Polaris Inc

Our primary sources of liquidity have been cash provided by operating and financing activities, including funds as needed from our credit facility and issuances of long-term debt. Our primary uses of funds have been for new product development, capital investments, cash dividends to shareholders, repurchases and retirements of common stock, and acquisitions. The seasonality of production and shipments cause working capital requirements to fluctuate during the year and from year to year.

We believe that existing cash balances and cash flows to be generated from operating activities, borrowing capacity under our credit facility and from future issuances or borrowings of long-term debt, will be sufficient to fund operations, new product development, cash dividends to shareholders, repurchases and retirement of common stock, and capital requirements for at least the next 12 months and for the foreseeable future thereafter.

Cash Flows

The following table summarizes the cash flows from operating, investing and financing activities:

Operating Activities:

The decrease in net cash from operating activities was primarily the result of lower net income.

Investing Activities:

The primary sources and uses of cash were for the purchase of property, equipment and tooling for continued capacity and capability at our manufacturing, distribution, and product development facilities, and distributions from and contributions to Polaris Acceptance. Net cash used for investing activities decreased due to a reduction in property, equipment and tooling purchases, as well as increased distributions from Polaris Acceptance. These decreases were partially offset by strategic investments in the current year.

Financing Activities:

The increase in net cash from financing activities was primarily due to increased net borrowings under debt arrangements and lower share repurchases, partially offset by reduced proceeds from stock issuances under employee plans. Net borrowings totaled $271.0 million for the nine months ended September 30, 2024, compared to $157.7 million of net borrowings for the comparable period in 2023.

Financing Arrangements:

We are party to an unsecured Master Note Purchase Agreement, as amended and supplemented, under which we have issued senior notes. As of September 30, 2024, outstanding borrowings under the Master Note Purchase Agreement totaled $350.0 million.

We are also party to an unsecured credit facility, which includes a $1.0 billion variable interest rate Revolving Loan Facility that matures in June 2026, under which we have unsecured borrowings. As of September 30, 2024, there were borrowings of $141.6 million outstanding under the Revolving Loan Facility. Our credit facility also includes a Term Loan Facility, on which $744.0 million was outstanding as of September 30, 2024. We are required to make principal payments under the Term Loan Facility totaling $45 million over the next 12 months. For the credit facility, interest is charged at rates based on Adjusted Term SOFR plus the applicable add-on percentage, as defined in the agreements governing the credit facility. As of September 30, 2024, we had $850.9 million of availability on the Revolving Loan Facility.

In November 2023, we amended the credit facility to terminate all guarantees provided by our subsidiaries under the credit facility, remove the requirement for our subsidiaries to provide guarantees of the obligations under the credit facility, and remove certain of our subsidiaries as co-borrowers.

In July 2024, the Company further amended the credit facility to provide for a new incremental 364-day term loan in the amount of $400 million (the “Incremental Term Loan Facility”). The Incremental Term Loan Facility is unsecured and has a term ending on July 25, 2025. As with other borrowings under the credit facility, interest is charged at rates based on Adjusted Term SOFR plus the applicable add-on percentage, as defined in the agreements governing the credit facility. Net proceeds from the Incremental Term Loan Facility were used to repay amounts outstanding under the Company’s Revolving Loan Facility.

The agreements governing the facility and the Master Note Purchase Agreement contain covenants that require the Company to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. The agreements also require the Company to maintain an interest coverage ratio of not less than 3.00 to 1.00 and a leverage ratio of not more than 3.50 to 1.00 on a rolling four quarter basis.

In November 2023, we issued $500 million aggregate principal amount of 6.95% Senior Notes pursuant to a public offering. We received approximately $492 million in net proceeds from the notes offering after deducting the underwriting discount and other fees and expenses. The notes bear interest at a rate of 6.95% per year, with interest payable semi-annually in arrears in March and September of each year. The notes mature in March of 2029. The indenture governing the notes is subject to customary covenants and make-whole provisions upon early termination.

On July 2, 2018, pursuant to the Agreement and Plan of Merger dated May 29, 2018, the Company completed the acquisition of Boat Holdings, LLC, a privately held Delaware limited liability company, headquartered in Elkhart, Indiana which manufactures boats (“Boat Holdings”). As a component of the Boat Holdings merger agreement, we have committed to make a series of deferred payments to the former owners through July 2030. The original discounted payable was for $76.7 million, of which $43.2 million was outstanding as of September 30, 2024.

As of September 30, 2024, we were in compliance with all debt covenants and our debt to total capital ratio was 62 percent. Additionally, as of September 30, 2024, we had letters of credit outstanding of $48.6 million, primarily related to purchase obligations for raw materials.

Share Repurchases:

We repurchased a total of approximately 1.0 million shares of our common stock for $82.3 million during the first nine months of 2024, which had a favorable impact of two cents on diluted net income per share. As of September 30, 2024, our Board of Directors has authorized us to repurchase up to an additional $1,109.3 million of our common stock.

Wholesale Customer Financing Arrangements:

We have arrangements with certain finance companies 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, boats, and related PG&A are financed under similar arrangements whereby we receive payment within a few days of shipment of the product. We participate in the cost of dealer financing up to certain limits.

Under these arrangements, we have agreed to repurchase products repossessed by these finance companies. As of September 30, 2024, the potential aggregate repurchase obligations were approximately $407.4 million. Our financial exposure under these repurchase agreements is limited to the difference between the amounts unpaid by the dealer with respect to the repossessed product plus costs of repossession and the amount received on the resale of the repossessed product. No material losses have been incurred under these agreements during the periods presented.

Retail Customer Financing Arrangements:

We have agreements with third-party financing companies to provide financing options to end consumers of our products. We have no material contingent liabilities for residual value or credit collection risk under these agreements.