2018 and $75,000,000 of 4.60 percent unsecured senior notes
due May 2021 (collectively, the ‘‘Senior Notes’’). The Senior Notes were issued in May 2011. In December
2013, the Company entered into a First Supplement to Master Note Purchase Agreement, under which the
Company issued $100,000,000 of 3.13 percent unsecured senior notes due December 2020. At December 31,
2013 and 2012, outstanding borrowings under the amended Master Note Purchase Agreement totaled
$200,000,000 and $100,000,000, respectively.
The unsecured revolving loan facility and the amended Master Note Purchase Agreement contain covenants
that require Polaris to maintain certain financial ratios, including minimum interest coverage and maximum
leverage ratios. Polaris was in compliance with all such covenants as of December 31, 2013.
The Company entered into and settled an interest rate lock contract in November 2009 in connection with the
Master Note Purchase Agreement. The interest rate lock settlement resulted in a $251,000 gain, net of
deferred taxes of $149,000, which will be amortized into income over the life of the related debt.
The following summarizes activity under Polaris’ credit arrangements (dollars in thousands):
2013 2012 2011
Total borrowings at December 31 .................. $280,500 $100,000 $100,000
Average outstanding borrowings during year .......... $138,400 $100,000 $133,800
Maximum outstanding borrowings during year ......... $411,000 $100,000 $200,000
Interest rate at December 31 ...................... 2.98% 4.40% 4.40%
The carrying amount of the Company’s long-term debt approximates its fair value as December 31, 2013 and
2012.
Capital leases: As of December 31, 2013 and 2012, the Company’s capital lease obligations totaled $7,123,000
and $7,179,000, respectively, which included $3,281,000 and $2,887,000, respectively, classified as a current
liability.
Letters of credit: At December 31, 2013, Polaris had open letters of credit totaling $19,102,000. The amounts
are primarily related to inventory purchases and are reduced as the purchases are received.
Dealer financing programs: Certain finance companies, including Polaris Acceptance, an affiliate (see Note 8),
provide floor plan financing to dealers on the purchase of Polaris products. The amount financed by
worldwide dealers under these arrangements at December 31, 2013, was approximately $1,163,545,000. Polaris
has agreed to repurchase products repossessed by the finance companies up to an annual maximum of no
more than 15 percent of the average month-end balances outstanding during the prior calendar year. Polaris’
financial exposure under these arrangements is limited to the difference between the amount paid to the
finance companies for repurchases and the amount received on the resale of the repossessed product. No
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