Polaris 2015 Annual Report Download - page 86

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, 2015.
A property lease agreement 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.
In January 2015, the Company announced plans to build a new production facility in Huntsville, Alabama to
provide additional capacity and flexibility. The 725,000 square-foot facility will focus on ORV and Slingshot
production. The Company broke ground on the facility in the first quarter of 2015 and expects to start
production in the second quarter of 2016. A mortgage note payable agreement of $14,500,000 for land, on
which Polaris is building the facility, commenced in February 2015. The payment of principal and interest for
the note payable is forgivable if the Company satisfies certain job commitments over the term of the note.
Forgivable loans related to other Company facilities are also included within notes payable.
The following summarizes activity under Polaris’ credit arrangements (dollars in thousands):
2015 2014 2013
Total borrowings at December 31 .................. $425,707 $200,000 $280,500
Average outstanding borrowings during year .......... $403,097 $361,715 $138,400
Maximum outstanding borrowings during year ......... $523,097 $500,000 $411,000
Interest rate at December 31 ...................... 2.33% 3.77% 2.98%
The carrying amount of the Company’s long-term debt approximates its fair value as December 31, 2015 and
2014.
Letters of credit. At December 31, 2015, Polaris had open letters of credit totaling $21,563,000. 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, 2015, was approximately $1,562,014,000. 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
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 in the accompanying consolidated
statements of income.
Note 5. Goodwill and Other Intangible Assets
ASC Topic 350 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. Topic
350 requires that these assets be reviewed for impairment at least annually. An impairment charge for
goodwill is recognized only when the estimated fair value of a reporting unit, including goodwill, is less than
its carrying amount. The Company performed the annual impairment test as of December 31, 2015 and 2014.
The results of the impairment test indicated that no goodwill or intangible impairment existed as of the test
date. The Company has had no historical impairments of goodwill. In accordance with Topic 350, the
Company will continue to complete an impairment analysis on an annual basis or more frequently if an event
or circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying
amount occurs. Goodwill and other intangible assets, net, consist of $131,014,000 and $123,031,000 of goodwill
and $105,103,000 and $100,935,000 of intangible assets, net of accumulated amortization, for the periods
ended December 31, 2015 and 2014, respectively.
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