Polaris Inc

Previous wording

The following discussion pertains to the results of operations and financial position of the Company and should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere in this report. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Current wording

The following discussion pertains to the results of operations and financial position of the Company and should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report. This section of this Annual Report generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

Full year net income from continuing operations attributable to Polaris Inc. of $502.8 million decreased 17 percent from 2022, with diluted earnings per share from continuing operations decreasing from $10.04 to $8.71 per share. In addition to the reasons discussed above, these decreases were primarily the result of increased operating expenses and higher interest expense. We reported Adjusted EBITDA of $1,020.9 million in 2023 compared to $1,075.9 million in 2022. For information on how we define and calculate Adjusted EBITDA, and a reconciliation from net income from continuing operations to Adjusted EBITDA, see “Non-GAAP Financial Measures”.

Current wording

Full year net income from continuing operations attributable to Polaris Inc. was $110.8 million, or $1.95 per diluted share, compared to 2023 full year net income from continuing operations attributable to Polaris Inc. of $502.8 million, or $8.71 per diluted share. These decreases were primarily the result of decreased shipments in all segments, lower net pricing driven by higher promotional costs, and decreased leverage of fixed costs as a result of reduced sales volumes, partially offset by favorable operating costs. We reported Adjusted EBITDA of $635.4 million in 2024 compared to $1,020.9 million in 2023. For information on how we define and calculate Adjusted EBITDA, and a reconciliation from net income from continuing operations to Adjusted EBITDA, see “Non-GAAP Financial Measures”.

Previous wording

On February 1, 2024, we announced that our Board of Directors declared a quarterly cash dividend of $0.66 per share for the first quarter of 2024, a two percent increase from the prior quarterly cash dividend, representing the 29th consecutive year of increased dividends to shareholders.

Current wording

On January 30, 2025, we announced that our Board of Directors declared a quarterly cash dividend of $0.67 per share for the first quarter of 2025, a two percent increase from the prior quarterly cash dividend, representing the 30th consecutive year of increased dividends to shareholders.

Previous wording

Sales in Canada decreased four percent during 2023, primarily due to unfavorable foreign currency exchange rate movement. Currency rate movements had an unfavorable impact of three percentage points on sales in 2023.

Current wording

Sales in Canada decreased primarily as a result of decreased snowmobile shipments. Currency rate movements had an unfavorable impact of one percentage point on sales in 2024.

Previous wording

Operating expenses for 2023, in absolute dollars and as a percentage of sales, increased compared to 2022, primarily due to higher general and administrative and selling and marketing expenses.

Current wording

Operating expenses for 2024, in absolute dollars, decreased due to reduced selling and marketing and research and development expenses, partially offset by increased general and administrative expenses. Operating expenses for 2024, as a percentage of sales, increased compared to 2023, primarily due to decreased leverage of fixed costs as a result of reduced sales volumes.

Previous wording

Income from financial services increased 66 percent in 2023, primarily due to higher wholesale financing income from Polaris Acceptance driven by higher dealer inventory levels.

Current wording

Income from financial services increased 21 percent in 2024, primarily due to higher wholesale financing income from Polaris Acceptance driven by higher dealer inventory levels.

Previous wording

Interest expense increased for 2023 due to higher interest rates.

Current wording

Interest expense increased for 2024 primarily as a result of higher interest rates.

Previous wording

Other (income) expense is primarily the result of currency exchange rate movements and the corresponding effects on currency transactions related to our international subsidiaries.

Current wording

Other expense (income) is primarily the result of currency exchange rate movements and the corresponding effects on currency transactions related to our international subsidiaries. The increase in other expenses in 2024 was also attributable to an impairment charge recorded related to an investment held by the Company.

Previous wording

Weighted average diluted shares outstanding decreased throughout 2023 primarily due to share repurchases.

Current wording

Weighted average diluted shares outstanding decreased throughout 2024 primarily due to share repurchases and a reduction in the dilutive effect of share-based equity awards.

Previous wording

The summary that follows provides a discussion of the results of operations of each of our three reportable segments, Off Road, On Road, and Marine. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit. The Corporate amounts include revenues and costs of businesses that were divested in 2021, as well as costs that are not allocated to segments, including certain unallocated manufacturing costs. Businesses that are presented as discontinued operations are excluded from the tables below.

Current wording

The summary that follows provides a discussion of the results of operations of each of our three reportable segments, Off Road, On Road, and Marine. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit. The Corporate amounts include costs that are not allocated to segments, including certain unallocated manufacturing costs, the impacts from certain foreign currency transactions, and certain unallocated incentive compensation costs.

Previous wording

Off Road sales, inclusive of PG&A sales, increased nine percent in 2023 driven by increased shipments and product mix, partially offset by higher finance interest. Sales to customers outside of North America increased one percent in 2023 driven by increased snowmobile shipments. The average per unit sales price for the Off Road segment increased approximately two percent, driven by higher pricing.

Current wording

Off Road sales, inclusive of PG&A sales, decreased 18 percent in 2024 primarily as a result of decreased ORV and snowmobile shipments. The average per unit sales price for the Off Road segment decreased approximately one percent, primarily due to lower net pricing driven by higher promotional costs, partially offset by product mix.

Previous wording

•Total Polaris North America ORV unit retail sales up mid-single digits percent

Current wording

•Total Polaris North America ORV unit retail sales down low-single digits percent

Previous wording

•Estimated North America industry ORV unit retail sales up low-single digits percent

Current wording

•Estimated North America industry ORV unit retail sales flat

Previous wording

•Total Polaris North America ORV dealer inventories up approximately 55 percent

Current wording

•Total Polaris North America ORV dealer inventories down approximately 16 percent

Previous wording

•Polaris North America snowmobile unit retail sales for the 2023-2024 season-to-date period through December 31, 2023 up low-teens percent

Current wording

•Polaris North America snowmobile unit retail sales for the 2024-2025 season-to-date period through December 31, 2024 down low-forties percent

Previous wording

•Estimated North America industry snowmobile unit retail sales for the 2023-2024 season-to-date period through December 31, 2023 up low-double digits percent

Current wording

•Estimated North America industry snowmobile unit retail sales for the 2024-2025 season-to-date period through December 31, 2024 down mid-thirties percent

Previous wording

•Total Polaris North America snowmobile dealer inventories up approximately 120 percent

Current wording

•Total Polaris North America snowmobile dealer inventories up approximately 10 percent

Previous wording

On Road sales, inclusive of PG&A sales, increased two percent in 2023 driven by product mix. On Road sales to customers outside of North America increased nine percent in 2023, driven by product mix. The average per unit sales price for the On Road segment increased five percent, driven by product mix.

Current wording

On Road sales to customers outside of North America decreased 10 percent in 2024, primarily as a result of lower Indian Motorcycle shipments.

Previous wording

•Indian Motorcycle North America unit retail sales up mid-single digits percent

Current wording

•Indian Motorcycle North America unit retail sales down high-single digits percent

Previous wording

•Estimated North America industry 900cc cruiser, touring, and standard motorcycle unit retail sales down high-single digits percent

Current wording

•Estimated North America industry 900cc cruiser, touring, and standard motorcycle unit retail sales down mid-single digits percent

Previous wording

•Polaris North America motorcycle dealer inventories up approximately 20 percent

Current wording

•Polaris North America motorcycle dealer inventories up approximately five percent

Previous wording

•Polaris U.S pontoon unit retail sales down mid-single digits percent

Current wording

•Polaris U.S pontoon unit retail sales down mid-teens percent

Previous wording

•Estimated U.S. industry pontoon unit retail sales down high-single digits percent

Current wording

•Estimated U.S. industry pontoon unit retail sales down low-double digits percent

Previous wording

•Polaris U.S. deck boat unit retail sales down mid-teens percent

Current wording

•Polaris U.S. deck boat unit retail sales down mid-thirties percent

Previous wording

•Estimate U.S. industry deck boat unit retail sales down mid-twenties percent

Current wording

•Estimate U.S. industry deck boat unit retail sales down low-twenties percent

Previous wording

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income from continuing operations, excluding interest expense, income tax expense, depreciation and amortization, and certain other non-cash, non-recurring, or non-operating items impacting net income from continuing operations from time to time. For example, costs associated with our multi-phase supply chain transformation initiative and certain corporate restructuring activities, such as acquisitions and divestitures, are included as non-GAAP adjustments. We use the non-GAAP financial measure of Adjusted EBITDA Margin, which is defined as Adjusted EBITDA divided by net sales. We believe that Adjusted EBITDA and Adjusted EBITDA Margin help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude from Adjusted EBITDA and Adjusted EBITDA Margin.

Current wording

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income from continuing operations, excluding interest expense, income tax expense, depreciation and amortization, and certain other non-cash, non-recurring, or non-operating items impacting net income from continuing operations from time to time. For example, costs associated with certain corporate restructuring activities, such as acquisitions and divestitures, are included as non-GAAP adjustments. We use the non-GAAP financial measure of Adjusted EBITDA Margin, which is defined as Adjusted EBITDA divided by adjusted net sales. We believe that Adjusted EBITDA and Adjusted EBITDA Margin help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude from Adjusted EBITDA and Adjusted EBITDA Margin.

Previous wording

The increase in net cash provided by operating activities of continuing operations in 2023 was primarily the result of reduced working capital in the current year compared to working capital additions in the prior year, partially offset by lower net income from continuing operations.

Current wording

The decrease in net cash provided by operating activities in 2024 was primarily the result of lower net income.

Previous wording

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, capital deployed for acquisitions and proceeds received from the disposal of businesses, and distributions from and contributions to Polaris Acceptance. Net cash used for investing activities of continuing operations increased in 2023 due to an increase in property, equipment and tooling purchases, as well as cash utilized for an acquisition in the current period compared to proceeds received for the disposal of certain businesses in the prior year.

Current wording

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 net distributions from Polaris Acceptance in 2024 compared to net contributions to Polaris Acceptance in 2023. These decreases were partially offset by increased strategic investments in 2024.

Previous wording

The increase in net cash used for financing activities was attributable to decreased net borrowings under debt arrangements. Net repayments totaled $158.2 million in 2023 compared to $257.7 million of net borrowings in 2022. This increase was partially offset by lower share repurchases and increased proceeds from stock issuances under employee plans.

Current wording

The decrease in net cash used for financing activities was primarily the result of net borrowings under debt arrangements in 2024 compared to net repayments under debt arrangements in 2023, as well as lower share repurchases. These changes were partially offset by reduced proceeds from stock issuances under employee plans. Net borrowings totaled $165.8 million in 2024 compared to net repayments of $158.2 million in 2023.

Previous wording

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 December 31, 2023, there were borrowings of $228.2 million outstanding under the Revolving Loan Facility. Our credit facility also includes a Term Loan Facility, on which $780.0 million was outstanding as of December 31, 2023. We are required to make principal payments under the Term Loan Facility totaling $45 million over the next 12 months. Interest is charged at rates based on adjusted Term SOFR for the credit facility. As of December 31, 2023, we had $764.3 million of availability on the Revolving Loan Facility.

Current wording

We are also party to an unsecured credit facility, which includes a $1.4 billion variable interest rate Revolving Loan Facility that matures in December 2029, under which we have unsecured borrowings. As of December 31, 2024, there were borrowings of $282.0 million outstanding under the Revolving Loan Facility. Our credit facility also includes a Term Loan Facility, on which $500.0 million was outstanding as of December 31, 2024. We are required to make principal payments under the Term Loan Facility totaling $25.0 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 December 31, 2024, we had $1.1 billion of availability on the Revolving Loan Facility.

Previous wording

The agreements governing the credit facility and the Master Note Purchase Agreement contain covenants that require us to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. The agreements require us 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.

Current wording

The agreements governing the credit facility and the Master Note Purchase Agreement contain covenants that require us to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. The agreements require us 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 December 2024, the Company entered into an amendment (the “NPA Amendment”) to the Existing Master Note Purchase Agreement. The NPA Amendment amended the Existing Note Purchase Agreement to revise the leverage ratio covenant from a gross leverage ratio to a net leverage ratio and revise the interest coverage ratio covenant definition to be based on EBITDA to interest expense. The credit facility was also amended in December 2024 and, as part of such amendment, the interest coverage ratio covenant definition was revised to be based on EBITDA to interest expense.

Previous wording

In November 2023, we issued $500 million aggregate principal amount of 6.950% Senior Notes pursuant to a public offering. We received approximately $492 million pursuant to the notes after deducting the underwriting discount and other fees and expenses. Net proceeds from the notes, along with cash on hand, were used to repay borrowings due in December 2023 under the Incremental Term Loan. The notes bear interest at a rate of 6.950% 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 senior notes is subject to customary covenants and make-whole provisions upon early termination.

Current wording

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 senior notes is subject to customary covenants and make-whole provisions upon early redemption.

Previous wording

On July 2, 2018, pursuant to the Agreement and Plan of Merger dated May 29, 2018, we 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 $49.4 million was outstanding as of December 31, 2023.

Current wording

On July 2, 2018, pursuant to the Agreement and Plan of Merger dated May 29, 2018, we 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 December 31, 2024.

Previous wording

As of December 31, 2023, and December 31, 2022, we were in compliance with all debt covenants. Our debt to total capital ratio was 57 percent and 65 percent as of December 31, 2023 and December 31, 2022, respectively. Additionally, as of December 31, 2023, we had letters of credit outstanding of $42.6 million, primarily related to purchase obligations for raw materials.

Current wording

As of December 31, 2024, and December 31, 2023, we were in compliance with all debt covenants. Our debt to total capital ratio was 62 percent and 57 percent as of December 31, 2024 and December 31, 2023, respectively. Additionally, as of December 31, 2024, we had letters of credit outstanding of $46.1 million, primarily related to purchase obligations for raw materials.

Previous wording

As of December 31, 2023, our Board of Directors has authorized us to repurchase up to an additional $1,185.1 million of our common stock. We repurchased a total of 1.6 million shares of our common stock for $178.6 million during 2023, which had a favorable impact on diluted net income from continuing operations per share of 13 cents.

Current wording

We repurchased a total of 1.0 million shares of our common stock for $82.7 million during 2024, which had a favorable impact on diluted net income from continuing operations per share of three cents. As of December 31, 2024, our Board of Directors has authorized us to repurchase up to an additional $1,109.3 million of our common stock.

Previous wording

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. As of December 31, 2023 and 2022, the outstanding amount financed worldwide by dealers under these arrangements was approximately $2,629.9 million and $1,893.9 million, respectively. We participate in the cost of dealer financing up to certain limits.

Current wording

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. As of December 31, 2024 and 2023, the outstanding amount financed worldwide by dealers under these arrangements was approximately $2,255.5 million and $2,629.9 million, respectively. We participate in the cost of dealer financing up to certain limits.

Previous wording

Under these arrangements, we have agreed to repurchase products repossessed by these finance companies. As of December 31, 2023, the potential aggregate repurchase obligations were approximately $496.3 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.

Current wording

Under these arrangements, we have agreed to repurchase products repossessed by these finance companies. As of December 31, 2024, the potential aggregate repurchase obligations were approximately $372.8 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.

Previous wording

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. During 2023, consumers financed 27 percent of our vehicles sold in the United States through these arrangements. The volume of installment credit contracts written in calendar year 2023 with these institutions was $1,403.1 million, a 28 percent increase from 2022.

Current wording

We have agreements with third-party finance 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. During 2024, consumers financed 31 percent of our vehicles sold in the United States through these arrangements. The volume of installment credit contracts written in calendar year 2024 with these institutions was $1,480.4 million, a five percent increase from 2023.

Previous wording

Revenue recognition. With respect to wholegood vehicles, boats, and PG&A, revenue is recognized when we transfer control of the product to our customer (primarily dealers and distributors). With respect to services provided by us, revenue is recognized upon completion of the service or over the term of the service agreement in proportion to the costs expected to be incurred in satisfying the obligations over the term of the service period. Revenue is measured based on the amount of consideration that we expect to be entitled to in exchange for the goods or services transferred. Sales, value add, and other taxes collected from a customer concurrent with revenue-producing activities are excluded from revenue. When the right of return exists, we adjust the consideration for the estimated effect of returns. We estimate expected returns based on historical sales levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of customer, and a projection of this experience into the future. We have agreed to repurchase products repossessed by the finance companies up to certain limits. Our financial exposure is limited to the difference between the amount paid to the finance companies and the amount received on the resale of the repossessed product.

Current wording

Revenue recognition. With respect to wholegood vehicles, boats, and PG&A, revenue is recognized when we transfer control of the product to our customer (primarily dealers and distributors). With respect to services provided by us, revenue is recognized upon completion of the service or over the term of the service agreement in proportion to the costs expected to be incurred in satisfying the obligations over the service period. Revenue is measured based on the amount of consideration that we expect to be entitled to in exchange for the goods or services transferred. Sales, value add, and other taxes collected from a customer concurrent with revenue-producing activities are excluded from revenue. When the right of return exists, we adjust the consideration for the estimated effect of returns. We estimate expected returns based on historical sales levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of customer, and a projection of this experience into the future. We have agreed to repurchase products repossessed by finance companies up to certain limits. Our financial exposure is limited to the difference between the amount unpaid by the dealer with respect to repurchased product plus costs of repossession and the amount received on the resale of the repossessed product.

Previous wording

Sales promotions and incentives. We accrue for estimated sales promotion and incentive expenses, which are recognized as a component of sales in measuring the amount of consideration we expect to receive in exchange for transferring goods or providing services. Examples of sales promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and sales associate incentives. Sales promotion and incentive expenses are estimated based on current programs, planned programs, and historical rates for each product line. We record these amounts as a liability in the consolidated balance sheet until they are ultimately paid. As of December 31, 2023 and 2022, accrued sales promotions and incentives were $230.9 million and $127.0 million, respectively. Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if the customer usage rate varies from historical trends. Adjustments to sales promotion and incentive accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date.

Current wording

Sales promotions and incentives. We accrue for estimated sales promotion and incentive expenses, which are recognized as a component of sales in measuring the amount of consideration we expect to receive in exchange for transferring goods or providing services. Examples of sales promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and sales associate incentives. Sales promotion and incentive expenses are estimated based on current programs, planned programs, and historical rates for each product line. We record these amounts as a liability in the consolidated balance sheets until they are ultimately paid. As of December 31, 2024 and 2023, accrued sales promotions and incentives were $249.0 million and $230.9 million, respectively. Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if the customer usage rate varies from historical trends. Adjustments to sales promotion and incentive accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date.