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POLARIS INDUSTRIES INC. ANNUAL REPORT

Table of contents

  • Page 1
    POLARIS INDUSTRIES INC. ANNUAL REPORT

  • Page 2
    ... EVEN MORE BREAKTHROUGH NEW PRODUCTS. BY COMBINING OUR DIVERSE PORTFOLIO OF BEST-IN-CLASS BRANDS WITH OPERATIONAL EXCELLENCE AND IRREPRESSIBLE TALENT, WE PLAN TO CONTINUE CAPTURING IMAGINATIONS AS WE CAPTURE GREATER MARKET SHARE, CUSTOMERS AND PROFITS TO CONTINUE DELIVERING STRONG SHAREHOLDER VALUE.

  • Page 3

  • Page 4
    ... IS BOTH BROAD AND DEEP: OUR MARKET-LEADING POWERSPORTS PRODUCTS INCLUDE ALL-TERRAIN RECREATIONAL, UTILITY AND MILITARY OFF-ROAD VEHICLES (ORVS); SNOWMOBILES; MOTORCYCLES; AND RELATED PARTS, GARMENTS AND ACCESSORIES (PG&A). OUR SMALL VEHICLES INCLUDE ON-ROAD LIGHT-DUTY HAULERS, PEOPLE MOVERS AND...

  • Page 5
    HEADQUARTERS: MEDINA, MINNESOTA SOLD IN: MORE THAN 100 COUNTRIES EMPLOYEES: APPROXIMATELY 7,800 NYSE SYMBOL: PII SNOWMOBILES SMALL VEHICLES PG&A Mountain Powersports accessories Light-duty haulers Performance/trail Light-duty haulers Mid-size People movers Light-duty haulers Technical ...

  • Page 6
    ... capable Polaris. Our more than 7,800 global employees work hard every day to deliver value for our customers, and increasingly, to make us better. Not one of us thinks this is the time to relax and enjoy our success, especially as we see intensifying competition and weakening growth in many markets...

  • Page 7
    ... and capture opportunities while affording us ï¬,exibility to respond to shifts in our markets. And even as our business becomes more complex, we work to simplify our internal processes. I have a personal passion to lead a large, successful growth company that "acts small yet plays big," but...

  • Page 8
    ... the Polaris Board of Directors, shareholders, employees and other stakeholders for our results and the Company's long-term success, and I am fortunate to work with a world-class team of leaders who own and drive accountability through their teams and businesses. Steve Menneto's Motorcycle division...

  • Page 9
    ...highquality vehicles, products, services and experiences that enrich their lives. STRATEGY Polaris will be a highly profitable, customer-centric, $8 billion global enterprise by 2020. We will make the best off-road and on-road vehicles and products for recreation, transportation and work supporting...

  • Page 10
    ... same successful formula we've been using: Develop great brands and products that meet customer needs for off-road mobility, recreation and work. The latest example is ACE . We launched it last year under the SPORTSMAN® brand as a new ATV category. It's been so successful at bringing us incremental...

  • Page 11
    ... EVENT AMONG RZR OWNERS THAT WE ADDED CAMP RZR EAST BRIMSTONE® IN HUNTSVILLE, TENNESSEE. IT DREW MORE THAN 12,000 DEVOTED CUSTOMERS FOR THREE DAYS OF RIDING, DEMOS, EXPOS, COMPETITIVE EVENTS AND MUSIC. 2014 // POLARIS ORV SA L E S 15 UP % 23 UP % 5 -YE A R CAGR AMONG OUR NEW SUCCESSFUL VEHICLE...

  • Page 12
    ... it a 100 horsepower liquid-cooled V-twin engine. That's the innovation Polaris brings to the brand. Q: What's the plan for Victory Motorcycles? A: We expected a sales decline in 2014, given several competitive product launches in the category, but Victory only lost 0.5 percent market share. There...

  • Page 13
    ... O 2014 // POLARIS MOTORCYCLE SALES* UP NORT H A M E RI CA UP I NT E RNAT I ONA L 55 % 70 % APPROX. * Includes Slingshot // MOTORCYCLE DEALERS* * 12/31/2014 I N D I AN // N O R T H AMERI C A VICTORY // N O R TH AM ERICA 175 118 SIGNED RETAILING 450 INDIAN & VICTORY // I N TE...

  • Page 14
    ...initially in North America, we had press in 39 countries within the first two weeks. In the second half of 2015, we'll expand sales into Europe. Q: What's the long-term potential for Slingshot? A: We envision a $300 to $500 million business within three to five years. There's a global trend toward...

  • Page 15
    ...3-WHEEL ROADSTER // BRAND PORTFOLI O S LINGSHOT // UNPRECEDENTED MEDIA COVERAGE FIRST SIX MONTHS >2 SNOWMOBILE // 2010 - 20 14 MA RKET SHARE GROW T H * MEDIA IMPRESSIONS >39 BILLION COUNTRIES FEATURED SLINGSHOT EDITORIAL *NO RT H AMERICA POLARIS SKI-DOO ARCTIC CAT YAMAHA 2016 800...

  • Page 16
    ...is a data-driven, consumer-focused initiative to maximize dealer retail sales. We're also deploying a Product Lifecycle Management system to ensure fast, reliable go-to-market execution of new products. Finally, our investments in distribution centers-in particular our Wilmington, Ohio, facility-put...

  • Page 17
    ... PER UNIT BY ALMOST 20 PERCENT IN 2014. // BRAND PORTFOLI O 2014 // P G &A SAL ES MIX OVER 60,000 SKUs 8% 92 % Polaris Engineered House Brands Aftermarket Brands // A FTERMARKET BRA ND P O RT FO L I O OUR HIGH-QUALITY BRANDED APPAREL AND ACCESSORIES IMPROVE THE RIDE BY MAKING IT...

  • Page 18
    ...example, we invested $1 million in shared engineering between Goupil and Mega that reduced our purchasing expenses and increased margins. We also combined sales forces, so our sales team is selling a single combined portfolio of European products. In North America, we combined the GEM and commercial...

  • Page 19
    ...c lu de S m a ll Veh ic les a nd Co mme rc ia l b u sin ess es 55 % 20 % APPROX. THROUGH A B2B PARTNERSHIP WITH ARIENS COMPANY, WE CO-DEVELOPED THE ATLAS VEHICLE (JVS), WHICH IS SOLD UNDER THEIR BRAND. DESPITE A WEAK EUROPEAN MARKET, AIXAM QUADRICYCLE SALES WERE UP MORE THAN 40 PERCENT IN 2014.

  • Page 20
    ... market is more than 100 times larger than the OffRoad Vehicle (ORV) market. Q: How are you tapping the On-Road potential? A: Our Motorcycle business continues to make inroads, but the big news for emerging markets is the joint venture we have with Eicher Motors Limited, a leading commercial vehicle...

  • Page 21
    ... new manufacturing facility in Poland helping you capture sales potential more economically? A: Due to regulations in Europe, our Off-Road Vehicles have to be on-road capable, too. So far, we've imported our North American-built ATVs, RANGERs and RZRs, then homologated them for European on-road use...

  • Page 22
    ...drive improved product cost through design and supply chain. In Engineering, we can focus on future core technologies like electric powertrains and new materials. Q: How do the new manufacturing plants help improve operations? A: The new Poland plant will allow us to serve our large EMEA market with...

  • Page 23
    ...NORTH A M E RIC A 1. CUYAHOGA FALLS, OHIO (Kolpin) ORV Utility Accessories 2. HUNTSVILLE, ALABAMA (opening 2016) SxS 3. MILFORD, IOWA ACE, SxS, GEM 4. MONTERREY, MEXICO SxS, Engines 5. OSCEOLA, WISCONSIN Engines SQUARE FEET OF MANUFACTURING AND RESEARCH & DEVELOPMENT SPACE IN NORTH AMERICA, EUROPE...

  • Page 24
    ... a new Master Service Dealer program, resulting in 1,500 additional Polaris-certified technicians in 2014, a 50 percent increase. We also improved aspects of our parts shipping and our service response times, so customers can get back to riding faster. Q: Why is the omnichannel experience important...

  • Page 25
    WE HAD 118 INDIAN MOTORCYCLE DEALERSHIPS RETAILING AT THE END OF 2014, ALL DEVELOPED TO DELIVER A CONSISTENT AND ENGAGING CONSUMER EXPERIENCE. 2014 // AVERAGE RETAIL SALES PER DEALERSHIP (UNITS) POLARIS // CERTIFIED MASTER SERVICE DEALERS Harley-Davidson BRP Honda Yamaha Kawasaki Arctic Cat ...

  • Page 26
    ... importance of safety- from significantly reducing our plant employee injury rates to making the highest quality products for our customers. One of the programs we're most proud of is our partnership with the Boy Scouts of America. In 2014, we began a 10-year partnership to provide youth ATVs...

  • Page 27
    ... for the registrant's Annual Meeting of Shareholders to be held on April 30, 2015 to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report (the ''2015 Proxy Statement''), are incorporated by reference into Part III of this Form...

  • Page 28
    ...Financial Condition and Results of Operations . . Quantitative and Qualitative Disclosures about Market Risk ...Financial Statements and Supplementary Data ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . Controls and Procedures ...Other Information ...PART...

  • Page 29
    ... utility use, Snowmobiles, Motorcycles and Small Vehicles (SV), together with the related replacement Parts, Garments and Accessories (PG&A). These products are sold through dealers and distributors principally located in the United States, Canada and Europe. Sales of ORVs, Snowmobiles, Motorcycles...

  • Page 30
    ... Indian Motorcycle brand to complement our Victory brand of motorcycles. In 2013, we re-launched the Indian brand by releasing the first three Indian Motorcycle models engineered by Polaris. In 2014, we introduced the Company's first three-wheeled, roadster motorcycle, Slingshot. The North America...

  • Page 31
    .... We also added a new bagger to the Victory motorcycle line in 2014, the Victory Magnum↩. The all-new three-wheel motorcycle, Slingshot was introduced in 2014, and is the Company's first roadster motorcycle. Our 2015 model year line of motorcycles for Victory, Indian and Slingshot consists of...

  • Page 32
    ... facility primarily manufactures ORVs and snowmobiles and our Monterrey facility primarily manufactures ORVs. Our facilities in Spirit Lake, Iowa and its surrounding areas primarily manufacture ORVs, motorcycles and GEM vehicles. In January 2015, we announced plans to build a new production facility...

  • Page 33
    ... for pre-ordered snowmobiles assist in production planning. In 2012, we began utilizing our Retail Flow Management (RFM) ordering system for Victory motorcycles, and now also use it as the ordering system for Indian motorcycles. In late 2014, we began utilizing RFM for certain ATV dealers. The RFM...

  • Page 34
    ... in Europe and Australia. We expect to further expand our motorcycle dealer network over the next few years in North America and internationally for Victory, Indian and Slingshot motorcycles. The SV businesses each have their own distribution networks through which their respective vehicles are...

  • Page 35
    ... Polaris Acceptance (United States) and GE affiliates (Australia, Canada, France, Germany, the United Kingdom, Ireland, China and New Zealand) to provide floor plan financing for our dealers. A majority of our North American sales of snowmobiles, ORVs, motorcycles, SVs and related PG&A are financed...

  • Page 36
    ...actual use conditions. We utilize our Wyoming, Minnesota facility for engineering, design and development personnel for our line of engines and powertrains, ORVs, Victory, Indian and Slingshot motorcycles, and SVs. In 2010, we acquired Swissauto Powersports Ltd., an engineering company that develops...

  • Page 37
    ... competitively priced and our sales and marketing support programs for dealers are comparable to those provided by our competitors. Our products compete with many other recreational products for the discretionary spending of consumers, and to a lesser extent, with other vehicles designed for utility...

  • Page 38
    ...subject to international standards related to safety in places where we sell our products outside the United States. We believe that our motorcycles, SVs, ORVs and snowmobiles have complied with applicable safety standards in the United States and other international locations. Use regulation. Local...

  • Page 39
    ... and Chief Financial Officer Vice President-Corporate Development Vice President-General Counsel, Compliance Officer and Secretary Vice President-Asia Pacific and Latin America Vice President-Parts, Garments and Accessories President-Global Adjacent Markets Vice President-Snowmobiles and Slingshot...

  • Page 40
    ... as Chief Executive Officer on September 1, 2008, and was named Chairman of the Board of Directors in January 2013. Prior to joining Polaris, Mr. Wine was President of Fire Safety Americas, a division of United Technologies, a provider of high technology products and services to the building systems...

  • Page 41
    ... Director of Product and Marketing Management for the ATV division and General Manager of Side-by-Sides. Prior to joining Polaris, Mr. Jonikas spent 12 years at General Mills, Inc. in numerous general management positions. Mr. Krishna became Vice President-Europe, Middle East and Africa in July 2014...

  • Page 42
    ... our financial condition. Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on our results of operations. We provide a limited warranty for ORVs for a period of six months, for a period of one year for our snowmobiles...

  • Page 43
    ... our business and operating results. The snowmobile, off-road vehicle, motorcycle and small vehicle markets are highly competitive. Competition in such markets is based upon a number of factors, including price, quality, reliability, styling, product features and warranties. At the dealer level...

  • Page 44
    ... income from financial services. We have arrangements with each of Capital One, Sheffield, Synchrony Bank and FreedomRoad to make retail financing available to consumers who purchase our products in the United States. During 2014, consumers financed approximately 32 percent of the vehicles we sold...

  • Page 45
    ... of capital from other operating initiatives and/or an increase in our leverage and debt service requirements to pay the acquisition purchase prices, which could in turn restrict our ability to access additional capital when needed or to pursue other important elements of our business strategy...

  • Page 46
    ... risks include: • increased costs of customizing products for foreign countries; • difficulties in managing and staffing international operations and increases in infrastructure costs including legal, tax, accounting, and information technology; • the imposition of additional United States and...

  • Page 47
    ... products and develop new innovative products in the global markets in which we compete. Product development requires significant financial, technological, and other resources. While we expended $148.5 million, $139.2 million, and $127.4 million for research and development efforts in 2014, 2013...

  • Page 48
    ... key employees, including managers, could have a negative effect on our business, financial condition and/or results of operations. We may be subject to information technology system failures, network disruptions and breaches in data security. We use many information technology systems and their...

  • Page 49
    .... In January 2015, we announced plans to build a new production facility in Huntsville, Alabama to provide additional capacity and flexibility. The 600,000 square-foot facility will focus on ORV production. We will break ground on the facility in the first quarter of 2015 with completion expected in...

  • Page 50
    ... under the caption ''Other Investor Information'' appearing on the inside back cover of the Company's 2014 Annual Report is incorporated herein by reference. On February 18, 2015, the last reported sale price for shares of our common stock on the New York Stock Exchange was $155.63 per share...

  • Page 51
    ... sets forth the information with respect to purchases made by or on behalf of Polaris of its own stock during the fourth quarter of the fiscal year ended December 31, 2014. Issuer Purchases of Equity Securities Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number...

  • Page 52
    ... 2014. Selected Financial Data (Dollars in millions, except per-share data) 2014 For the Years Ended December 31, 2013 2012 2011 2010 Statement of Operations Data Sales Data: Total sales ...Percent change from prior year ...Sales components: Off-Road Vehicles ...Snowmobiles ...Motorcycles ...Small...

  • Page 53
    ..., several new value models, and two models in a newly defined category of single-seat, ride-in ATVs, the Polaris ACE↩. We also introduced nine new snowmobiles in the all-new AXYS↩ chassis platform. In our motorcycles line, we added two new models to the iconic Indian Motorcycle↧ brand-the 2015...

  • Page 54
    ... Company sales compared to the prior year 2014 2013 Volume ...Product mix and price ...Currency ... 14% 6 (1) 19% 12% 7 (1) 18% The volume increases in 2014 and 2013 are primarily the result of shipping more ORVs, snowmobiles, motorcycles, small vehicles and related PG&A items to dealers given...

  • Page 55
    ... of the 2012-2013 snowmobile season and success of the model year 2014 new product introductions. Retail sales to consumers for the 2013-2014 season-to-date period through December 31, 2013, increased nearly ten percent. Sales of snowmobiles to customers outside of North America, principally within...

  • Page 56
    ... 400 new model year 2015 accessories, including additions to the family of Lock & Ride↧ attachments that add comfort, style and utility to ORVs and motorcycles. PG&A sales also increased due to the inclusion of Kolpin and Pro Armor in our consolidated financial statements, which were both acquired...

  • Page 57
    ... of Total Cost of Sales For the Years Ended December 31, Percent of Change Total Cost of 2014 vs. 2013 Sales 2013 2012 Percent of Total Cost of Sales Change 2013 vs. 2012 ($ in millions) 2014 Purchased materials and services ...Labor and benefits ...Depreciation and amortization ...Warranty costs...

  • Page 58
    ....6 percent in 2013. Operating expenses in absolute dollars increased in 2014 primarily due to higher selling, marketing and advertising expenses related to the launch of new model year 2015 products, including Slingshot, and the continued roll-out of Indian motorcycles, as well as increased general...

  • Page 59
    ..., GE and Capital One, and higher income from dealer inventory financing through Polaris Acceptance. Remainder of the Income Statement: For the Years Ended December 31, Change 2014 vs. 2013 2012 Change 2013 vs. 2012 ($ in millions except per share data) 2014 2013 Interest expense ...Equity...

  • Page 60
    ... accounting policies that management believes are the most critical to aid in fully understanding and evaluating our reported financial results include the following: revenue recognition, sales promotions and incentives, dealer holdback programs, share-based employee compensation, product warranties...

  • Page 61
    ... liabilities of $120.1 million and $100.6 million for dealer holdback programs in the consolidated balance sheets as of December 31, 2014 and 2013, respectively. Share-based employee compensation. We recognize in the financial statements the grant-date fair value of stock options and other equity...

  • Page 62
    ...and market conditions and may provide longer warranties related to certain promotional programs. Our standard warranties require us or our dealers to repair or replace defective products during such warranty periods at no cost to the consumers. The warranty reserve is established at the time of sale...

  • Page 63
    .... In 2014, we made large capital expenditures related to the expansion of many of our North America locations, including our manufacturing facilities in Spirit Lake, Iowa; Milford, Iowa; Roseau, Minnesota; and Monterrey, Mexico, as well as the construction of our new manufacturing facility in Opole...

  • Page 64
    ...companies (including Polaris Acceptance) to provide secured floor plan financing for our dealers. These arrangements provide liquidity by financing dealer purchases of our products without the use of our working capital. A majority of the worldwide sales of snowmobiles, ORVs, motorcycles and related...

  • Page 65
    ... has been included as a component of income from financial services in the accompanying consolidated statements of income. During 2014, consumers financed 32 percent of our vehicles sold in the United States through the combined Capital One revolving retail credit and Sheffield, Synchrony Bank and...

  • Page 66
    ... facility, our costs in the Mexican peso have continued to increase. We also market and sell to customers in Mexico through a wholly owned subsidiary. Fluctuations in the peso to U.S. dollar exchange rate primarily impacts sales, cost of sales, and net income. Canadian Dollar: We operate in Canada...

  • Page 67
    ...contracts did not meet the criteria for hedge accounting and the resulting unrealized loss as of December 31, 2014 was $4.8 million pretax, which was included in the consolidated statements of income as a component of cost of sales. Based on our current outlook for commodity prices, the total impact...

  • Page 68
    ... Firm on Internal Control over Financial Reporting ...Report Of Independent Registered Public Accounting Firm on Consolidated Financial Statements ...Consolidated Balance Sheets as of December 31, 2014 and 2013 ...Consolidated Statements of Income for the Years Ended December 31, 2014, 2013 and 2012...

  • Page 69
    Item 8. Financial Statements and Supplementary Data Management's Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting of the Company. This system is designed to provide ...

  • Page 70
    ... Public Accounting Firm on Internal Control over Financial Reporting The Board of Directors and Shareholders of Polaris Industries Inc. We have audited Polaris Industries Inc.'s (the Company) internal control over financial reporting as of December 31, 2014, based on criteria established in Internal...

  • Page 71
    ...all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Polaris Industries Inc.'s internal control over financial reporting as of December 31, 2014, based on criteria established...

  • Page 72
    ... and Shareholders' Equity Current liabilities: Current portion of capital lease obligations Accounts payable ...Accrued expenses: Compensation ...Warranties ...Sales promotions and incentives ...Dealer holdback ...Other ...Income taxes payable ...Total current liabilities ...Long-term income taxes...

  • Page 73
    ... OF INCOME (In thousands, except per share data) For the Years Ended December 31, 2014 2013 2012 Sales ...Cost of sales ...Gross profit ...Operating expenses: Selling and marketing ...Research and development General and administrative ... $4,479,648 3,160,470 1,319,178 314,449 148,458 203...

  • Page 74
    ...INDUSTRIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) For the Years Ended December 31, 2014 2013 2012 Net income ...Other comprehensive income (loss), net of tax: Foreign currency translation adjustments, net of tax benefit (expense) of $65, $1,841, and ($182) ...Unrealized...

  • Page 75
    ...INDUSTRIES INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except per share data) Number of Shares Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (loss) Total Balance, December 31, 2011 ...Employee stock compensation ...Proceeds...

  • Page 76
    ..., 2014 2013 2012 Operating Activities: Net income ...Loss from discontinued operations ...Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...Noncash compensation ...Noncash income from financial services ...Deferred income taxes ...Tax...

  • Page 77
    ... the ''Company''), a Minnesota corporation, and its subsidiaries are engaged in the design, engineering, manufacturing and marketing of innovative, high-quality, high-performance Off-Road Vehicles (ORV), Snowmobiles, Motorcycles and Small Vehicles (SV). Polaris products, together with related parts...

  • Page 78
    .... The Company utilizes the market approach to measure fair value for its non-qualified deferred compensation assets and liabilities, and the income approach for the foreign currency contracts and commodity contracts. The market approach uses prices and other relevant information generated by market...

  • Page 79
    ...the manufacture and distribution of the Company's products. Inventories are stated at the lower of cost (first-in, first-out method) or market. The major components of inventories are as follows (in thousands): December 31, 2014 December 31, 2013 Raw materials and purchased components Service parts...

  • Page 80
    ... regulations and market conditions and may also provide longer warranties related to certain promotional programs. Polaris' standard warranties require the Company or its dealers to repair or replace defective products during such warranty periods at no cost to the consumer. The warranty reserve is...

  • Page 81
    ... $ 47,723 Balance at end of year ... Share-based employee compensation. For purposes of determining the estimated fair value of share-based payment awards on the date of grant under ASC Topic 718, Polaris uses the Black-Scholes Model. The BlackScholes Model requires the input of certain assumptions...

  • Page 82
    ...addition, since 2007, the Company has granted a total of 138,000 deferred stock units to its non-employee directors under the Omnibus Plan (9,000, 12,000 and 12,000 in 2014, 2013 and 2012, respectively) which will be converted into common stock when the director's board service ends or upon a change...

  • Page 83
    ... 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, 2014, there was $82...

  • Page 84
    ... fair value of options of $39.97, $30.43, and $23.40 granted during the years ended December 31, 2014, 2013, and 2012, respectively: For the Years Ended December 31, 2014 2013 2012 Weighted-average volatility ...Expected dividend yield ...Expected term (in years) ...Weighted average risk free...

  • Page 85
    ...value is based on the Company's closing stock price on the last trading day of the year. The weighted average fair values at the grant dates of grants awarded under the Omnibus Plan for the years ended December 31, 2014, 2013, and 2012 were $134.34, $88.84, and $70.12, respectively. Note 3. Employee...

  • Page 86
    ... $100,000 $500,000 $411,000 $100,000 3.77% 2.98% 4.40% The carrying amount of the Company's long-term debt approximates its fair value as December 31, 2014 and 2013. Letters of credit. At December 31, 2014, Polaris had open letters of credit totaling $24,894,000. The amounts are primarily related...

  • Page 87
    ... product. No material losses have been incurred under these agreements during the periods presented. As a part of its marketing program, Polaris contributes to the cost of dealer financing up to certain limits and subject to certain conditions. Such expenditures are included as an offset to sales...

  • Page 88
    ... of intangible assets. Note 6. Income Taxes Polaris' income from continuing operations before income taxes was generated from its United States and foreign operations as follows (in thousands): For the Years Ended December 31, 2014 2013 2012 United States ...Foreign ...Income from continuing...

  • Page 89
    ... operations Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows: For the Years Ended December 31, 2014 2013 2012 Federal statutory rate ...State income taxes, net of federal benefit ...Domestic manufacturing deduction ...Research and development tax...

  • Page 90
    ... 31, 2014 2013 Current deferred income taxes: Inventories ...Accrued expenses ...Derivative instruments ...Total current ...Noncurrent deferred income taxes: Cost in excess of net assets of business acquired . Property and equipment ...Compensation payable in common stock ...Net operating loss...

  • Page 91
    ... 1,649,000 shares. Shareholder rights plan. During 2000, the Polaris Board of Directors adopted a shareholder rights plan. Under the plan, a dividend of preferred stock purchase rights will become exercisable if a person or group should acquire 15 percent or more of the Company's stock. The dividend...

  • Page 92
    ...Note 11 for further information regarding Polaris' derivative activities. Note 8. Financial Services Arrangements Polaris Acceptance, a joint venture between Polaris and GE Commercial Distribution Finance Corporation, an indirect subsidiary of General Electric Capital Corporation, which is supported...

  • Page 93
    ... during the periods presented. Summarized financial information for Polaris Acceptance reflecting the effects of the Securitization Facility is presented as follows (in thousands): For the Years Ended December 31, 2014 2013 2012 Revenues ...Interest and operating expenses ...Net income ... $40,968...

  • Page 94
    ... not be able to secure sufficient financing to reach viability through cash flow from operations. In January 2015, Polaris acquired the electric motorcycle business from Brammo. Brammo will continue to be a designer and developer of electric vehicle powertrains. Polaris will impair or write off an...

  • Page 95
    ...signed in 2013 for a manufacturing facility which Polaris began occupying in Opole, Poland commenced in February 2014. The Poland property lease is accounted for as a capital lease. Future minimum annual lease payments under capital and operating leases with noncancelable terms in excess of one year...

  • Page 96
    ... 31, 2014 and 2013 (in thousands): Carrying Values of Derivative Instruments as of December 31, 2014 Derivative Net Fair Value-Assets Fair Value-(Liabilities) Carrying Value Derivatives designated as hedging instruments Foreign exchange contracts(1) ...Total derivatives designated as hedging...

  • Page 97
    ... was not material for the years ended December 31, 2014 and 2013. The Company recognized a loss of $4,820,000 and $878,000 in cost of sales on commodity contracts not designated as hedging instruments in 2014 and 2013, respectively. Note 12. Segment Reporting Polaris has reviewed ASC Topic 280...

  • Page 98
    ... 31, 2014 2013 United States ...Mexico ...Other foreign countries ...Consolidated property and equipment, net ...Note 13. Subsequent Events $ 432,614 49,064 73,750 $ 555,428 $ 349,224 52,450 53,493 $ 455,167 On January 9, 2015, the Company announced plans to build a new production facility in...

  • Page 99
    ... of the Company's management, including the Company's Chief Executive Officer and its Vice President-Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act...

  • Page 100
    ...Services The section entitled ''Fees Paid to Independent Registered Public Accounting Firm'' in the Company's 2015 Proxy Statement is incorporated herein by reference. PART IV Item 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as part of this report: (1) Financial...

  • Page 101
    ... Consolidated Financial Statements or Notes thereto. (3) Exhibits The Exhibits to this report are listed in the Exhibit Index to Annual Report on Form 10-K on pages 78 to 81. A copy of any of these Exhibits will be furnished at a reasonable cost to any person who was a shareholder of the Company as...

  • Page 102
    ... of Minneapolis, State of Minnesota on February 20, 2015. POLARIS INDUSTRIES INC. By: /s/ SCOTT W. WINE Scott W. Wine Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

  • Page 103
    ...Charged to Costs and Expenses Additions Through Acquisition Inventory Reserve Other Changes Add (Deduct)(2) Balance at End of Period (In thousands) 2012: Deducted from asset accounts- Allowance for obsolete inventory ...2013: Deducted from asset accounts- Allowance for obsolete inventory ...2014...

  • Page 104
    ... Note Purchase Agreement effective as of December 19, 2013, incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, filed December 20, 2013. Amendments to the Polaris Industries Inc. Supplemental Retirement/Savings Plan, as amended and restated effective July 23, 2014...

  • Page 105
    ... Company's Current Report on Form 8-K filed on May 3, 2011.* Form of Deferred Stock Award Agreement for shares of deferred stock granted to non-employee directors in 2007 under the Polaris Industries Inc. 2007 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.t to the Company's Annual...

  • Page 106
    ... the Company's Annual Report on Form 10-K for the year ended December 31, 2012. Amended and Restated Manufacturer's Repurchase Agreement dated as of February 28, 2011, by and among the Company, Polaris Industries Inc., a Delaware Corporation, Polaris Sales Inc., and Polaris Acceptance, incorporated...

  • Page 107
    ... following financial information from Polaris Industries Inc.'s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 20, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets as of December 31, 2014 and 2013...

  • Page 108
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  • Page 109
    ...report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ SCOTT W. WINE Scott W. Wine Chairman and Chief Executive Officer Date: February 20, 2015

  • Page 110
    ... financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ MICHAEL W. MALONE Michael W. Malone Vice President-Finance and Chief Financial Officer Date...

  • Page 111
    ... Securities Exchange Act of 1934, as amended; and 3. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods indicated therein. Date: February 20, 2015 /s/ SCOTT...

  • Page 112
    ... Securities Exchange Act of 1934, as amended; and 3. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods indicated therein. Date: February 20, 2015 /s/ MICHAEL...

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  • Page 115
    ... the Company's annual report and financial information, products and specifications, press releases, dealer locations and product brochures, access Polaris on the Internet at: www.polaris.com INVESTOR RELATIONS Security analysts and investment professionals should direct their business-related...

  • Page 116
    ... .COM ©2015 POLARIS INDUSTRIES INC.... ALL RIGHTS RESERVED. PRINTED IN THE USA PRINTED ON RECYCLED PAPER CONTAINING 10 PERCENT POST-CONSUMER FIBER. BOBCAT® IS A REGISTERED TRADEMARK OF CLARK EQUIPMENT COMPANY ARIENS® AND GRAVELY® ARE REGISTERED TRADEMARKS OF ARIENS COMPANY...