Polaris 2015 Annual Report Download - page 63

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arranged by General Electric Capital Corporation (GECC), a GECDF affiliate, and the partnership
agreement was amended to provide that Polaris Acceptance would continue to sell portions of its receivable
portfolio to the Securitization Facility from time to time on an ongoing basis. The sale of receivables from
Polaris Acceptance to the Securitization Facility is accounted for in Polaris Acceptance’s financial statements
as a ‘‘true-sale’’ under ASC Topic 860. Polaris Acceptance is not responsible for any continuing servicing costs
or obligations with respect to the Securitized Receivables. The remaining portion of the receivable portfolio is
recorded on Polaris Acceptance’s books, and is funded through a loan from an affiliate of GECDF and
through equity contributions from both partners.
We have not guaranteed the outstanding indebtedness of Polaris Acceptance. In addition, the two partners of
Polaris Acceptance share equally a variable equity cash investment based on the sum of the portfolio balance
in Polaris Acceptance. Our total investment in Polaris Acceptance at December 31, 2015 was $99.1 million.
Substantially all of our U.S. sales are financed through Polaris Acceptance whereby Polaris receives payment
within a few days of shipment of the product. The partnership agreement provides that all income and losses
of Polaris Acceptance are shared 50 percent by our wholly owned subsidiary and 50 percent by GECDF’s
subsidiary. Our exposure to losses associated with respect to the Polaris Acceptance is limited to our equity in
Polaris Acceptance. We have agreed to repurchase products repossessed by Polaris Acceptance up to an
annual maximum of 15 percent of the aggregate average month-end balances outstanding during the prior
calendar year with respect to receivables retained by Polaris Acceptance and the Securitized Receivables. For
calendar year 2016, the potential 15 percent aggregate repurchase obligation is approximately $182.8 million.
Our financial exposure under this arrangement is limited to the difference between the amount paid to the
finance company for repurchases and the amount received on the resale of the repossessed product. No
material losses have been incurred under this agreement. During 2015, Polaris and GECDF amended the
Polaris Acceptance partnership agreement to extend it through February 2022 with similar terms to the
previous agreement.
On October 13, 2015, GECC announced that it agreed to sell a portfolio of assets, including its ownership
interests in Polaris Acceptance to Wells Fargo & Company, with the closing of the transaction expected in the
first quarter of 2016. The sale is not expected to impact the operations of the partnership agreement, which is
effective through February 2022.
Our investment in Polaris Acceptance is accounted for under the equity method and is recorded as investment
in finance affiliate in the accompanying consolidated balance sheets. Our allocable share of the income of
Polaris Acceptance has been included as a component of income from financial services in the accompanying
consolidated statements of income. At December 31, 2015, Polaris Acceptance’s wholesale portfolio
receivables from dealers in the United States (including the Securitized Receivables) was $1,305.1 million, a
14 percent increase from $1,141.1 million at December 31, 2014. Credit losses in the Polaris Acceptance
portfolio have been modest, averaging less than one percent of the portfolio.
We have agreements with Capital One, Chrome Capital, FreedomRoad, Sheffield Financial, and Synchrony
Bank, under which these financial institutions provide financing to end consumers of our products. The
income generated from these agreements has been included as a component of income from financial services
in the accompanying consolidated statements of income. At December 31, 2015, the agreements in place were
as follows:
Financial institution Agreement expiration date
Capital One ......................................... February 2016
Chrome Capital ...................................... January 2017
Freedom Road ....................................... December 2016
Sheffield Financial .................................... December 2020
Synchrony Bank ...................................... December 2020
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