UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended ~~September 30, 2017~~March 31, 2023

For the transition period from to

Commission File Number 1-11411

POLARIS ~~INDUSTRIES~~ INC.

(Exact name of registrant as specified in its charter)

Minnesota

41-1790959

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

2100 Highway 55,

Medina

55340

(Address of principal executive offices)

(Zip Code)

763

542-0500

~~Minnesota~~

~~41-1790959~~

~~(State or other jurisdiction of~~

~~incorporation or organization)~~

~~(I.R.S. Employer~~

~~Identification No.)~~

~~2100 Highway 55, Medina MN~~

~~55340~~

~~(Address of principal executive offices)~~

~~(Zip Code)~~

~~(763) 542-0500~~

(Registrant’s telephone number, including area code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)



	Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	PII	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



Large accelerated filer	x	Accelerated filer	¨☐
Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	¨☐
		Emerging growth company	¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x

~~APPLICABLE ONLY TO CORPORATE ISSUERS:~~

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of ~~October 19, 2017, 62,542,268~~April 18, 2023, 56,906,568 shares of Common Stock, $.01 par value, of the registrant were outstanding.

Table of Contents

POLARIS INC.

FORM 10-Q

For Quarterly Period Ended March 31, 2023

~~POLARIS INDUSTRIES INC.~~ ~~FORM 10-Q~~ ~~For Quarterly Period Ended September 30, 2017~~

					Page
Part I FINANCIAL INFORMATION
			Item 1 – Financial Statements		3
				Consolidated Balance Sheets	3
				Consolidated Statements of Income	4
				Consolidated Statements of Comprehensive Income	5
				Consolidated Statements of Equity	6
				Consolidated Statements of Cash Flows	67
				Notes to Consolidated Financial Statements	78
			Item 2 – ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations		1720
				Results of Operations	1821
				Liquidity and Capital Resources	2126
				~~Inflation and Foreign Exchange Rates~~	24
		Critical Accounting Policies	2528
				Note Regarding Forward Looking Statements	2528
			Item 3 – Quantitative and Qualitative Disclosures About Market Risk		2528
			Item 4 – Controls and Procedures		2530

Part II OTHER INFORMATION
			Item 1 – Legal Proceedings		2630
			Item 1A – Risk Factors		2631
			Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		2631
			~~Item 4 – Mine Safety Disclosures~~		27
	Item 6 – Exhibits		2732

SIGNATURES					2833

Table of Contents

Part I FINANCIAL INFORMATION

Item 1 – FINANCIAL STATEMENTS

POLARIS INC.

POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 30, 2017 December 31, 2016
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 132,260
$ 127,325
Trade receivables, net 184,074
174,832
Inventories, net 841,922
746,534
Prepaid expenses and other 80,859
91,636
Income taxes receivable 9,535
50,662
Total current assets 1,248,650
1,190,989
Property and equipment, net 735,441
727,596
Investment in finance affiliate 70,910
94,009
Deferred tax assets 191,287
188,471
Goodwill and other intangible assets, net 784,616
792,979
Other long-term assets 102,162
105,553
Total assets $ 3,133,066
$ 3,099,597
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of debt, capital lease obligations and notes payable $ 27,835
$ 3,847
Accounts payable 385,858
273,742
Accrued expenses:
Compensation 148,280
122,214
Warranties 112,085
119,274
Sales promotions and incentives 192,568
158,562
Dealer holdback 117,934
117,574
Other 183,030
162,432
Income taxes payable 27,448
2,106
Total current liabilities 1,195,038
959,751
Long-term income taxes payable 22,036
26,391
Capital lease obligations 18,451
17,538
Long-term debt 873,698
1,120,525
Deferred tax liabilities 9,366
9,127
Other long-term liabilities 107,182
90,497
Total liabilities $ 2,225,771
$ 2,223,829
Deferred compensation $ 11,331
$ 8,728
Shareholders’ equity:
Preferred stock $0.01 par value, 20,000 shares authorized, no shares issued and outstanding —
—
Common stock $0.01 par value, 160,000 shares authorized, 62,540 and 63,109 shares issued and outstanding, respectively $ 625
$ 631
Additional paid-in capital 688,798
650,162
Retained earnings 250,544
300,084
Accumulated other comprehensive loss, net (44,003 ) (83,837 )
Total shareholders’ equity 895,964
867,040
Total liabilities and shareholders’ equity $ 3,133,066
$ 3,099,597
CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)


	March 31, 2023		December 31, 2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	322.9	$	324.5
Trade receivables, net	324.6		343.0
Inventories, net	1,947.2		1,896.1
Prepaid expenses and other	190.1		183.7
Income taxes receivable	2.5		20.3
Total current assets	2,787.3		2,767.6
Property and equipment, net	1,058.4		1,018.4
Investment in finance affiliate	96.5		93.1
Deferred tax assets	221.2		210.5
Goodwill and other intangible assets, net	907.7		910.6
Operating lease assets	111.6		111.0
Other long-term assets	107.2		106.7
Total assets	$	5,289.9	$	5,217.9
Liabilities and Equity
Current liabilities:
Current financing obligations	$	553.6	$	553.6
Accounts payable	870.1		847.6
Accrued expenses	832.0		896.8
Other current liabilities	42.7		30.6
Total current liabilities	2,298.4		2,328.6
Long-term financing obligations	1,549.3		1,504.2
Other long-term liabilities	273.6		271.0
Total liabilities	$	4,121.3	$	4,103.8
Deferred compensation	$	13.8	$	12.6
Shareholders’ equity:
Preferred stock $0.01 par value per share, 20.0 shares authorized, no shares issued and outstanding	—		—
Common stock $0.01 par value per share, 160.0 shares authorized, 56.9 and 57.0 shares issued and outstanding, respectively	$	0.6	$	0.6
Additional paid-in capital	1,168.9		1,152.1
Retained earnings	57.3		33.8
Accumulated other comprehensive loss, net	(74.7)		(87.5)
Total shareholders’ equity	1,152.1		1,099.0
Noncontrolling interest	2.7		2.5
Total equity	1,154.8		1,101.5
Total liabilities and equity	$	5,289.9	$	5,217.9

The accompanying footnotes are an integral part of these consolidated statements.

POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Sales $ 1,478,726
$ 1,185,067
$ 3,997,428
$ 3,298,840
Cost of sales 1,114,764
924,297
3,040,589
2,505,989
Gross profit 363,962
260,770
956,839
792,851
Operating expenses:
Selling and marketing 122,642
89,751
355,486
244,812
Research and development 63,129
47,568
175,887
136,256
General and administrative 79,421
85,257
245,998
219,403
Total operating expenses 265,192
222,576
777,371
600,471
Income from financial services 18,138
19,195
57,711
59,155
Operating income 116,908
57,389
237,179
251,535
Non-operating expense:
Interest expense 8,492
4,051
24,438
10,718
Equity in loss of other affiliates 1,603
1,798
4,839
5,439
Other expense (income), net (2,368 ) 5,700
7,088
7,586
Income before income taxes 109,181
45,840
200,814
227,792
Provision for income taxes 27,293
13,528
59,796
77,425
Net income $ 81,888
$ 32,312
$ 141,018
$ 150,367
Net income per share:
Basic $ 1.31
$ 0.50
$ 2.24
$ 2.33
Diluted $ 1.28
$ 0.50
$ 2.21
$ 2.30
Weighted average shares outstanding:
Basic 62,646
64,151
62,890
64,535
Diluted 63,885
65,027
63,942
65,435

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POLARIS INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)


	Three months ended March 31,
		2023		2022
Sales		$	2,179.7	$	1,781.5
Cost of sales		1,710.5		1,428.6
Gross profit		469.2		352.9
Operating expenses:
Selling and marketing		137.6		111.6
Research and development		96.5		80.8
General and administrative		90.8		71.7
Total operating expenses		324.9		264.1
Income from financial services		16.8		11.4
Operating income		161.1		100.2
Non-operating expense:
Interest expense		28.3		11.8
Other (income) expense, net		(12.4)		(3.3)

Income from continuing operations before income taxes		145.2		91.7
Provision for income taxes		31.6		17.6
Net income from continuing operations		113.6		74.1
Loss from discontinued operations, net of tax		—		(4.2)

Net income		113.6		69.9
Net income attributable to noncontrolling interest		(0.2)		—
Net income attributable to Polaris Inc.		$	113.4	$	69.9

Amounts attributable to Polaris Inc. common shareholders:
Net income from continuing operations		$	113.6	$	74.1
Less net income attributable to noncontrolling interest		(0.2)		—
Net income from continuing operations attributable to Polaris Inc. common shareholders		113.4		74.1
Net loss from discontinued operations attributable to Polaris Inc. common shareholders		—		(4.2)
Net income attributable to Polaris Inc.		$	113.4	$	69.9

Net income (loss) per share attributable to Polaris Inc. common shareholders:
Basic
Continuing operations		$	1.98	$	1.23
Discontinued operations		$	—	$	(0.07)
Basic		$	1.98	$	1.16
Diluted
Continuing operations		$	1.95	$	1.21
Discontinued operations		$	—	$	(0.07)
Diluted		$	1.95	$	1.14
Weighted average shares outstanding:
Basic		57.4		60.3
Diluted		58.1		61.2

The accompanying footnotes are an integral part of these consolidated statements.

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POLARIS ~~INDUSTRIES~~ INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In ~~thousands)~~millions)

(Unaudited)

Three months ended September 30,
Nine months ended
September 30,
2017 2016 2017 2016
Net income $ 81,888
$ 32,312
$ 141,018
$ 150,367
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax benefit (expense) of ($20) and ($455) in 2017 and $13 and $41 in 2016 10,606
1,528
41,042
490
Unrealized gain (loss) on derivative instruments, net of tax benefit (expense) of $99 and $748 in 2017 and ($1,570) and $2,748 in 2016 (167 ) 2,638
(1,208 ) (4,621 )
Comprehensive income $ 92,327
$ 36,478
$ 180,852
$ 146,236


	Three months ended March 31,
		2023		2022
Net income		$	113.6	$	69.9
Other comprehensive income, net of tax:
Foreign currency translation adjustments		14.1		(0.8)
Unrealized gain (loss) on derivative instruments		(1.4)		8.3
Retirement plan and other activity		0.1		0.1
Comprehensive income		126.4		77.5
Comprehensive income attributable to noncontrolling interest		(0.2)		—
Comprehensive income attributable to Polaris Inc.		$	126.2	$	77.5

The accompanying footnotes are an integral part of these consolidated statements.

POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended September 30,
2017 2016
Operating Activities:
Net income $ 141,018
$ 150,367
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 138,105
121,903
Noncash compensation 34,249
43,137
Noncash income from financial services (20,131 ) (22,354 )
Deferred income taxes (2,703 ) (8,134 )
Excess tax benefits from share-based compensation —
(1,408 )
Impairment charges 25,395
—
Other, net 4,839
12,027
Changes in operating assets and liabilities:
Trade receivables (447 ) 5,686
Inventories (83,621 ) (33,804 )
Accounts payable 108,198
5,702
Accrued expenses 80,949
145,207
Income taxes payable/receivable 62,336
(278 )
Prepaid expenses and others, net 6,277
8,193
Net cash provided by operating activities 494,464
426,244
Investing Activities:
Purchase of property and equipment (126,647 ) (155,360 )
Investment in finance affiliate, net 43,230
29,223
Investment in other affiliates (7,110 ) (6,861 )
Acquisition and disposal of businesses, net of cash acquired 1,645
(54,830 )
Net cash used for investing activities (88,882 ) (187,828 )
Financing Activities:
Borrowings under debt arrangements / capital lease obligations 1,623,577
1,767,272
Repayments under debt arrangements / capital lease obligations (1,850,247 ) (1,795,316 )
Repurchase and retirement of common shares (88,877 ) (154,381 )
Cash dividends to shareholders (108,923 ) (105,732 )
Proceeds from stock issuances under employee plans 14,226
15,651
Excess tax benefits from share-based compensation —
1,408
Net cash used for financing activities (410,244 ) (271,098 )
Impact of currency exchange rates on cash balances 9,597
29
Net increase (decrease) in cash and cash equivalents 4,935
(32,653 )
Cash and cash equivalents at beginning of period 127,325
155,349
Cash and cash equivalents at end of period $ 132,260
$ 122,696

Supplemental Cash Flow Information:
Interest paid on debt borrowings $ 21,968
$ 8,731
Income taxes paid (refunded) $ (582 ) $ 82,789

Table of Contents

POLARIS INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In millions)

(Unaudited)


	Number of Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (loss)		Non Controlling Interest		Total Equity
Balance, December 31, 2022	57.0	$	0.6	$	1,152.1	$	33.8	$	(87.5)	$	2.5	$	1,101.5
Employee stock compensation	0.3	—		14.7		—		—		—		14.7
Deferred compensation	—	—		(0.1)		(1.1)		—		—		(1.2)
Proceeds from stock issuances under employee plans	0.1	—		13.2		—		—		—		13.2
Cash dividends declared (1)	—	—		—		(37.0)		—		—		(37.0)
Repurchase and retirement of common shares	(0.5)	—		(11.0)		(51.8)		—		—		(62.8)
Net income	—	—		—		113.4		—		0.2		113.6
Other comprehensive loss	—	—		—		—		12.8		—		12.8
Balance, March 31, 2023	56.9	0.6		1,168.9		57.3		(74.7)		2.7		1,154.8


	Number of Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (loss)		Non Controlling Interest		Total Equity
Balance, December 31, 2021	60.4	$	0.6	$	1,143.8	$	157.3	$	(77.4)	$	2.0	$	1,226.3
Employee stock compensation	0.4	—		13.3		—		—		—		13.3
Deferred compensation	—	—		(0.7)		0.5		—		—		(0.2)
Proceeds from stock issuances under employee plans	0.2	—		13.9		—		—		—		13.9
Cash dividends declared (1)	—	—		—		(37.9)		—		—		(37.9)
Repurchase and retirement of common shares	(1.5)	—		(27.5)		(144.8)		—		—		(172.3)
Net income	—	—		—		69.9		—		—		69.9
Other comprehensive loss	—	—		—		—		7.6		—		7.6
Balance, March 31, 2022	59.5	0.6		1,142.8		45.0		(69.8)		2.0		1,120.6

(1) Polaris Inc. declared a $0.65 dividend per share for the three month period ended March 31, 2023 and a $0.64 dividend per share for the three month period ended March 31, 2022.

The accompanying footnotes are an integral part of these consolidated statements.

Table of Contents

POLARIS ~~INDUSTRIES~~INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) (Unaudited)


	Three months ended March 31,
	2023		2022
Operating Activities:
Net income	$	113.6	$	69.9
Loss from discontinued operations, net of tax	—		4.2

Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization	61.8		56.6
Noncash compensation	14.7		13.3
Noncash income from financial services	(8.7)		(2.3)
Deferred income taxes	(10.5)		9.4
Other, net	(0.7)		(0.8)
Changes in operating assets and liabilities:
Trade receivables	19.1		(12.0)
Inventories	(47.6)		(220.3)
Accounts payable	20.3		180.1
Accrued expenses	(65.2)		(159.2)
Income taxes payable/receivable	29.5		(0.4)
Prepaid expenses and others, net	(2.1)		23.1
Net cash provided by (used for) operating activities of continuing operations	124.2		(38.4)
Net cash used for operating activities of discontinued operations	—		(10.7)
Net cash provided by (used for) operating activities	124.2		(49.1)
Investing Activities:
Purchase of property and equipment	(94.4)		(55.8)
Investment in finance affiliate, net	5.3		18.2


Net cash used for investing activities of continuing operations	(89.1)		(37.6)
Net cash used for investing activities of discontinued operations	—		(1.6)
Net cash used for investing activities	(89.1)		(39.2)
Financing Activities:
Borrowings under financing obligations	573.4		568.0
Repayments under financing obligations	(528.4)		(420.2)
Repurchase and retirement of common shares	(62.8)		(172.3)
Cash dividends to shareholders	(37.0)		(37.9)
Proceeds from stock issuances under employee plans	13.2		13.9
Net cash used for financing activities	(41.6)		(48.5)
Impact of currency exchange rates on cash balances	4.9		(0.3)
Net decrease in cash, cash equivalents and restricted cash	(1.6)		(137.1)
Cash, cash equivalents and restricted cash at beginning of period	339.7		529.1
Cash, cash equivalents and restricted cash at end of period	$	338.1	$	392.0

Supplemental Cash Flow Information:
Interest paid on debt borrowings	$	31.8	$	14.8
Income taxes paid	$	12.2	$	10.1
Leased assets obtained for operating lease liabilities	$	5.1	$	28.6

The following presents the classification of cash, cash equivalents and restricted cash within the consolidated balance sheets:
Cash and cash equivalents	$	322.9	$	367.1
Current assets held for sale	—		8.3
Other long-term assets	15.2		16.6
Total	$	338.1	$	392.0

The accompanying footnotes are an integral part of these consolidated statements.

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POLARIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation and Significant Accounting Policies

Basis of presentation. The accompanying unaudited consolidated financial statements of Polaris ~~Industries~~ Inc. (“Polaris” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and, therefore, do not include all information and disclosures of results of operations, financial position, and changes in cash flow in conformity with accounting principles generally accepted in the United States for complete financial statements. Accordingly, such statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 previously filed with the Securities and Exchange Commission (“SEC”). In the opinion of management, such statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, equity, and cash flows for the periods presented. Due to the seasonality trends for certain products and to certain changes in production and shipping cycles, results of such periods are not necessarily indicative of the results to be expected for the complete year.

Reclassifications. Reclassifications of certain prior year segment results and account balances have been made to conform to the current-year presentation. The reclassifications had no impact on the consolidated balance sheets, statements of income, comprehensive income, equity, or cash flows, as previously reported. Refer to Note 12 for additional information.

On July 1, 2022, the Company completed the sale of its Transamerican Auto Parts (“TAP”) business. The operating results of the TAP business are reported in loss from discontinued operations, net of tax, in the consolidated statements of income for all periods presented. All amounts and disclosures included in the Notes to consolidated financial statements reflect only the Company's continuing operations unless otherwise noted. Refer to Note 4 for additional information.

Fair value measurements. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In making fair value measurements, observable market data must be used when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. The Company utilizes the market approach to measure fair value for its non-qualified deferred compensation assets and liabilities, and the income approach for foreign currency contracts, interest rate contracts, and commodity contracts. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities, and for the income approach, the Company uses significant other observable inputs to value its derivative instruments used to hedge foreign currency, interest rate transactions, and commodity transactions.

Table of Contents

Assets and liabilities measured at fair value on a recurring basis are summarized below (in ~~thousands)~~millions):


	Input Level	March 31, 2023		December 31, 2022
Assets
Non-qualified deferred compensation assets	Level 1	$	40.4	$	39.8
Foreign exchange contracts, net	Level 2	$	11.6	$	8.4
Interest rate contracts, net	Level 2	$	—	$	5.9
Commodity contracts, net	Level 2	$	0.9	$	—
Liabilities
Non-qualified deferred compensation liabilities	Level 1	$	(40.4)	$	(39.8)
Interest rate contracts, net	Level 2	$	(0.4)	$	—

Fair Value Measurements as of September 30, 2017
Asset (Liability) Total Level 1 Level 2 Level 3
Non-qualified deferred compensation assets $ 51,959
$ 51,959
—
—
Total assets at fair value $ 51,959
$ 51,959
—
—
Non-qualified deferred compensation liabilities $ (51,959 ) $ (51,959 ) —
—
Foreign exchange contracts, net (1,685 ) —
$ (1,685 ) —
Total liabilities at fair value $ (53,644 ) $ (51,959 ) $ (1,685 ) —

Fair Value Measurements as of December 31, 2016
Asset (Liability) Total Level 1 Level 2 Level 3
Non-qualified deferred compensation assets $ 49,330
$ 49,330
—
—
Foreign exchange contracts, net 298
—
$ 298
—
Total assets at fair value $ 49,628
$ 49,330
$ 298
—
Non-qualified deferred compensation liabilities $ (49,330 ) $ (49,330 ) —
—
Total liabilities at fair value $ (49,330 ) $ (49,330 ) —
—

Fair value of other financial instruments. The carrying values of the Company’s short-term financial instruments, including cash and cash equivalents, trade receivables, accounts payable and ~~short-term debt, including~~ current ~~maturities of long-term debt, capital lease~~financing obligations ~~and notes payable,~~ approximate their fair ~~values. At September 30, 2017~~values due to their short-term nature. As of March 31, 2023 and December 31, ~~2016,~~2022, the fair value of the Company’s current and long-term ~~debt, capital lease~~financing obligations ~~and notes payable~~ was approximately ~~$931,601,000~~$2,117.6 million and

~~$1,156,181,000,~~ $2,070.3 million, respectively, and was determined primarily using Level 2 inputs, including quoted market prices or discounted cash flows based on quoted market rates for similar types of debt. The carrying value of current and long-term ~~debt, capital lease~~financing obligations was��$2,102.9 million and ~~notes payable including current maturities was $919,984,000 and $1,141,910,000~~$2,057.8 million as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively.

~~Inventories.~~ ~~Inventory costs include material, labor~~Property and ~~manufacturing overhead costs, including depreciation~~equipment. Depreciation expense ~~associated with~~was $57.4 million and $51.6 million for the ~~manufacture~~three months ended March 31, 2023 and ~~distribution~~2022. Substantially all 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):~~property and equipment is located in North America.

September 30, 2017 December 31, 2016
Raw materials and purchased components $ 196,233
$ 141,566
Service parts, garments and accessories 331,539
316,383
Finished goods 368,410
333,760
Less: reserves (54,260 ) (45,175 )
Inventories $ 841,922
$ 746,534

Product warranties. ~~Polaris provides a limited warranty for its vehicles for a period of~~ ~~six~~ months to two years, depending on the product. Polaris provides longer warranties in certain geographical markets as determined by local 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 established at the time of sale to the dealer or distributor based on management’s best estimate using historical rates and trends. Adjustments to the warranty reserve are made from time to time as actual claims become known in order to properly estimate the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors that could have an impact on the warranty accrual in any given period include the following: change in manufacturing quality, shifts in product mix, changes in warranty coverage periods, snowfall and its impact on snowmobile usage, product recalls and any significant changes in sales volume. The activity in the warranty reserve during the periods presented was as follows (in ~~thousands)~~millions):


	Three months ended March 31,
		2023		2022
Balance at beginning of period		$	172.9	$	132.9

Additions charged to expense		44.5		27.1
Warranty claims paid, net		(63.4)		(33.9)
Balance at end of period		$	154.0	$	126.1

New accounting pronouncements.

There are no new accounting pronouncements that are expected to have a significant impact on the Company’s consolidated financial statements.

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Balance at beginning of period $ 108,403
$ 76,873
$ 119,274
$ 56,474
Additions to warranty reserve through acquisitions —
—
—
147
Additions charged to expense 42,039
87,679
103,855
155,210
Warranty claims paid, net (38,357 ) (34,498 ) (111,044 ) (81,777 )
Balance at end of period $ 112,085
$ 130,054
$ 112,085
$ 130,054

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~~During 2016,~~Note 2. Supplemental Balance Sheet Information


In millions	March 31, 2023		December 31, 2022
Inventories
Raw materials and purchased components	$	852.5	$	843.5
Service parts, garments and accessories	385.0		371.1
Finished goods	800.0		768.2
Less: reserves	(90.3)		(86.7)
Inventories, net	$	1,947.2	$	1,896.1
Property and equipment
Land, buildings and improvements	$	567.6	$	539.1
Equipment and tooling	1,712.2		1,645.0
	2,279.8		2,184.1
Less: accumulated depreciation	(1,221.4)		(1,165.7)
Property and equipment, net	$	1,058.4	$	1,018.4
Accrued expenses
Compensation	$	131.7	$	212.3
Warranties	154.0		172.9
Sales promotions and incentives	154.5		127.0
Dealer holdback	139.1		129.7
Other accrued expenses	252.7		254.9
Total accrued expenses	$	832.0	$	896.8
Other current liabilities
Current operating lease liabilities	25.2		24.1
Income taxes payable	17.5		6.5
Total other current liabilities	$	42.7	$	30.6
Other long-term liabilities
Long-term income taxes payable	$	12.2	$	11.7
Deferred tax liabilities	4.6		4.6
Long-term operating lease liabilities	87.1		87.0
Other long-term liabilities	169.7		167.7
Total other long-term liabilities	$	273.6	$	271.0

Note 3. Revenue Recognition

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the amount of consideration that the Company ~~incurred significant additions~~expects to be entitled to in exchange for the goods or services transferred. Sales, value add, and other taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue. Revenue from goods and services transferred to customers at a point-in-time accounts for the majority of the Company’s revenue. Revenue from products or services transferred over time is discussed in the contract liabilities section.

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The following tables disaggregate the Company's revenue by major product type and geography (in millions):


	Three months ended March 31, 2023
	Off Road		On Road		Marine		Total
Revenue by product type
Wholegoods	$	1,250.4	$	267.2	$	264.4	$	1,782.0
PG&A	341.4		56.3		—		397.7
Total revenue	$	1,591.8	$	323.5	$	264.4	$	2,179.7

Revenue by geography
United States	$	1,279.8	$	157.6	$	257.2	$	1,694.6
Canada	128.4		12.4		6.8		147.6
EMEA	117.7		134.9		—		252.6
APLA	65.9		18.6		0.4		84.9
Total revenue	$	1,591.8	$	323.5	$	264.4	$	2,179.7

	Three months ended March 31, 2022
	Off Road		On Road		Marine		Total
Revenue by product type
Wholegoods	$	1,000.5	$	180.5	$	211.5	$	1,392.5
PG&A	341.6		47.4		—		389.0
Total revenue	$	1,342.1	$	227.9	$	211.5	$	1,781.5

Revenue by geography
United States	$	1,033.4	$	104.2	$	207.1	$	1,344.7
Canada	136.3		5.9		4.4		146.6
EMEA	122.7		99.6		—		222.3
APLA	49.7		18.2		—		67.9
Total revenue	$	1,342.1	$	227.9	$	211.5	$	1,781.5

For the majority of wholegood vehicles, boats, and Parts, Garments, and Accessories (“PG&A”), the Company transfers control and recognizes a sale when it ships the product from its manufacturing facility, distribution center, or vehicle holding center to its customer. The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its customers. Payment terms vary by customer and most of the Company’s sales are financed by the customer under floorplan financing arrangements whereby the Company receives payment within a few days of shipment of the product.

When the right of return exists, the Company adjusts the consideration for the estimated effect of returns. The Company estimates 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. The Company adjusts its estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed.

Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of the consideration received because it has to satisfy a future obligation. The Company uses an observable price to determine the stand-alone selling price for separate performance obligations. The Company has elected to recognize the cost for freight and shipping when control over vehicles, boats, parts, garments or accessories has transferred to the customer as an expense in cost of sales.

Financial Products. The Company sells separately-priced extended service contracts (“ESCs”) that extend mechanical coverages beyond the base limited warranty ~~reserve, primarily associated with recall activity~~as well as prepaid maintenance agreements to vehicle owners. Each of these separately priced service contracts range from 12 months to 84 months. The Company typically receives payment at the

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inception of the contract and recognizes revenue over the term of the agreement in proportion to the costs expected to be incurred in satisfying the obligations under the contract.

Contract Liabilities

Contract liabilities relate to deferred revenue recognized for ~~certain~~ ~~RZR~~ ~~ORVs. In April 2016,~~cash consideration received at contract inception in advance of the Company's performance under the respective contract and generally relate to the sale of separately priced ESCs. The Company ~~issued a voluntary recall for certain~~ ~~RZR~~ ~~900 and 1000 ORVs manufactured since model year 2013 due to reports of thermal-related incidents, including fire, and in September 2016, the Company issued a voluntary recall for certain~~ ~~RZR~~ ~~XP Turbo off-road vehicles due to similar thermal-related incidents.~~

~~Deferred revenue.~~ ~~In the second quarter of 2016, Polaris began financing~~finances its self-insured risks related to ~~extended service contracts (“ESCs”).~~ESCs. The premiums for ESCs are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. Additionally, in the fourth quarter of 2016, the Company acquired Transamerican Auto Parts (“TAP”), which recognizes revenues related to sales of its extended warranty programs for tires and other products over the term of the warranty period which vary from two to five years. Warranty costs are recognized as incurred. Revenues related to sales of its extended warranty program for powertrains and related accrued costs for claims are deferred and amortized over the warranty period, generally five years, while warranty administrative costs are recognized as incurred.

The activity in the deferred revenue reserve during the periods presented was as follows (in ~~thousands)~~millions):


	Three months ended March 31,
		2023		2022
Balance at beginning of period		$	111.1	$	108.3
New contracts sold		13.7		15.5
Revenue recognized on existing contracts		(13.3)		(8.9)
Balance at end of period		$	111.5	$	114.9

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Balance at beginning of period $ 36,188
$ 8,100
$ 26,157
—
New contracts sold 6,962
3,554
22,076
$ 11,830
Less: reductions for revenue recognized (3,130 ) (354 ) (8,213 ) (530 )
Balance at end of period (1) $ 40,020
$ 11,300
$ 40,020
$ 11,300

~~(1) Unamortized extended service contract premiums (deferred revenue)~~The Company expects to recognize approximately $35.6 million of ~~$16,045,000 and $23,975,000 were~~the unearned amount over the next 12 months, which is recorded in other current liabilities ~~and~~as of March 31, 2023, compared to $36.8 million as of March 31, 2022. The amount recorded in other long-term liabilities ~~respectively,~~totaled $75.9 million and $78.1 million as of ~~September 30, 2017.~~March 31, 2023 and 2022, respectively.

~~New accounting pronouncements.~~

~~Share-based payment accounting.~~ ~~During the first quarter of 2017,~~

Note 4. Divestitures and Discontinued Operations

2022 Divestitures.

On July 1, 2022, the Company ~~adopted Accounting Standards Update (ASU) No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting. As~~completed the sale of its TAP business, an aftermarket parts business, for a ~~result~~sales price, net of ~~the adoption, the Company recognized a tax benefit~~post-closing purchase price adjustments, of $4,397,000 and $7,546,000 of excess tax benefits related to share-based payments in our provision for income taxes for the three and nine months ended September 30, 2017, respectively. These items were historically recorded in additional paid-in capital. In addition, for each period presented, cash flows related to excess tax benefits are now classified as an operating activity along with other income tax related cash flows. The Company elected to apply the change in presentation of excess tax benefits in the statements of cash flows on a prospective basis. The Company’s compensation expense each period continues to reflect estimated forfeitures.

~~Revenue from contracts with customers.~~ ~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers. This ASU~~$42.2 million. TAP is a comprehensive new revenue recognition model that requires a company to recognize revenue from the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017 and is effective for the Company’s fiscal year beginning January 1, 2018. Subsequent to the issuance of ASU 2014-09, the FASB issued ASU 2016-08, ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), and ASU 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~. These ASUs do not change the core principle of the guidance stated in ASU 2014-09, instead these amendments are intended to clarify and improve operability of certain topics included within the revenue standard. These ASUs will have the same effective date and transition requirements as ASU 2014-09.

The Company has completed a preliminary assessment of the impact of ASU 2014-09 and other related ASUs, and does not anticipate that the impact of adoption will be significant to the Company’s financial statements, accounting policies or processes. The Company will expand its revenue related disclosures as a result of adopting the new standard, which will primarily include revenue disaggregation. The Company will adopt ASU 2014-09 for the Company’s fiscal year beginning January 1, 2018, using the modified retrospective approach.

~~Statement of cash flows.~~ ~~In November 2016, the FASB issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The provisions of ASU 2016-18 are effective for years beginning after December 15, 2017, with early adoption permitted. The Company expects to adopt the requirements of the new standard for the Company’s fiscal year beginning January 1, 2018, using the retrospective transition method, as required by the new standard. The adoption of this ASU is not expected to have a material impact to the consolidated statements of cash flows.

~~Leases.~~ ~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~. This ASU requires most lessees to recognize right of use assets and lease liabilities, but recognize expenses in a manner similar with current accounting standards. The standard is effective for fiscal years and interim periods beginning after December 15, 2018 and is effective for the Company’s fiscal year beginning January 1, 2019. Entities are required to use a modified retrospective approach, with early adoption permitted. The Company is evaluating the impact of this new standard on the financial statements.

~~Derivatives and hedging.~~ ~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~. This ASU better aligns accounting rules with a company’s risk management activities; better reflects economic results of hedging in financial statements; and simplifies hedge accounting treatment. The standard is effective for fiscal years and interim periods beginning after December 15, 2018 and is effective for the Company’s fiscal year beginning January 1, 2019, with early adoption permitted. The Company is evaluating the impact of this new standard on the financial statements.

~~There are no other new accounting pronouncements that are expected to have a significant impact on Polaris’ consolidated financial statements.~~

~~Note 2. Acquisitions~~

~~Transamerican Auto Parts~~

~~On October 11, 2016, the Company entered into a definitive agreement with TAP Automotive Holdings, LLC~~

~~(“Transamerican Auto Parts” or “TAP”) to acquire the outstanding equity interests in Transamerican Auto Parts, a privately held,~~ vertically integrated manufacturer, distributor, retailer, and installer of off-road Jeep^® and truck parts and accessories ~~for an aggregate consideration~~. The transaction included TAP’s full portfolio of ~~$668,348,000, net~~operations, including all brands, product lines, manufacturing operations, distribution facilities, more than 100 4 Wheel Parts retail locations, and more than 1,700 TAP employees.

The results of ~~cash acquired. TAP’s products and services for customers~~ TAP have been presented as discontinued operations. TAP was historically included within the ~~off-road four-wheel-drive market correspond closely to our ORV business.~~Company’s Aftermarket segment; however, as a result of the divestiture, the Company began management of its portfolio of businesses under a new basis as of June 30, 2022. The ~~transaction closed on November 10, 2016. The Company funded~~Aftermarket segment was eliminated and the ~~purchase price with borrowings under its existing credit facilities.~~

Asresults of ~~September 30, 2017,~~ the ~~purchase price allocation for~~Company’s remaining aftermarket businesses historically included within the ~~acquisition is preliminary. The following table summarizes the preliminary fair values assigned~~Aftermarket segment were reclassified to the ~~TAP net assets acquired~~Off Road and ~~the determination~~On Road segments. The comparative 2022 segment results were reclassified for comparability.

Results of ~~final net assets~~discontinued operations were as follows (in ~~thousands)~~millions):


	Three months ended March 31, 2022
Sales	$	175.4
Cost of sales	131.9
Other costs and expenses	49.0
Loss from discontinued operations before income taxes	(5.5)
Income tax benefit	(1.3)
Loss from discontinued operations, net of tax	(4.2)

Cash and cash equivalents $ 3,017
Trade receivables 18,214
Inventory 145,612
Property, plant and equipment 32,814
Customer relationships 87,000
Trademarks / trade names 175,500
Goodwill 264,324
Other assets 18,578
Deferred revenue (7,944 )
Other liabilities assumed (65,750 )
Total fair value of net assets acquired 671,365
Less cash acquired (3,017 )
Total consideration for acquisition, less cash acquired $ 668,348

~~On the acquisition date, amortizable intangible assets had a weighted-average useful life~~Table of 8.9 years. The customer relationships were valued based on the Discounted Cash Flow Method and are amortized over 5-10 years, depending on the customer class. The trademarks and trade names were valued on the Relief from Royalty Method and have indefinite remaining useful lives. Goodwill is deductible for tax purposes.

The following unaudited pro forma information represents the Company’s results of operations as if the fiscal 2016 acquisition of TAP had occurred at the beginning of fiscal 2015 (in thousands, except per share data). These performance results may not be indicative of the actual results that would have occurred under the ownership and management of the Company.

Contents

Three months ended September 30, 2016 Nine months ended September 30, 2016
Net sales $ 1,367,944
$ 3,867,221
Net income $ 36,603
$ 165,670
Basic earnings per share $ 0.57
$ 2.56
Diluted earnings per share $ 0.56
$ 2.53

Note 3.5. Share-Based Compensation

The amount of compensation cost for share-based awards to be recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company analyzes historical data to estimate pre-vesting forfeitures and records share-based compensation expense for those awards expected to vest.

Total share-based compensation expenses were comprised as follows (in ~~thousands)~~millions):


												Three months ended March 31,
	Three months ended September 30,						Nine months ended September 30,						2023		2022
	2017			2016			2017		2016
Option plan	$	5,766		$	6,210		$	12,837	$	17,772
Option awards											Option awards		$	5.8	$	5.1
Other share-based awards	(3,919		)	(3,139		)	18,191		15,680		Other share-based awards		6.2		5.5
Total share-based compensation before tax	1,847			3,071			31,028		33,452		Total share-based compensation before tax		12.0		10.6
Tax benefit	686			1,146			11,524		12,478		Tax benefit		2.8		2.6
Total share-based compensation expense included in net income	$	1,161		$	1,925		$	19,504	$	20,974	Total share-based compensation expense included in net income		$	9.2	$	8.0

In addition to the above share-based compensation expenses, ~~Polaris~~the Company sponsors a qualified non-leveraged employee stock ownership plan ~~(ESOP)~~(“ESOP”). Shares allocated to eligible participants’ accounts vest at various percentage rates based on years of service and require no cash payments from the recipient.

At ~~September 30, 2017~~,As of March 31, 2023, there was ~~$105,401,000~~$79.4 million of total unrecognized share-based compensation expense related to unvested share-based equity awards. Unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of ~~1.72~~2.0 years. Included in unrecognized share-based compensation expense iswas approximately ~~$36,774,000~~$11.0 million related to stock options and ~~$68,627,000~~ ~~for~~$68.4 million related to restricted stock.

Note 4.6. Financing Agreements

The carrying value of ~~debt, capital lease~~financing obligations ~~notes payable~~ and the average related interest rates were as follows (in ~~thousands)~~millions):


	Average interest rate as of March 31, 2023	Maturity	March 31, 2023		December 31, 2022
Incremental term loan	6.16%	December 2023	500.0		500.0
Revolving loan facility	5.34%	June 2026	$	371.0	$	312.9
Term loan facility	6.16%	June 2026	816.0		828.0
Senior notes—fixed rate	4.23%	July 2028	350.0		350.0
Finance lease obligations	5.22%	Various through 2029	11.2		11.4
Notes payable and other	4.26%	Various through 2030	60.1		61.4
Debt issuance costs			(5.4)		(5.9)
Total financing obligations			$	2,102.9	$	2,057.8
Less: Current financing obligations			553.6		553.6
Long-term financing obligations			$	1,549.3	$	1,504.2

Average interest rate at September 30, 2017 Maturity September 30, 2017 December 31, 2016
Revolving loan facility May 2021 —
$ 172,142
Term loan facility 2.52% May 2021 $ 690,000
740,000
Senior notes—fixed rate 3.81% May 2018 25,000
25,000
Senior notes—fixed rate 4.60% May 2021 75,000
75,000
Senior notes—fixed rate 3.13% December 2020 100,000
100,000
Capital lease obligations 5.15% Various through 2029 20,092
19,306
Notes payable and other 3.50% June 2027 12,383
13,618
Debt issuance costs (2,491 ) (3,156 )
Total debt, capital lease obligations, and notes payable $ 919,984
$ 1,141,910
Less: current maturities 27,835
3,847
Total long-term debt, capital lease obligations, and notes payable $ 892,149
$ 1,138,063
In December 2010, the Company entered an unsecured Master Note Purchase Agreement, which has been amended and supplemented, under which it has issued senior notes. In July 2018, the Company issued $350 million of unsecured senior notes due July 2028 which remain outstanding.

~~In August 2011, Polaris entered into~~The Company maintains an unsecured credit facility which consists of a ~~$350,000,000~~ ~~unsecured~~term loan facility (the “Term Loan Facility”) and a revolving loan ~~facility.~~facility (the “Revolving Loan Facility”). In ~~March 2015, Polaris~~July 2018, the Company amended ~~the loan~~its unsecured credit facility to increase its Term Loan Facility to $1,180 million, of which $816.0 million was outstanding as of March 31, 2023. In June 2021, the Company further amended its unsecured credit facility to ~~$500,000,000~~increase its Revolving Loan Facility to $1.0 billion, of which $371.0 million was outstanding as of March 31, 2023, and ~~to provide more beneficial covenant and interest rate terms. The amended terms also extended~~extend the ~~expiration~~maturity date to ~~March 2020.~~June 2026. Interest is charged at rates based on ~~a LIBOR or “prime” base rate.~~ adjusted Term SOFR.

In ~~May 2016, Polaris~~December 2021, the Company amended the ~~revolving loan~~credit facility to ~~increase~~provide an unsecured incremental 364-day term loan (the “Incremental Term Loan”) in the amount of $500 million, which was fully drawn on closing. In December 2022, the Company further amended its unsecured credit facility to ~~$600,000,000 and~~ extend the ~~expiration~~maturity date of the Incremental Term Loan to ~~May 2021. The amended terms also established a $500,000,000 term loan facility.~~December 15, 2023. There are no required principal payments prior to the maturity date. In ~~November 2016, Polaris amended~~addition to the ~~revolving loan facility to increase~~payment of the ~~term loan facility to $750,000,000, of which $690,000,000 is outstanding as of September 30, 2017.~~

~~In December 2010,~~$500 million Incremental Term Loan, the Company ~~entered into a Master Note Purchase Agreement~~is required to ~~issue~~ ~~$25,000,000~~ ~~of unsecured senior notes due~~ ~~May 2018~~ ~~and~~ ~~$75,000,000~~ ~~of unsecured senior notes due~~ ~~May 2021~~ ~~(collectively,~~make principal payments under the ~~“Senior Notes”).~~ Term Loan Facility totaling $45.0 million over the next 12 months. These payments are classified as current maturities in the consolidated balance sheets.

The ~~Senior Notes were issued in~~ ~~May 2011. In December 2013,~~credit agreements governing the ~~Company entered into a First Supplement to Master Note Purchase Agreement, under which the Company issued $100,000,000 of unsecured senior notes due December 2020.~~

~~The unsecured revolving loan~~credit facility and the Master Note Purchase Agreement contain covenants that require ~~Polaris~~the Company to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. ~~Polaris~~The

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agreements 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. The Company was in compliance with all such covenants as of ~~September 30, 2017~~.March 31, 2023.

~~The debt~~Debt issuance costs are recognized as a reduction in the carrying value of the related long-term debt in the consolidated balance sheets and are being amortized to interest expense in ~~our~~the consolidated statements of income over the expected remaining terms of the related debt.

~~A property lease~~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, ~~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.~~

~~The~~the Company has committed to make a ~~mortgage note payable agreement for land, on which Polaris built~~series of deferred payments to the ~~Huntsville, Alabama manufacturing facility in 2016.~~former owners following the closing date of the merger through July 2030. The original ~~mortgage note~~discounted payable was for ~~$14,500,000,~~$76.7 million, of which ~~$12,083,000 is~~$55.3 million was outstanding as of ~~September 30, 2017.~~March 31, 2023. The ~~payment of principal~~outstanding balance is included in long-term financing obligations and ~~interest for~~current financing obligations in the note payable is forgivable if the Company satisfies certain job commitments over the term of the note. The Company has met the required commitments to date. Forgivable loans related to other Company facilities are also included within notes payable.consolidated balance sheets.

Note 5.7. Goodwill and Other Intangible Assets

Goodwill and other intangible assets, net of accumulated amortization, as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022 are as follows (in ~~thousands)~~millions):


	March 31, 2023		December 31, 2022
Goodwill	$	387.5	$	386.2
Other intangible assets, net	520.2		524.4
Total goodwill and other intangible assets, net	$	907.7	$	910.6

September 30, 2017 December 31, 2016
Goodwill $ 430,766
$ 421,563
Other intangible assets, net 353,850
371,416
Total goodwill and other intangible assets, net $ 784,616
$ 792,979

There have been no material additions to goodwill and other intangible assets in 2017. In March 2016, the Company acquired Taylor-Dunn Manufacturing Company (“Taylor-Dunn”), a leading provider of industrial vehicles serving a broad range of commercial, manufacturing, warehouse and ground-support customers. Taylor-Dunn is based in Anaheim, California, and is included in the Global Adjacent Markets reporting segment.

In November 2016, the Company acquired TAP, a vertically integrated manufacturer, distributor, retailer and installer of off-road Jeep and truck accessories. TAP is based in Compton, California, and is included in the Aftermarket reporting segment. As of September 30, 2017, the purchase price allocation for the TAP acquisition remains preliminary.

The changes in the carrying amount of goodwill by reportable segment for the ~~nine~~three months ended ~~September 30, 2017~~ ~~were~~March 31, 2023 and 2022 are as follows (in ~~thousands)~~millions):


	Off Road		On Road		Marine		Total
Balance as of December 31, 2022	$	110.7	$	48.4	$	227.1	$	386.2
Currency translation effect on foreign goodwill balances	0.1		1.2		—		1.3
Balance as of March 31, 2023	$	110.8	$	49.6	$	227.1	$	387.5


	Off Road		On Road		Marine		Total
Balance as of December 31, 2021	$	111.7	$	52.5	$	227.1	$	391.3
Currency translation effect on foreign goodwill balances	0.2		(1.2)		—		(1.0)
Balance as of March 31, 2022	$	111.9	$	51.3	$	227.1	$	390.3

During 2020, the Company recorded impairment charges of $270.3 million related to goodwill of the Company’s Aftermarket reporting segment. As part of the Company’s segment reorganization in the second quarter of 2022, the Aftermarket segment was eliminated and historical goodwill impairments of $60.8 million and $20.3 million were allocated to the Off Road and On Road segments, respectively, on a relative fair value basis. The goodwill amounts above are shown net of these impairment charges.

Nine months ended September 30, 2017
Goodwill, beginning of period $ 421,563
Goodwill from businesses acquired —
Currency translation effect on foreign goodwill balances 9,203
Goodwill, end of period $ 430,766

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The components of other intangible assets were as follows ~~(in thousands)~~($ in millions):


		March 31, 2023						December 31, 2022
	Weighted-average useful life (years)	Cost		Accumulated amortization		Net		Cost		Accumulated amortization		Net
Definite-life intangibles
Dealer/customer related	19	$	341.7	$	(84.4)	$	257.3	$	341.7	$	(80.0)	$	261.7
Indefinite-life intangibles
Brand/trade names		262.9		—		262.9		262.7		—		262.7
Total other intangible assets, net		$	604.6	$	(84.4)	$	520.2	$	604.4	$	(80.0)	$	524.4

Total estimated life (years) September 30, 2017 December 31, 2016
Non-amortizable—indefinite lived:
Brand names $ 232,514
$ 229,121
Amortizable:
Non-compete agreements 5 540
540
Dealer/customer related 5-10 169,023
164,837
Developed technology 5-7 20,849
26,048
Total amortizable 190,412
191,425
Less: Accumulated amortization (69,076 ) (49,130 )
Net amortized other intangible assets 121,336
142,295
Total other intangible assets, net $ 353,850
$ 371,416

Amortization expense for intangible assets was $4.4 million and $5.0 million for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016 was~~ ~~$6,344,000~~ ~~and $3,747,000,~~2022, respectively. Estimated future amortization expense for identifiable intangible assets during the ~~remainder of~~ ~~2017~~ ~~through~~ ~~2022~~next five years is as ~~follows:~~ ~~2017~~ ~~(remainder),~~ ~~$7,400,000~~; ~~2018~~, ~~$27,900,000~~; ~~2019~~, ~~$26,300,000~~; ~~2020~~, ~~$21,200,000~~; ~~2021~~, ~~$18,800,000~~; ~~2022~~, ~~$17,600,000~~;follows (in millions):


	Q2-Q4 2023		2024		2025		2026		2027		2028
Estimated amortization expense	$	13.3	$	17.7	$	17.7	$	17.7	$	17.7	$	17.7

~~and after~~ ~~2022~~, ~~$2,100,000~~. The preceding expected amortization expense is an estimate and actual amounts could differ due to additional intangible asset acquisitions, changes in foreign currency rates or ~~impairment~~impairments of intangible assets.

Note 6.8. Shareholders’ Equity

During the ~~nine~~three months ended ~~September 30, 2017, Polaris~~March 31, 2023, the Company paid ~~$88,877,000~~$62.8 million to repurchase ~~and retire~~ approximately ~~1,015,000~~0.5 million shares of its common stock. As of ~~September 30, 2017~~,March 31, 2023, the Board of Directors has authorized the Company to repurchase up to an additional ~~6,448,000~~ ~~shares~~$300.5 million of ~~Polaris~~the Company’s common stock. The repurchase of any or all such shares authorized for repurchase will be governed by applicable SEC rules and dependent on management’s assessment of market ~~conditions. Polaris~~conditions and subject to the restrictions on share repurchases set forth in the incremental amendment.

The Company paid a regular cash dividend of ~~$0.58~~$0.65 per share on ~~September~~March 15, ~~2017~~2023 to holders of record at the close of business on ~~September~~March 1, 2017. On October 26, 2017, the Polaris Board of Directors declared a regular cash dividend of $0.58 per share payable on December 15, 2017 to holders of record of such shares at the close of business on December 1, 2017.

2023. Cash dividends declared and paid per common share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~,2022, were as follows:

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Cash dividends declared and paid per common share $ 0.58
$ 0.55
$ 1.74
$ 1.65


	Three months ended March 31,
		2023		2022
Cash dividends declared and paid per common share		$	0.65	$	0.64

Net income per share

Basic ~~earnings~~income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each period, including shares earned under the Deferred Compensation Plan for Directors (“Director Plan”) ~~and~~, the ESOP and deferred stock units under the 2007 Omnibus Incentive Plan (“Omnibus Plan”). Diluted ~~earnings~~income per share is computed under the treasury stock method and is calculated to compute the dilutive effect of outstanding stock options and certain ~~shares~~share-based awards issued under the Omnibus Plan. A reconciliation of these amounts is as follows (in ~~thousands)~~millions):


	Three months ended March 31,
		2023	2022
Weighted average number of common shares outstanding		57.0	59.9
Director Plan and deferred stock units		0.2	0.2
ESOP		0.2	0.2
Common shares outstanding—basic		57.4	60.3
Dilutive effect of restricted stock units		0.4	0.5
Dilutive effect of stock option awards		0.3	0.4
Common and potential common shares outstanding—diluted		58.1	61.2

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Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Weighted average number of common shares outstanding 62,398 63,902
62,637 64,263
Director Plan and deferred stock units 161 143
154 168
ESOP 87 106
99 104
Common shares outstanding—basic 62,646 64,151
62,890 64,535
Dilutive effect of Omnibus Plan 1,239 876
1,052 900
Common and potential common shares outstanding—diluted 63,885 65,027
63,942 65,435

During the three ~~and nine~~ months ended ~~September 30, 2017~~,March 31, 2023, the number of options ~~that could potentially dilute earnings per share on a fully diluted basis~~ that were not included in the computation of diluted ~~earnings~~income per share ~~(because to do so~~because the option exercise price was greater than the market price, and therefore, the effect would have been ~~anti-dilutive) were 2,892,000 and 2,816,000, respectively,~~anti-dilutive was 1.7 million compared to ~~1,786,000~~ ~~and 1,736,000~~1.3 million for the same ~~periods~~period in ~~2016~~.2022.

Accumulated other comprehensive loss

Changes in the accumulated other comprehensive loss balance iswere as follows (in ~~thousands)~~millions):


	Foreign Currency Translation		Cash Flow Hedging Derivatives		Retirement Plan Activity		Accumulated Other Comprehensive Loss
Balance as of December 31, 2022	$	(94.8)	$	10.5	$	(3.2)	$	(87.5)
Reclassification to the statement of income	—		(6.0)		0.1		(5.9)
Change in fair value	14.1		4.6		—		18.7
Balance as of March 31, 2023	$	(80.7)	$	9.1	$	(3.1)	$	(74.7)

Foreign
Currency
Items Cash Flow
Hedging Derivatives Accumulated Other
Comprehensive Loss
Balance as of December 31, 2016 $ (84,133 ) $ 296
$ (83,837 )
Reclassification to the statement of income —
(2,255 ) (2,255 )
Change in fair value 41,042
1,047
42,089
Balance as of September 30, 2017 $ (43,091 ) $ (912 ) $ (44,003 )

~~The table below provides data about~~See Note 11 for the amount of gains and losses, net of tax, reclassified from accumulated other comprehensive loss into the ~~statement~~statements of income for cash flow derivatives designated as hedging ~~instruments for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~(in thousands):~~instruments.

Derivatives in Cash
Flow Hedging Relationships
Location of (Gain) Loss
Reclassified from
Accumulated OCI
into Income
Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Foreign currency contracts Other expense, net $ (174 ) $ (3,002 ) $ 2,433
$ (579 )
Foreign currency contracts Cost of sales 258
(838 ) (178 ) (1,687 )
Total $ 84
$ (3,840 ) $ 2,255
$ (2,266 )

~~The net amount of the existing gains or losses at~~ ~~September 30, 2017~~ that is expected to be reclassified into the statement of income within the next 12 months is not expected to be material. See Note 10 for further information regarding Polaris’ derivative activities.

Note 7.9. Financial Services Arrangements

Polaris Acceptance, a joint venture between ~~Polaris~~the Company and Wells Fargo Commercial Distribution Finance Corporation, a direct subsidiary of Wells Fargo Bank, N.A. (“Wells Fargo”), which is supported by a partnership agreement between their respective wholly owned subsidiaries, finances substantially all of ~~Polaris’~~the Company’s United States sales of snowmobiles, off-road vehicles (“ORV”), motorcycles, and related PG&A, whereby ~~Polaris~~the Company receives payment within a few days of shipment of the product.

~~Polaris’~~The Company’s subsidiary has a 50 percent equity interest in Polaris Acceptance. ~~Polaris Acceptance sells a majority of its receivable portfolio to a securitization facility (the “Securitization Facility”) arranged by Wells Fargo.~~ 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 Accounting Standards Codification (“ASC”) Topic 860. Polaris’Company’s 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. The partnership agreement is effective through February ~~2022.~~2027.

~~Polaris’~~The Company’s total investment in Polaris Acceptance of ~~$70,910,000 at~~ ~~September 30, 2017~~$96.5 million as of March 31, 2023 is accounted for under the equity method and is recorded in investment in finance affiliate in the ~~accompanying~~ consolidated balance sheets. ~~At September 30, 2017,~~As of March 31, 2023, the outstanding amount of net receivables financed for dealers under this arrangement was ~~$1,157,388,000, which included $489,316,000 in the Polaris Acceptance portfolio and $668,072,000 of receivables within the Securitization Facility (“Securitized Receivables”).~~$1,358.1 million.

~~Polaris~~The Company has agreed to repurchase products repossessed by Polaris Acceptance up to an annual maximum of 15 percent of the aggregate average month-end outstanding Polaris Acceptance receivables and Securitized Receivables during the prior calendar year. For calendar year ~~2017~~,2023, the potential 15 percent aggregate repurchase obligation is approximately ~~$183,951,000. Polaris’~~$110.5 million.

A subsidiary of Huntington Bancshares Incorporated (“Huntington”) finances a portion of the Company’s United States sales of boats whereby the Company receives payment within a few days of shipment of the product. The Company has agreed to repurchase products repossessed by Huntington up to a maximum of 100 percent of the aggregate outstanding Huntington receivables balance. As of March 31, 2023, the potential aggregate repurchase obligation was approximately $423.2 million.

The Company has other financing arrangements related to its foreign subsidiaries in which it has agreed to repurchase repossessed products. For calendar year 2023, the potential aggregate repurchase obligations are approximately $24.4 million.

The Company’s financial exposure under ~~this arrangement~~these repurchase agreements is limited to the difference between the amounts unpaid by the dealer or distributor 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 ~~this agreement~~these agreements during the periods presented.

~~Polaris~~The Company has agreements with ~~Performance Finance, Sheffield Financial and Synchrony Bank, under which these financial institutions~~third-party financing companies to provide financing options to end consumers of ~~Polaris~~the Company’s products. ~~Polaris’~~The Company has no material contingent liabilities for residual value or credit collection risk under these agreements. The Company’s income generated from these agreements has been included as a component of income from financial services in the ~~accompanying~~ consolidated statements of income.

Polaris also administers and provides extended service contracts to consumers and certain insurance contracts to dealers and consumers through various third-party suppliers. Polaris finances its self-insured risks related to extended service contracts, but does not retain any insurance or financial risk under any of the other arrangements. Polaris’ service fee income generated from these arrangements has been included as a component of income from financial services in the accompanying consolidated statements of income.

~~Note 8. Investment in Other Affiliates~~

~~The Company has certain investments in nonmarketable securities of strategic companies. As of September 30, 2017 and~~ ~~December 31, 2016~~, the Company’s investment in Eicher-Polaris Private Limited (EPPL) represents the majority of these investments and is recorded as a component of other long-term assets in the accompanying consolidated balance sheets.

EPPL is a joint venture established in 2012 with Eicher Motors Limited (“Eicher”). Polaris and Eicher each control 50 percent of the joint venture, which is intended to design, develop and manufacture a full range of new vehicles for India and other emerging markets. The investment in EPPL is accounted for under the equity method, with Polaris’ proportionate share of income or loss recorded within the consolidated financial statements on a one month lag due to financial information not being available timely. As of ~~September 30, 2017~~ ~~and December 31, 2016, the carrying value of the Company’s investment in~~

~~EPPL was $20,225,000 and $20,182,000, respectively. Through~~ ~~September 30, 2017~~, Polaris has invested $46,810,000 in the joint venture. Polaris’ share of EPPL loss for the three and nine months ended September 30, 2017 was $1,603,000 and $4,839,000, respectively, compared to $1,798,000 and $5,439,000 for the same respective periods in 2016. The loss is included in equity in loss of other affiliates on the consolidated statements of income.

Polaris will impair or write off an investment and recognize a loss if and when events or circumstances indicate there is impairment in the investment that is other-than-temporary. When necessary, Polaris evaluates investments in nonmarketable securities for impairment, utilizing Level 3 fair value inputs. As a result of the Victory^® Motorcycles wind down, the Company recorded an impairment of a cost-method investment in Brammo, Inc. during the first quarter of 2017. See Note 12 for additional discussion related to charges incurred related to the Victory Motorcycles wind down. In October 2017, an agreement was signed to sell the assets of Brammo, Inc. to a third party. The sale is expected to be completed in the fourth quarter of 2017.

Note 9.10. Commitments and Contingencies

~~Polaris~~Product liability. The Company is subject to product liability claims in the normal course of business. In ~~late~~ 2012, ~~Polaris purchased~~the Company began purchasing excess insurance coverage for ~~catastrophic~~ product liability ~~claims for incidents occurring after the policy date. Polaris~~claims. The Company self-insures product liability claims

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before the policy date and up to the purchased ~~catastrophic~~ insurance coverage after the policy date. The estimated costs resulting from any losses are charged to operating expenses when it is probable a loss has been incurred and the amount of the loss is reasonably ~~determinable.~~estimable. The Company utilizes historical trends and actuarial analysis, ~~tools,~~ along with an analysis of current claims, to assist in determining the appropriate loss reserve levels. At ~~September 30, 2017~~,As of March 31, 2023, the Company had an accrual of ~~$40,602,000~~$113.1 million for the probable payment of pending claims related to product liability litigation associated with ~~Polaris~~the Company’s products. This accrual is included as a component of other accrued expenses in the ~~accompanying~~ consolidated balance sheets.

~~Polaris~~Litigation. The Company is a defendant in lawsuits and subject to other claims arising in the normal course of ~~business.~~ business, including matters related to intellectual property, commercial matters, employment, and product liability claims. In addition, as of March 31, 2023, the Company is party toputative class actions pending against the Company in the United States which are described in more detail in Part II, Item 1 – Legal Proceedings. The Company is unable to provide an evaluation of the likelihood that a loss will be incurred or an estimate of the range of possible loss on the putative class actions.

In the opinion of management, it is presently unlikely that any legal proceedings pending against or involving ~~Polaris~~the Company will have a material adverse effect on ~~Polaris’~~the Company’s financial position, or results of ~~operations.~~

Asoperations, or cash flows. However, in many of these matters, it is inherently difficult to determine whether a ~~component of certain past acquisition agreements, Polaris has committed~~loss is probable or reasonably possible or to ~~make additional payments to certain sellers contingent upon either~~estimate the ~~passage of time~~size or ~~certain financial performance criteria. Polaris initially records the fair value of each commitment as~~range of the ~~respective opening balance sheet,~~possible loss given the variety of potential outcomes of actual and ~~each~~potential claims, including legal proceedings seeking punitive damages for which we are not insured, the uncertainty of future rulings, the behavior or incentives of adverse parties, and other factors outside of the control of the Company. Accordingly, the Company’s loss reserve may change from time to time, and actual losses could exceed the amounts accrued by an amount that could be material to the Company’s consolidated financial position, results of operations, or cash flows in any particular reporting ~~period~~period.

Regulatory. In the ~~fair value is evaluated, using Level 3 inputs,~~normal course of business, the Company’s products are subject to extensive laws and regulations relating to safety, environmental, and other regulations promulgated by the United States federal government and individual states, as well as international regulatory authorities. Failure to comply with ~~the change~~applicable regulations could result in ~~value reflected in the consolidated statements of income. As of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, the fair values of contingent purchase price commitments are immaterial.~~fines, penalties or other costs.

Note ~~10.~~11. Derivative Instruments and Hedging Activities

The Company is exposed to certain risks ~~relating~~from fluctuations in foreign currency exchange rates, interest rates, and commodity prices. To reduce its exposure to ~~its ongoing business operations. From time~~such risks, the Company selectively uses derivative financial instruments. The decision of whether and when to ~~time, the primary risks managed by using~~execute derivative instruments, ~~are foreign currency~~along with the duration of the instrument, may vary from period to period depending on market conditions, the relative costs of the instruments and capacity to hedge. The duration is linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. The Company does not use any financial contracts for trading purposes. The derivative contracts contain credit risk ~~interest rate~~to the extent that our bank counterparties may be unable to meet the terms of the agreements. The amount of such credit risk is generally limited to the unrealized gains, if any, in such contracts. Such risk is minimized by limiting those counterparties to major financial institutions of high credit quality.

The Company conducts business in various locations throughout the world and ~~commodity price fluctuations. Derivative contracts on various currencies are entered into in order~~is subject to ~~manage foreign currency exposures~~market risk associated with certain product sourcing activities and intercompany cash ~~flows. Interest rate swaps are occasionally entered into~~flows due to changes in ~~order~~the value of foreign currencies in relation to ~~maintain a balanced risk of fixed and floating interest rates associated with~~its reporting currency, the Company’s long-term debt. Commodity hedging contracts are entered into in order to manage fluctuating market prices of certain purchased commodities and raw materials that are integrated into the Company’s end products.

U.S. dollar. The Company’s foreign currency management objective is to mitigate the potential impact of currency fluctuations on the value of its U.S. dollar cash flows and to reduce the variability of certain cash flows at the subsidiary level. The Company actively manages certain forecasted foreign currency exposures and uses a centralized currency management operation to take advantage of potential opportunities to naturally offset foreign currency ~~exposures against each other.~~exposures. The ~~decision~~Company utilizes foreign currency exchange contracts to mitigate the effects of whether and when to execute derivative instruments, along with the duration of the instrument, can vary from period to period depending on market conditions, the relative costs of the instruments and capacity to hedge. The duration is linkedforeign currency exchange rate fluctuations related to the ~~timing~~Australian dollar, Canadian dollar, and Mexican peso. The Company's foreign currency exchange contracts generally have maturities of ~~the underlying exposure, with the connection between the two being regularly monitored. Polaris does not use any financial contracts for trading purposes.~~

At ~~September 30, 2017, Polaris had the following~~less than one year. The Company’s open foreign currency contracts, ~~(in thousands):~~

Foreign Currency
Notional Amounts
(in U.S. Dollars)
Net Unrealized Gain (Loss)
Australian Dollar $ 27,947
$ (308 )
Canadian Dollar 136,019
(1,697 )
Japanese Yen 907
(18 )
Mexican Peso 4,401
338
Total $ 169,274
$ (1,685 )

~~These contracts,~~ with maturities through ~~December 2018,~~June 2024, met the criteria for cash flow hedges.

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company enters into interest rate swap transactions to hedge the variable interest rate payments for the Term Loan Facility. In connection with these contracts, the Company pays interest based upon a fixed rate and receives variable rate interest payments based on adjusted Term SOFR. These contracts, with maturities through February 2026, met the criteria for cash flow hedges.

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Commodity hedging contracts are entered into in order to manage fluctuating market prices of certain purchased commodities and raw materials that are integrated into the Company’s end products. The Company's commodity contracts generally have maturities of less than one year.

The notional and fair values of the Company’s derivative financial instruments designated as cash flow hedges were as follows (in millions):


	March 31, 2023						December 31, 2022
	Notional Value (in U.S. Dollars)		Fair Value — Assets		Fair Value — Liabilities		Notional Value (in U.S. Dollars)		Fair Value — Assets		Fair Value — Liabilities
Foreign currency contracts	$	223.4	$	12.2	$	(0.6)	$	154.0	$	8.4	$	—
Interest rate contracts	550.0		1.4		(1.8)		550.0		5.9		—
Commodity contracts	11.5		1.4		(0.5)		—		—		—
Total	$	784.9	$	15.0	$	(2.9)	$	704.0	$	14.3	$	—

Assets are included in prepaid expenses and other and liabilities are included in accrued expenses in the consolidated balance sheets. Assets and liabilities are offset in the consolidated balance sheet if the right of offset exists.

The amounts of gains and losses related to the Company’s derivative financial instruments designated as cash flow hedges were as follows (in millions):


Derivatives Designated as Cash Flow Hedges	Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Gain (Loss) Reclassified from AOCI into Income				Gain (Loss) Recognized in OCI
		Three months ended March 31,				Three months ended March 31,
		2023		2022		2023		2022
Commodity contracts	Cost of sales	(0.4)		—		1.0		—
Foreign exchange contracts	Cost of sales	1.8		0.3		4.0		3.3
Interest rate contracts	Interest expense	3.2		(1.9)		(4.8)		6.6
Foreign exchange contracts	Other (income) expense, net	$	1.4	$	0.9	$	(1.6)	$	(1.6)
Total		$	6.0	$	(0.7)	$	(1.4)	$	8.3

The unrealized gains or losses, after tax, are recorded as a component of accumulated other comprehensive loss in shareholders’ equity.

~~The table below summarizes the carrying values of derivative instruments as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~(in thousands):~~

Carrying Values of Derivative Instruments as of September 30, 2017

Fair Value—
Assets

Fair Value—
(Liabilities)

Derivative Net
Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts(1) $ 802
$ (2,487 ) $ (1,685 )
Total derivatives designated as hedging instruments $ 802
$ (2,487 ) $ (1,685 )
Total derivatives $ 802
$ (2,487 ) $ (1,685 )

Carrying Values of Derivative Instruments as of December 31, 2016

Fair Value—
Assets

Fair Value—
(Liabilities)

Derivative Net
Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts(1) $ 2,128
$ (1,830 ) $ 298
Total derivatives designated as hedging instruments $ 2,128
$ (1,830 ) $ 298
Total derivatives $ 2,128
$ (1,830 ) $ 298


~~(1)~~	~~Assets are included in prepaid expenses and other and liabilities are included in other accrued expenses on the accompanying consolidated balance sheets.~~

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive loss and reclassified into the statements of income in the same period or periods during which the hedged transaction affects the statements of income. Gains and losses on ~~the~~ derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness ~~are~~is recognized currently in the ~~current statement~~consolidated statements of ~~income.~~income and were not material for the periods presented.

The net amount of the existing gains ~~(losses), net~~or losses as of ~~tax, related~~March 31, 2023 that is expected to the effective portion of derivative instruments designated as cash flow hedges included in accumulated other comprehensive loss for the three and nine months ended September 30, 2017 was $(167,000) and $(1,208,000), respectively, compared to $2,638,000 and $(4,621,000) for the same respective periods in 2016.

~~See Note 6 for information about the amount of gains and losses, net of tax,~~be reclassified ~~from accumulated other comprehensive loss~~ into the statements of income ~~for derivative instruments designated as hedging instruments. The ineffective portion of foreign currency contracts was~~within the next 12 months is not ~~material for the~~ ~~three and nine~~ ~~month periods ended~~ ~~September 30, 2017~~.expected to be material.

Note ~~11.~~12. Segment Reporting

On January 1, 2022, the Company began management of its portfolio of businesses under a new basis as a result of the divestiture of the GEM and Taylor-Dunn businesses. As such, the Global Adjacent Markets segment was eliminated and the results of the Company’s remaining businesses historically included within the Global Adjacent Markets segment were reclassified to the Off Road and On Road segments. All historical segment results were reclassified for comparability.

On June 30, 2022, the Company again began management of its portfolio of businesses under a new basis as a result of the divestiture of TAP. As such, the Aftermarket segment was eliminated and the results of the Company’s remaining aftermarket businesses historically included within the Aftermarket segment were reclassified to the Off Road and On Road segments. All historical segment results were reclassified for comparability.

The Company’s reportable segments are based on the Company’s method of internal reporting ~~which generally segregates~~and are comprised of various product offerings that serve multiple end markets. These results are not necessarily indicative of the ~~operating segments by product line, inclusive~~results of ~~wholegoods and PG&A.~~operations that would have occurred had each segment been an independent, stand-alone entity during the periods presented. The internal reporting of these operating segments is defined based, in part, on the reporting and review process used by the Company’s Chief Executive Officer. The Company has ~~five~~three operating segments: 1) ~~ORV,~~Off Road, 2) ~~Snowmobiles,~~On Road, and 3) ~~Motorcycles, 4) Global Adjacent Markets and 5) Aftermarket, and four~~Marine which are all reportable ~~segments: 1) ORV/Snowmobiles, 2) Motorcycles, 3) Global Adjacent Markets, and 4) Aftermarket.~~

Through December 31, 2016, the Company reported under three segments for segment reporting. However, during the first quarter ended March 31, 2017, as a result of the acquisition of TAP, the Company established a new reporting segment, Aftermarket, which includes the results of TAP as well as the other aftermarket brands. The comparative 2016 results were reclassified to reflect the new reporting segment structure.

The ORV/Snowmobiles segment includes the aggregated results of our ORV and Snowmobiles operating segments. The Motorcycles, Global Adjacent Markets and Aftermarket segments include the results for those respective operating segments. The Corporate amounts include costs that are not allocated to ~~individual~~ segments, ~~which include incentive-based compensation and other~~including certain unallocated manufacturing ~~costs. Additionally, given~~costs and the ~~commonality~~impacts from certain foreign currency transactions. Businesses that are presented as discontinued operations are excluded from the table below.

Table of ~~customers, manufacturing and asset management, the Company does not maintain separate balance sheets for each segment. Accordingly, the segment information presented below is limited to~~Contents

Segment sales and gross profit data ~~(in thousands):~~

Three months ended
September 30,

Nine months ended
September 30,
2017 2016 2017 2016
Sales
ORV/Snowmobiles $ 1,007,392
$ 895,550
$ 2,577,003
$ 2,402,985
Motorcycles 155,059
181,181
473,345
594,840
Global Adjacent Markets 91,575
78,485
280,152
243,553
Aftermarket 224,700
29,851
666,928
57,462
Total sales $ 1,478,726
$ 1,185,067
$ 3,997,428
$ 3,298,840
Gross profit
ORV/Snowmobiles $ 296,904
$ 221,595
$ 776,013
$ 656,076
Motorcycles 10,354
20,301
11,589
86,475
Global Adjacent Markets 15,983
21,828
65,297
66,163
Aftermarket 63,239
10,591
164,721
18,272
Corporate (22,518 ) (13,545 ) (60,781 ) (34,135 )
Total gross profit $ 363,962
$ 260,770
$ 956,839
$ 792,851

~~Note 12. Victory Motorcycles Wind Down~~

On January 9, 2017, the Company’s Board of Directors approved a strategic plan to wind down the Victory Motorcycles brand. The Company began wind down activities during the first quarter of 2017. As a result of the activities, the Company recognized total pretax charges of $2,666,000 and $59,131,000, respectively, for the three and nine month periods ended September 30, 2017 that are within the scope of ASC 420, ~~Exit or Disposal Cost Obligations~~ (ASC 420). These totals exclude the promotional pretax impacts of $6,143,000 and $18,109,000, respectively, incurred for the three and nine month periods ended September 30, 2017. The Company estimates that the total impact of wind down activities in 2017 will be in the range of $80,000,000 to $90,000,000, inclusive of promotional activity. Substantially all costs related to wind down activities are expected to be recognized by the end of 2017.

As a result of the wind down activities, the Company has incurred expenses within the scope of ASC 420 consisting of dealer termination, supplier termination, dealer litigation, employee separation, asset impairment charges, including the impairment of a cost method investment, inventory write-down charges and other costs. There were no wind down expenses related to this initiative during the three and nine month periods ended September 30, 2016. The wind down expenses have been included as components of cost of sales, selling and administrative expenses, general and administrative expenses or other expense (income), net, in the consolidated statements of income. Charges related to the wind down plan for the three and nine months ended September 30, 2017 within the scope of ASC 420 wereis summarized as follows (in ~~thousands)~~millions):


	Three months ended March 31,
		2023		2022
Sales
Off Road		$	1,591.8	$	1,342.1
On Road		323.5		227.9
Marine		264.4		211.5
Total sales		$	2,179.7	$	1,781.5
Gross profit
Off Road		$	331.6	$	258.7
On Road		69.2		41.2
Marine		61.5		46.5
Corporate		6.9		6.5
Total gross profit		$	469.2	$	352.9

Table of Contents

Three months ended September 30, Nine months ended September 30,
2017 2017
Contract termination charges $ 1,501
$ 19,196
Asset impairment charges —
18,760
Inventory charges —
12,680
Other costs 1,165
8,495
Total $ 2,666
$ 59,131

Total reserves related to the Victory Motorcycles wind down activities are $8,058,000 as of September 30, 2017. These reserves are included in other accrued expenses and inventory in the consolidated balance sheets. Changes to the reserves during the nine months ended September 30, 2017 were as follows (in thousands):

Contract termination charges Inventory charges Other costs Total
Reserves balance as of January 1, 2017 —
—
—
—
Expenses $ 19,196
$ 12,680
$ 8,495
$ 40,371
Cash payments / scrapped inventory (16,616 ) (8,892 ) (6,805 ) (32,313 )
Reserves balance as of September 30, 2017 $ 2,580
$ 3,788
$ 1,690
$ 8,058

Item 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Overview~~

The following discussion pertains to the results of operations and financial position of Polaris ~~Industries~~ Inc., a Minnesota corporation, for the three ~~and nine~~month ~~periods~~period ended ~~September 30, 2017~~March 31, 2023 compared to the three ~~and nine~~month ~~periods~~period ended ~~September 30, 2016.~~March 31, 2022. The terms “Polaris,” the “Company,” “we,” “us,” and “our” as used herein refer to the business and operations of Polaris ~~Industries~~ Inc., its subsidiaries and its predecessors, which began doing business in 1954. We design, engineer and manufacture powersports vehicles, which ~~include Off-Road Vehicles (ORV)~~include: off-road vehicles (“ORV”), including all-terrain vehicles ~~(ATV)~~(“ATV”) and side-by-side vehicles; military and commercial off-road vehicles; snowmobiles; motorcycles; ~~Global Adjacent Markets vehicles, including Work & Transportation and Government and Defense vehicles;~~moto-roadsters; quadricycles; boats; and related Parts, Garments and Accessories ~~(PG&A)~~(“PG&A”), ~~as well as Aftermarket~~which includes aftermarket accessories and apparel. Due to the seasonality of certain products and to certain changes in production and shipping cycles, results of such periods are not necessarily indicative of the results to be expected for the complete year.

~~We reported net income of~~ ~~$81.9 million, or~~ ~~$1.28~~ ~~per diluted share, compared to~~ ~~2016third quarter~~ ~~net income of~~ ~~$32.3 million, or~~ ~~$0.50~~ ~~per diluted share. Sales totaled~~ ~~$1,478.7 million, an increase of~~ 25 ~~percent from last year’s~~ ~~third quarter~~ ~~sales of~~ ~~$1,185.1 million~~. The sales increase was driven primarily by the acquisition of TAP, as well as strong ORV sales. Our unit retail sales to consumers in North America increased 13 percent in the third quarter of 2017, primarily driven by increased retail demand for ATVs and side-by-sides. Our third quarter sales to North American customers increased 27 percent, due primarily to the TAP acquisition. Our sales to customers outside of North America increased 11 percent, driven by a ten percent increase in sales in the Asia/Pacific region, a 12 percent increase in sales in Europe, Middle East and Africa (“EMEA”) and a six percent increase in the Latin American region. Our gross profit of ~~$364.0 million~~ ~~increased 40 percent from~~ ~~$260.8 million~~ ~~in the comparable prior year period. The increase in gross profit dollars was primarily driven by the TAP acquisition and lower warranty costs. Our liquidity remained healthy with~~ ~~$132.3 million~~ ~~of cash on hand and $599.6 million of availability on the revolving loan facility at~~ ~~September 30, 2017~~.

As a result of our decision to wind down the Victory Motorcycles brand, total non-recurring wind down activities had a pre-tax impact of $8.8 million and $77.2 million for the three and nine month periods ended September 30, 2017, respectively. We estimate the total pre-tax impact of non-recurring wind down activities in 2017 to be in the range of $80.0 million to $90.0 million. Substantially all costs related to wind down activities are expected to be recognized by the end of 2017.

~~Results of Operations~~

Unless otherwise noted, all “quarter” comparisons are from the ~~third~~first quarter ~~2017~~of 2023 to the ~~third~~first quarter ~~2016,~~of 2022. Estimates related to industry retail sales are unaudited and ~~all “year-to-date” comparisons~~based on internally-generated management estimates, including estimates based on extrapolations from third-party surveys of the industries in which we compete, and are subject to change.

Overview

First quarter sales totaled $2,179.7 million, an increase of 22 percent from ~~the nine month period ended September 30, 2017~~last year’s first quarter sales of $1,781.5 million. Our first quarter sales to ~~the nine month period ended September 30, 2016.~~

~~Sales:~~

~~Quarter~~customers in North America increased 24 percent and our sales ~~were~~ ~~$1,478.7 million, a~~ 25 ~~percent~~to customers outside of North America increased 16 percent. The increase ~~from~~ ~~$1,185.1 million~~ ~~of quarter~~in sales in the ~~prior year. Year-to-date sales were $3,997.4~~quarter was driven primarily by increased shipments, favorable product mix, and higher net pricing.

Our gross profit of $469.2 million ~~a 21~~increased 33 percent ~~increase~~ from ~~$3,298.8~~$352.9 million ~~of sales~~ in the comparable prior year ~~period.~~ first quarter. Gross profit, as a percentage of sales, increased primarily due to increased shipments and favorable product mix. Net income from continuing operations attributable to Polaris of $113.4 million, or $1.95 per diluted share, compared to 2022 first quarter net income from continuing operations attributable to Polaris of $74.1 million, or $1.21 per diluted share. We reported first quarter Adjusted EBITDA of $238.1 million, compared to 2022 first quarter Adjusted EBITDA of $164.0 million. For information on how we define and calculate Adjusted EBITDA and a reconciliation of net income from continuing operations to Adjusted EBITDA, see “Non-GAAP Financial Measures”.

During the third quarter of 2022, we completed the sale of our Transamerican Auto Parts (“TAP”) business, an aftermarket parts business. The ~~following table is an analysis~~results of TAP have been presented as discontinued operations for all periods presented.

Table of Contents

Consolidated Results of Operations

The consolidated results of operations were as follows:


	Three months ended March 31,
($ in millions except percentages and share data)		2023			2022			Change 2023 vs. 2022
Sales		$	2,179.7		$	1,781.5		22	%
Cost of sales		$	1,710.5		$	1,428.6		20	%
Gross profit		$	469.2		$	352.9		33	%
Percentage of sales		21.5		%	19.8		%	+172 bps
Operating expenses:
Selling and marketing		$	137.6		$	111.6		23	%
Research and development		$	96.5		$	80.8		19	%
General and administrative		$	90.8		$	71.7		27	%
Total operating expenses		$	324.9		$	264.1		23	%
Percentage of sales		14.9		%	14.8		%	+8 bps
Income from financial services		$	16.8		$	11.4		47	%
Operating income		$	161.1		$	100.2		61	%

Non-operating expense:
Interest expense		$	28.3		$	11.8		140	%

Other (income) expense, net		$	(12.4)		$	(3.3)		NM
Income from continuing operations before income taxes		$	145.2		$	91.7		58	%
Provision for income taxes		$	31.6		$	17.6		80	%
Effective income tax rate		21.7		%	19.2		%	+257 bps

Net income from continuing operations		$	113.6		$	74.1		53	%
Net income attributable to noncontrolling interest		$	(0.2)		$	—		NM
Net income from continuing operations attributable to Polaris Inc. shareholders		$	113.4		$	74.1		53	%

Adjusted EBITDA		$	238.1		$	164.0		45	%
Adjusted EBITDA Margin		10.9		%	9.2		%	+172 bps

Diluted net income from continuing operations per share attributable to Polaris Inc. shareholders		$	1.95		$	1.21		61	%
Weighted average diluted shares outstanding		58.1			61.2			(5)	%
NM = not meaningful

Table of Contents

Sales:

Sales for the quarter were $2,179.7 million, a 22 percent increase from $1,781.5 million of sales in 2022. The growth for the quarter was driven primarily by increased shipments, favorable product mix, and higher net pricing.

The components of the ~~percentage~~consolidated sales change ~~in total Company sales:~~were as follows:


	Percent change in total Company sales compared to corresponding period of the prior year
	Three months ended
	March 31, 2023
Volume	12	%
Product mix and price	11

Currency	(1)
	22	%

Percent change in total Company sales compared to corresponding period of the prior year
Three months ended Nine months ended
September 30, 2017 September 30, 2017
Volume 6 % 2 %
Product mix and price 2
—
Acquisitions 16
19
Currency 1
—
25 % 21 %

~~The~~Volume drove a 12 percent increase to sales for the quarter, ~~and year-to-date acquisition impact is primarily driven by the TAP acquisition in 2016. The volume increase is~~ primarily driven by increased ORV and Indian Motorcycle shipments. Product mix and price contributed an 11 percent increase for the quarter primarily due to favorable product mix. Currency rate movements drove a one percent decrease in sales for the quarter.

Sales by geographic region were as follows:


	Three months ended March 31,
($ in millions)		2023		Percent of Total Sales		2022		Percent of Total Sales		Percent Change 2022 vs. 2021
United States		$	1,694.6	78	%	$	1,344.7	76	%	26	%
Canada		147.6		7	%	146.6		8	%	1	%
Other countries		337.5		15	%	290.2		16	%	16	%
Total sales		$	2,179.7	100	%	$	1,781.5	100	%	22	%

Sales in the United States increased 26 percent during the quarter driven by increased shipments, favorable product mix, and and higher net pricing.

Sales in Canada increased one percent during the quarter driven by favorable product mix. Currency rate movements had an unfavorable impact of ~~ORVs.~~six percentage points on quarter-to-date sales.

Sales in other countries, primarily in Europe, increased 16 percent during the quarter driven by favorable product mix. Currency rate movements had an unfavorable impact of five percentage points on quarter-to-date sales, respectively.

Cost of Sales:

The following table reflects our cost of sales in dollars and as a percentage of sales:


	Three months ended March 31,
($ in millions)				2023		Percent of Total Cost of Sales		2022		Percent of Total Cost of Sales		Percent Change 2023 vs. 2022
Purchased materials and services				$	1,430.9	84	%	$	1,215.1	85	%	18	%
Labor and benefits				186.1		11	%	142.3		10	%	31	%
Depreciation and amortization				49.0		3	%	44.1		3	%	11	%
Warranty costs				44.5		2	%	27.1		2	%	64	%
Total cost of sales				$	1,710.5	100	%	$	1,428.6	100	%	20	%
Percentage of sales		78.5	%			80.2	%	-172 bps

Cost of sales increased during the quarter primarily due to increased volume, higher labor, raw material, and logistics costs, as well as increased warranty costs.

Table of Contents

Gross Profit:

Consolidated gross profit for the quarter, as a percentage of sales, increased primarily due to increased shipments and favorable product mix.

Operating Expenses:

Operating expenses, in absolute dollars, increased for the quarter due to higher selling and marketing, general and administrative, and research and development expenses. Operating expenses, as a percentage of sales, increased slightly during the quarter.

Income from Financial Services:

Income from financial services increased 47 percent for the quarter, primarily due to higher wholesale financing income from Polaris Acceptance driven by higher dealer inventory levels.

Interest Expense:

Interest expense increased for the quarter due to higher debt levels and higher interest rates.

Other (income) expense, net:

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

Provision for income taxes:

The increase in the effective income tax rate for the quarter is primarily due to a decrease in excess tax benefits related to share based compensation as well as state income tax audit adjustments recorded during the quarter.

Adjusted EBITDA:

Adjusted EBITDA, in absolute dollars, increased during the quarter primarily due to favorable product mix and increased shipments, partially offset by higher operating expenses. Adjusted EBITDA, as a percentage of sales, increased during the quarter primarily due to favorable product mix and increased shipments.

For information on how we define and calculate Adjusted EBITDA and a reconciliation of net income from continuing operations to Adjusted EBITDA, see “Non-GAAP Financial Measures”.

Weighted average diluted shares outstanding:

Over the time period within and between the comparable quarterly periods, weighted average diluted shares outstanding was down five percent compared to the comparable prior year periods, primarily due to share repurchases.

Cash Dividends:

We paid a regular cash dividend of $0.65 per common share on March 15, 2023 to holders of record at the close of business on March 1, 2023.

Segment Results of Operations

On January 1, 2022, the Company began management of its portfolio of businesses under a new basis as a result of the divestiture of the GEM and Taylor-Dunn businesses. As a such, the Global Adjacent Markets segment was eliminated and the results of the Company’s remaining businesses historically included within the Global Adjacent Markets segment were reclassified to the Off Road and On Road segments. All historical segment results were reclassified for comparability.

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. Businesses that are presented as discontinued operations are excluded from the tables below.

Table of Contents

Our sales and gross profit by reporting segment, which includes the respective PG&A, were as follows:


	Three months ended March 31,
($ in millions)		2023		Percent of Sales		2022		Percent of Sales		Percent Change 2023 vs. 2022
Off Road		$	1,591.8	73	%	$	1,342.1	75	%	19	%
On Road		323.5		15	%	227.9		13	%	42	%
Marine		264.4		12	%	211.5		12	%	25	%
Total sales		$	2,179.7	100	%	$	1,781.5	100	%	22	%
NM = not meaningful

Three months ended September 30, Nine months ended September 30,
($ in millions)
2017 Percent
of Total
Sales 2016 Percent
of Total
Sales Percent
Change
2017 vs.
2016 2017 Percent
of Total
Sales 2016 Percent
of Total
Sales Percent
Change
2017 vs.
2016
ORV/Snowmobiles $ 1,007.4
68 % $ 895.5
76 % 12 % $ 2,577.0
64 % $ 2,403.0
73 % 7 %
Motorcycles 155.1
11 % 181.2
15 % (14 )% 473.3
12 % 594.8
18 % (20 )%
Global Adjacent Markets 91.5
6 % 78.5
6 % 17 % 280.2
7 % 243.5
7 % 15 %
Aftermarket 224.7
15 % 29.9
3 % 653 % 666.9
17 % 57.5
2 % 1,061 %
Total sales $ 1,478.7
100 % $ 1,185.1
100 % 25 % $ 3,997.4
100 % $ 3,298.8
100 % 21 %


	Three months ended March 31,
($ in millions)				2023		Percent of Sales		2022		Percent of Sales		Percent Change 2023 vs. 2022
Off Road				$	331.6	20.8	%	$	258.7	19.3	%	28	%
On Road				69.2		21.4	%	41.2		18.1	%	68	%
Marine				61.5		23.3	%	46.5		22.0	%	32	%
Corporate				6.9				6.5
Total gross profit				$	469.2			$	352.9			33	%
Percentage of sales		21.5	%			19.8	%	+172 bps

~~ORV/Snowmobiles~~Off Road:

~~ORVs:Quarter and year-to-date~~Off Road sales, inclusive of PG&A sales, increased 19 percent for the quarter, Off Road sales to customers outside of North America increased six percent for the quarter, and the average per unit sales price for the Off Road segment increased approximately 11 percent for the quarter. These increases were primarily due to increased ~~ORV~~ shipments ~~of side-by-side vehicles. Sales outside~~and higher net pricing.

Additional information on our end markets for the quarter:

•Polaris North America ATV unit retail sales down mid-teens percent

•Polaris North America side-by-side unit retail sales down high-single digits percent

•Total Polaris North America ORV unit retail sales down about 10 percent

•Estimated North America industry ORV unit retail sales down low-double digits percent

•Total Polaris North America ORV dealer inventories up approximately 240 percent

•Polaris North America snowmobile unit retail sales for the 2022-2023 season ending March 31, 2023 up low-single digits percent

•Estimated North America industry snowmobile unit retail sales for the 2022-2023 season ending March 31, 2023 down low-single digits percent

•Total Polaris North America snowmobile dealer inventories up approximately 40 percent

Gross profit, as a percentage of sales, increased 11during the quarter, primarily due to increased net pricing and lower input costs, partially offset by higher finance interest costs and unfavorable product mix.

On Road:

On Road sales, inclusive of PG&A sales, increased 42 percent infor the quarter primarily due to increased shipments ~~of side-by-side vehicles. The quarter average per unit sales price increased six percent.~~

~~Our North American ORV quarter unit retail sales to consumers increased mid-teens percent compared to the 2016 third quarter, with consumer purchases of side-by-side vehicles, which include~~ ~~RANGER~~^®, ~~RZR,~~ and ~~Polaris GENERAL~~^™, and ATVs both increasing mid-teens percent over the prior year. The Company estimates that North American industry ORV retail sales increased high-single digits percent from the third quarter of 2016. Polaris’ North American dealer unit inventory decreased 12 percent from the third quarter of 2016.

~~Snowmobiles:~~Quarter and year-to-date sales, inclusive of PG&A sales, increased 22 percent due to the timing of shipments for the upcoming snowmobile retail selling season, year-over-year, as we manufactured and shipped our snowmobiles later in 2016. Sales outside North America decreased 29 percent in the quarter, primarily due to decreased shipments in the EMEA region. The quarter average snowmobile per unit sales price increased two percent.

~~Motorcycles~~

~~Quarter and year-to-date sales decreased due to the wind down of VictoryMotorcycles, as well as decreased shipments of Slingshot~~^®,favorable product mix, partially offset by ~~increased shipments of Indian Motorcycle~~^®~~. Indian Motorcycle sales increased in the low-twenty percent range in the third quarter driven by new product introductions and increased awareness of the brand. Quarter~~lower net pricing. On Road sales to customers outside of North America ~~decreased six~~increased 30 percent for the quarter primarily due ~~primarily~~ to ~~decreased shipments of Victory Motorcycles.~~favorable product mix. The ~~quarter~~ average per unit sales price ~~decreased four percent, excluding Victory Motorcycles.~~

~~Consumer North American retail sales~~ for ~~Indian Motorcycle and Slingshot~~the On Road segment increased ~~mid-single digits~~approximately one percent for the quarter. Indian Motorcycle retail sales increased mid-teens percent and gained market share, partly driven by new model introductions including the new Chieftain Elite and Limited models and Roadmaster Classic. Slingshot retail sales decreased, although the rate of decline decelerated during the quarter. North American industry retail sales, 900cc and above, decreased high-single digits percent in the quarter. North American Polaris dealer inventory increased low-double digits percent.

~~Global Adjacent Markets~~

~~Quarter and year-to-date sales increased due~~quarter primarily to increased Work and Transportation wholegood sales, including our Aixam quadricycle business and our Goupil light-utility business in France. The quarter average per unit sales price increased three percent.

~~Aftermarket~~

~~Quarter and year-to-date sales, which includes Transamerican Auto Parts (TAP), along with our other aftermarket brands of Klim, Kolpin, ProArmor, Trail Tech and 509, increased~~ due to ~~the acquisition of TAP in November 2016. TAP contributed sales of $190.6 million and $601.7 million for the quarter and year-to-date periods, respectively.~~

~~Sales by Geography~~

~~Sales by geographic region were as follows:~~

Three months ended September 30, Nine months ended September 30,
($ in millions) 2017 Percent of Total Sales 2016 Percent of Total Sales Percent Change 2017 vs. 2016 2017 Percent of Total Sales 2016 Percent of Total Sales Percent Change 2017 vs. 2016
United States $ 1,202.0
81 % $ 946.5
80 % 27 % $ 3,217.2
80 % $ 2,592.6
79 % 24 %
Canada 120.0
8 % 97.6
8 % 23 % 266.1
7 % 232.1
7 % 15 %
Other foreign countries 156.7
11 % 141.0
12 % 11 % 514.1
13 % 474.1
14 % 8 %
Total sales $ 1,478.7
100 % $ 1,185.1
100 % 25 % $ 3,997.4
100 % $ 3,298.8
100 % 21 %

~~United States:Quarter sales in the U.S. increased due primarily to our acquisition of TAP in November 2016, and increased ORV shipments. Year-to-date sales increased due primarily to the TAP acquisition.~~

~~Canada:Quarter and year-to-date sales in Canada increased due to the acquisition of TAP and increased ORV shipments, partially offset by lower shipments of motorcycles. Currency rate movement had a~~ favorable ~~five and one percent impact on quarter and year-to-date sales, respectively.~~

~~Other foreign countries:~~Quarter and year-to-date sales in other foreign countries increased due to increased ORV and Global Adjacent Markets shipments. Currency rate movements had a positive impact on sales of four percent on the quarter, and had no impact on year-to-date sales.

~~Cost of Sales:~~

Three months ended September 30, Nine months ended September 30,
($ in millions) 2017 Percent of Total Cost of Sales 2016 Percent of Total Cost of Sales
Change
2017 vs. 2016
2017 Percent of Total Cost of Sales 2016 Percent of Total Cost of Sales Change 2017 vs. 2016
Purchased materials and services $ 954.7
86 % $ 732.8
79 % 30 % $ 2,610.9
86 % $ 2,060.0
82 % 27 %
Labor and benefits 79.5
7 % 71.3
8 % 12 % 220.7
7 % 199.6
8 % 11 %
Depreciation and amortization 38.6
3 % 32.5
4 % 19 % 105.1
4 % 91.2
4 % 15 %
Warranty costs 42.0
4 % 87.7
9 % (52 )% 103.9
3 % 155.2
6 % (33 )%
Total cost of sales $ 1,114.8
100 % $ 924.3
100 % 21 % $ 3,040.6
100 % $ 2,506.0
100 % 21 %
Percentage of sales 75.4 % 78.0 % -261 basis points 76.1 % 76.0 % +10 basis points

~~The increase in quarter and year-to-date cost of sales dollars resulted primarily from the acquisition of TAP and Victory Motorcycles wind down costs.~~

~~Gross Profit:~~

Three months ended September 30, Nine months ended September 30,
($ in millions) 2017 Percent of Sales 2016 Percent of Sales
Change
2017 vs.
2016
2017 Percent of Sales 2016 Percent of Sales
Change
2017 vs.
2016
ORV/Snowmobiles $ 296.9
29.5 % $ 221.6
24.7 % 34 % $ 776.0
30.1 % $ 656.0
27.3 % 18 %
Motorcycles 10.4
6.7 % 20.3
11.2 % (49 )% 11.6
2.4 % 86.5
14.5 % (87 )%
Global Adjacent Markets 16.0
17.5 % 21.8
27.8 % (27 )% 65.3
23.3 % 66.2
27.2 % (1 )%
Aftermarket 63.2
28.1 % 10.6
35.5 % 497 % 164.7
24.7 % 18.3
31.8 % 801 %
Corporate (22.5 ) (13.5 )
(60.8 ) (34.1 )
Total gross profit dollars $ 364.0
$ 260.8
40 % $ 956.8
$ 792.9
21 %
Percentage of sales 24.6 % 22.0 % +261 basis points 23.9 % 24.0 % -10 basis points

~~Consolidated. Quarter gross profit, as a percentage of sales, increased due to lower warranty costs, increased volume, gross VIP cost savings, and positive~~ product mix, partially offset by ~~higher promotions. Gross profit~~unfavorable foreign currency exchange rate movement.

Additional information on our end markets for the ~~quarter includes the negative impact~~quarter:

•Indian Motorcycle North America unit retail sales flat

Table of ~~$7.6 million of Victory Motorcycles wind~~Contents

•Estimated North America industry 900cc cruiser, touring, and standard motorcycles unit retail sales down costs and $6.2 million of manufacturing network realignment costs. Year-to-date gross profit includes the negative impact of $55.0 million of costs related to the wind down of Victory Motorcycles, $13.0 million of inventory step-up accounting adjustments related to the TAP acquisition, $10.5 million of manufacturing network realignment costs and increased promotional costs. These year-to-date costs were partially offset by lower warranty and product cost reduction efforts generated through lean initiatives.low-double digits percent

~~ORV/Snowmobiles~~. •Polaris North America motorcycle dealer inventories up approximately 190 percent

Gross profit, as a percentage of sales, increased for the quarter due to favorable product mix, partially offset by lower net pricing and ~~year-to-date periods,~~higher finance interest costs.

Marine:

Marine sales increased 25 percent for the quarter primarily due to increased shipments and favorable net pricing. The average per unit sales price for the Marine segment increased approximately six percent for the quarter primarily due to favorable ~~changes in~~ product mix ~~as well as decreased warranty costs.~~and previous pricing actions.

~~Motorcycles~~. Additional information on our end markets for the quarter:

•Polaris U.S pontoon unit retail sales down low-thirties percent

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

Gross profit, as a percentage of sales, ~~decreased significantly for~~increased during the quarter ~~and year-to-date periods,~~ primarily due to ~~higher~~favorable product mix.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

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 divestitures, are included as non-GAAP adjustments. We use the ~~wind down~~non-GAAP financial measure of ~~Victory Motorcycles, including increased promotions~~Adjusted EBITDA Margin, which is defined as Adjusted EBITDA divided by net sales. We believe that Adjusted EBITDA and ~~inventory charges,~~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 ~~lower Slingshot volume.~~Adjusted EBITDA Margin.

~~Global Adjacent Markets. Gross profit,~~We believe that these measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

Adjusted EBITDA has limitations and should not be considered in isolation from, as a ~~percentage~~substitute for, or more meaningful than, net income from continuing operations as determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance. Our presentation of ~~sales, decreased~~Adjusted EBITDA and Adjusted EBITDA Margin should not be construed as an inference that our results will be unaffected by unusual or non-recurring items.

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The following table presents a reconciliation of net income from continuing operations, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the ~~quarter and year-to-date~~ periods ~~primarily due to costs incurred~~presented:


	Three months ended March 31,
($ in millions)		2023			2022
Sales		$	2,179.7		$	1,781.5

Net income from continuing operations		113.6			74.1
Provision for income taxes		31.6			17.6
Interest expense		28.3			11.8
Depreciation		57.4			51.6
Intangible amortization		4.4			5.0

Restructuring and realignment expenses (1)		0.7			3.8
Class action litigation expenses (2)		2.1			0.1
Adjusted EBITDA		$	238.1		$	164.0
Adjusted EBITDA Margin		10.9		%	9.2		%

(1) Represents adjustments for ~~manufacturing~~corporate restructuring, network realignment ~~of $6.2 million and $10.5 million for the three and nine month periods ended September 30, 2017, respectively.~~

~~Aftermarket~~. Gross profit, in absolute dollars, increased for the quarter and year-to-date periods, but decreased as a percentage of sales, due to the acquisition of TAP. Year-to-date gross profit, includes the negative impact of $13.0 million of inventory step-up adjustments related to the TAP acquisition.

~~Operating Expenses:~~

Three months ended September 30, Nine months ended September 30,
($ in millions)
2017 2016 Change
2017 vs. 2016 2017 2016 Change
2017 vs. 2016
Selling and marketing $ 122.7
$ 89.8
37 % $ 355.5
$ 244.8
45 %
Research and development 63.1
47.6
33 % 175.9
136.3
29 %
General and administrative 79.4
85.2
(7 )% 246.0
219.4
12 %
Total operating expenses $ 265.2
$ 222.6
19 % $ 777.4
$ 600.5
29 %
Percentage of sales 17.9 % 18.8 % -85 basis points
19.4 % 18.2 % +125 basis points

Operating expenses, in absolute dollars, for the quarter and year-to-date periods increased primarily due to the TAP acquisition. For the quarter, operating expenses included $1.3 million of Victory Motorcycles wind down costs, and ~~$3.5 million of TAP integration expenses. For the year-to-date period, operating~~supply chain transformation costs

(2) Represents adjustments for certain class action litigation-related expenses included $9.3 million of Victory Motorcycles wind down costs and $10.5 million of TAP integration expenses. In addition to these costs, research and development expenses increased for ongoing product refinement and innovation, and selling and marketing costs have increased due to the introduction of new products, partially offset by decreased legal related expenses.

~~Income from Financial Services:~~

Three months ended September 30, Nine months ended September 30,
($ in millions) 2017 2016 Change
2017 vs. 2016 2017 2016 Change
2017 vs. 2016
Income from financial services $ 18.1
$ 19.2
(6 )% $ 57.7
$ 59.2
(2 )%
Percentage of sales 1.2 % 1.6 % -39 basis points
1.4 % 1.8 % -35 basis points

The decrease for the quarter and year-to-date periods in income from financial services is directly related to lower income generated from the wholesale portfolio due to the lower dealer inventory levels. Further discussion can be found in the “Liquidity and Capital Resources” section below.

~~Remainder of the Statement of Income:~~

Three months ended September 30, Nine months ended September 30,
($ in millions except per share data) 2017 2016 Change
2017 vs. 2016 2017 2016 Change
2017 vs. 2016
Interest expense $ 8.5
$ 4.1
110 % $ 24.4
$ 10.7
128 %
Equity in loss of other affiliates $ 1.6
$ 1.8
(11 )% $ 4.8
$ 5.4
(11 )%
Other expense (income), net $ (2.4 ) $ 5.7
(142 )% $ 7.1
$ 7.6
(7 )%

Income before taxes $ 109.2
$ 45.8
138 % $ 200.8
$ 227.8
(12 )%
Provision for income taxes $ 27.3
$ 13.5
102 % $ 59.8
$ 77.4
(23 )%
Percentage of income before taxes 25.0 % 29.5 % -451 basis
29.8 % 34.0 % -420 basis
points
points
Net income $ 81.9
$ 32.3
153 % $ 141.0
$ 150.4
(6 )%
Diluted net income per share: $ 1.28
$ 0.50
156 % $ 2.21
$ 2.30
(4 )%
Weighted average diluted shares outstanding 63.9
65.0
(2 )% 63.9
65.4
(2 )%

~~Interest expense:~~ The quarter and year-to-date increase is primarily due to increases in debt levels related to the acquisition of TAP in November 2016 through borrowings on our term loan facility during the comparative periods.

~~Equity in loss of other affiliates:~~ ~~Quarter and year-to-date losses relate to continued operating activities at Eicher-Polaris Private Limited (EPPL). During the quarter, EPPL continued production of the jointly-developed Multix~~^™ ~~personal vehicle, which is specifically designed to satisfy the varied transportation needs of consumers in India. We have recorded our proportionate 50 percent share of EPPL losses.~~

~~Other expense (income), net:~~ The quarter change primarily relates to foreign currency exchange rate movements and the corresponding effects on foreign currency transactions and balance sheet positions related to our foreign subsidiaries from period to period.

~~Provision for income taxes:~~The quarter tax rate decrease is partially due to a benefit recognized from certain favorable outcomes of effectively settled federal income tax audits in the third quarter of 2017 and the adoption of the new share-based accounting standard in the first quarter of 2017.

~~Weighted average shares outstanding:~~ Over the time period within and between the comparable quarter, weighted average shares outstanding decreased approximately two percent due primarily to share repurchases under our stock repurchase program.

~~Cash Dividends:~~

~~We paid a regular cash dividend of $0.58 per share on September 15, 2017 to holders of record at the close of business on~~ ~~September 1, 2017. On October 26, 2017, the Polaris Board of Directors declared a regular cash dividend of $0.58 per share~~

~~payable on December 15, 2017 to holders of record of such shares at the close of business on December 1, 2017.~~

Liquidity and Capital Resources

Our primary ~~source~~sources of funds ~~has~~have been cash provided by operating and financing activities. Our primary uses of funds have been for acquisitions, ~~repurchase~~repurchases and retirement of common stock, capital ~~investment,~~investments, new product development and cash dividends to shareholders.

The seasonality of production and shipments cause working capital requirements to fluctuate during the year and year to year.

We believe that existing cash balances, ~~and~~ cash flow to be generated from operating activities and borrowing capacity under the credit facility arrangement will be sufficient to fund operations, new product development, cash dividends, share repurchases, and capital requirements for at least the next 12 months and for the foreseeable ~~future. At this time, management is not aware of any factors that would have a material adverse impact on cash flow.~~future thereafter.

Cash Flows

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

activities of continuing operations:


($ in millions)	Nine months ended September 30,									($ in millions)	Three months ended March 31,
	2017			2016			Change				2023		2022		Change
Total cash provided by (used for):										Total cash provided by (used for):
Operating activities	$	494.5		$	426.2		$	68.3		Operating activities	$	124.2	$	(38.4)	$	162.6
Investing activities	(88.9		)	(187.8		)	98.9			Investing activities	(89.1)		(37.6)		(51.5)
Financing activities	(410.2		)	(271.1		)	(139.1		)	Financing activities	(41.6)		(48.5)		6.9
Impact of currency exchange rates on cash balances	9.6			—			9.6
Increase (decrease) in cash and cash equivalents	$	5.0		$	(32.7	)	$	37.7

Operating ~~activities:~~Activities:

The ~~$68.3 million~~ increase in net cash provided by operating activities ~~in 2017 is due to~~of continuing operations was primarily the ~~timing~~result of ~~accounts payable~~lower working capital additions and ~~accrued expense payments, as well as collection of tax receivables, partially offset by lower~~higher net income ~~and higher factory inventory.~~ from continuing operations.

Investing Activities:

The ~~decrease in working capital for the nine months ended September 30, 2017 was $43.0 million. Changes in working capital (as reflected in our statements~~primary uses of cash flows) was a decrease of $173.7 million, compared to a decrease of $130.7 million for the same period in 2016. This was primarily due to an increase in net cash used of $49.8 million related to inventory purchases, partially offset by a decrease in net cash used of $102.5 million related to payments made for accounts payable.

~~Investing activities:~~ ~~The primary use of cash was~~were for the purchase of property, equipment and ~~equipment,~~tooling for continued capacity and capability at our manufacturing ~~facilities. Investing~~and distribution facilities and for product development, and distributions from and contributions to Polaris Acceptance. Net cash used for investing activities ~~for the comparative 2016 period includes the acquisition~~ of ~~Taylor-Dunn.~~continuing operations increased due to an increase in property, equipment and tooling purchases and a net decrease in distributions from Polaris Acceptance.

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Financing ~~activities:~~ ~~Cash~~Activities:

The decrease in net cash used for financing activities ~~changed~~was primarily due to lower share repurchases, mostly offset by decreased net ~~repayments~~borrowings under debt ~~arrangements, capital lease obligations and notes payable~~arrangements. We recorded $45.0 million of ~~$226.7 million~~net borrowings for the three months ended March 31, 2023, compared to $147.8 million of net ~~repayments of $28.0 million in~~borrowings for the~~2016~~ comparable period ~~and common stock repurchases of~~ ~~$88.9 million~~ ~~compared to~~ ~~$154.4 million~~in ~~the 2016 comparable period. Additionally, we paid cash dividends of~~ ~~$108.9 million~~ ~~and~~ ~~$105.7 million~~ ~~for the~~ ~~nine months ended September 30, 2017~~ ~~and~~ ~~2016, respectively. Proceeds from the issuance of stock under employee plans were~~ ~~$14.2 million~~ ~~and~~ ~~$15.7 million~~ ~~for the~~ ~~nine months ended September 30, 2017~~ ~~and~~ ~~2016, respectively.~~2022.

~~The seasonality of production and shipments cause working capital requirements to fluctuate during the year.~~

~~Debt and Capital~~Financing Arrangements:

We are party to ~~a $600 million variable interest rate bank lending agreement and a~~an unsecured Master Note Purchase Agreement, as amended and supplemented, under which we have ~~unsecured borrowings.~~ issued senior notes. As of March 31, 2023, outstanding borrowings under the Master Note Purchase Agreement totaled $350.0 million.

We are also party to an unsecured credit agreement, which includes a ~~$750~~$1.0 billion variable interest rate Revolving Loan Facility that matures in June 2026, under which we have unsecured borrowings. As of March 31, 2023, there were borrowings of $371.0 million ~~term loan facility, of~~outstanding under the Revolving Loan Facility. Our credit agreement also includes a Term Loan Facility, on which ~~$690~~$816.0 million iswas outstanding as of ~~September 30, 2017.~~March 31, 2023. Interest is charged at rates based on adjusted Term SOFR for the credit facility. As of March 31, 2023, we had $621.5 million of availability on the Revolving Loan Facility.

~~We enter into leasing arrangements~~In December 2021, the Company amended the credit facility to ~~finance~~provide an unsecured incremental 364-day term loan (the “Incremental Term Loan”) in the ~~use~~amount of $500 million, which was fully drawn on closing. In December 2022, the Company further amended its unsecured credit facility to extend the maturity date of the Incremental Term Loan to December 15, 2023. There are no required principal payments prior to the maturity date. In addition to the payment of the $500 million Incremental Term Loan, the Company is required to make principal payments under the Term Loan Facility totaling $45 million over the next 12 months.

The credit agreements governing the facility and the Master Note Purchase Agreement contain covenants that require the Company to maintain certain ~~property~~financial ratios, including minimum interest coverage and ~~equipment.~~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.

WeOn 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 ~~mortgage note payable agreement for land, on which Polaris built our Huntsville, Alabama manufacturing facility in 2016.~~series of deferred payments to the former owners through July 2030. The original ~~mortgage note~~discounted payable was for ~~$14.5~~$76.7 million, of which ~~$12.1~~$55.3 million iswas outstanding as of ~~September 30, 2017. The payment~~March 31, 2023.

As of ~~principal and interest for the note payable is forgivable if the Company satisfies certain job commitments over the term of the note. We have met the required commitments to date, and expect to comply~~March 31, 2023, we were in compliance with ~~the commitments in the future.~~

~~Debt, capital lease obligations, notes payable, and the average related interest rates at~~ ~~September 30, 2017~~ ~~were as follows:~~

($ in millions) Average interest rate at September 30, 2017 Maturity September 30, 2017
Term loan facility 2.52% May 2021 $ 690.0
Senior notes—fixed rate 3.81% May 2018 25.0
Senior notes—fixed rate 4.60% May 2021 75.0
Senior notes—fixed rate 3.13% December 2020 100.0
Capital lease obligations 5.15% Various through 2029 20.1
Notes payable and other 3.50% June 2027 12.4
Debt issuance costs (2.5)
Total debt, capital lease obligations, and notes payable $ 920.0
Less: current maturities 27.8
Long-term debt, capital lease obligations, and notes payable $ 892.2

all debt covenants. Our debt to total capital ratio was 5165 percent ~~and 32 percent at~~ ~~September 30, 2017~~ ~~and~~ ~~2016, respectively.~~

as of March 31, 2023. Additionally, at ~~September 30, 2017~~,as of March 31, 2023, we had letters of credit outstanding of ~~$7.6~~$33.3 million, primarily related to purchase obligations for raw materials.

Share ~~Repurchases~~Repurchases:

~~Our~~As of March 31, 2023, our Board of Directors has authorized ~~the cumulative~~us to repurchase of up to ~~86.5~~an additional $300.5 million ~~shares~~ of our common stock. ~~Of that total, approximately~~ ~~80.1 million~~ ~~shares have been repurchased cumulatively from 1996 through~~ ~~September 30, 2017~~. We repurchased ~~approximately 1.0~~a total of 0.5 million shares of our common stock for ~~$88.9~~$62.8 million during the first ~~nine~~three months of ~~2017~~,2023, which had a favorable impact on diluted net income from continuing operations per share of ~~two cents on earnings per share.~~ one cent.

Wholesale Customer Financing Arrangements:

We have ~~authorization from~~arrangements with certain finance companies to provide secured floor plan financing for our ~~Board of Directors to repurchase up to an additional 6.4 million shares~~dealers. These arrangements provide liquidity by financing dealer purchases of our ~~common stock as~~products without the use of ~~September 30, 2017. The repurchase~~our working capital. A majority of ~~any or all such shares authorized remaining for repurchase will be governed by applicable SEC rules.~~

~~Other Financial Arrangements~~

~~Polaris Acceptance, a joint venture between Polaris~~the worldwide sales of snowmobiles, ORVs, motorcycles, boats and Wells Fargo Commercial Distribution Finance (“WFCDF”), a direct subsidiary of Wells Fargo Bank, N.A. (“Wells Fargo”), which is supported by a partnership agreement between their respective wholly owned subsidiaries, finances substantially all of Polaris’ U.S. sales,related PG&A are financed under similar arrangements whereby ~~Polaris receives~~we receive payment within a few days of shipment of the product. ~~The partnership agreement is effective through February 2022.~~

Polaris Acceptance sells a majority of its receivables portfolio (the “Securitized Receivables”) to a securitization facility (“Securitization Facility”) arranged by Wells Fargo, a WFCDF affiliate. Polaris Acceptance is not responsible for any continuing servicing costs or obligations with respect to the Securitized Receivables. At September 30, 2017, the outstanding amount of net receivables financed for dealers under this arrangement, including Securitized Receivables, was $1,157.4 million, a seven percent decrease from $1,246.3 million at September 30, 2016.

We account for our investment in Polaris Acceptance under the equity method. Polaris Acceptance is funded through equal equity cash investments from the partners and a loan from an affiliate of WFCDF. We do not guarantee the outstanding indebtedness of Polaris Acceptance. 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 WFCDF’s subsidiary. Our total investment in Polaris Acceptance at September 30, 2017 was $70.9 million. Our exposure to losses of Polaris Acceptance is limited to our equity in Polaris Acceptance. Credit lossesparticipate in the ~~Polaris Acceptance portfolio have been modest, averaging less than one percent~~cost of ~~the portfolio.~~dealer financing up to certain limits.

WeUnder these arrangements, we have agreed to repurchase products repossessed by ~~Polaris Acceptance up to an annual maximum~~these finance companies. As of ~~15 percent of the aggregate average month-end outstanding Polaris Acceptance receivables and Securitized Receivables during the prior calendar year. For calendar year 2017,~~March 31, 2023, the potential ~~15 percent~~ aggregate repurchase ~~obligation is~~obligations were approximately ~~$184.0~~$558.1 million. Our financial exposure under ~~this arrangement~~these repurchase agreements is limited to the difference between the ~~amount paid~~amounts unpaid by the dealer with respect to the ~~finance company for repurchases~~repossessed product plus costs of repossession and the amount received on the resale of the repossessed product. No material losses have been incurred under ~~this agreement.~~these agreements during the periods presented.

~~See Note 7 in the Notes to Consolidated Financial Statements for further discussion~~

Table of ~~Polaris Acceptance.~~Contents

Retail Customer Financing Arrangements:

We have agreements with ~~certain financial institutions, under which these financial institutions~~third-party financing companies to provide financing options to end consumers of our products in the United States. 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 September 30, 2017, the agreements in place were as follows:



~~Financial institution~~	~~Agreement expiration date~~
~~Performance Finance~~	~~December 2021~~
~~Sheffield Financial~~	~~February 2021~~
~~Synchrony Bank~~	~~December 2020~~

~~Inflation and Foreign Exchange Rates~~

The changing relationships of the U.S. dollar to the Japanese yen, the Mexican peso, the Canadian dollar, the Australian dollar, the Euro and other foreign currencies have had a material impact on our results of operations from time to time. We actively manage our exposure to fluctuating foreign currency exchange rates by entering into foreign exchange hedging contracts.

~~Japanese Yen:~~ During 2016, purchases totaling approximately two percent of our cost of sales were from yen-denominated suppliers. Fluctuations in the yen to U.S. dollar exchange rate primarily impact cost of sales and net income.

~~Mexican Peso:~~products. We have a production facility in Monterrey, Mexico, and also market and sell to customers in Mexico through a wholly owned subsidiary. Fluctuations in the peso to U.S. dollar exchange rate primarily impact sales, cost of sales, and net income.no material contingent liabilities for residual value or credit collection risk under these agreements.

~~Canadian Dollar:~~ ~~We operate in Canada through a wholly owned subsidiary. The relationship of the U.S. dollar in relation to the Canadian dollar impacts both sales and net income.~~

~~Other currencies:~~ We operate in various countries, principally in Europe and Australia, through wholly owned subsidiaries and also sell to certain distributors in other countries. We also purchase components from certain suppliers directly for our U.S. operations in transactions denominated in the Euro and other foreign currencies. The relationship of the U.S. dollar with these other currencies impacts each of sales, cost of sales and net income.

At ~~September 30, 2017~~, we had the following open foreign currency hedging contracts for the remainder of 2017 and through December 2018, and expect the following net currency impact on net income, after consideration of the existing foreign currency hedging contracts, when compared to the respective prior year periods:

Foreign Currency
Foreign currency hedging contracts Currency impact on net income compared to the prior year period
Currency Position Notional amounts (in thousands of U.S. Dollars)
Average exchange rate of open contracts
Third quarter 2017 Estimated remainder of 2017
Australian Dollar (AUD) Long $ 27,947
$0.77 to 1 AUD Slightly positive Neutral
Canadian Dollar (CAD) Long 136,019
$0.78 to 1 CAD Slightly positive Neutral
Euro Long —
— Slightly positive Neutral
Japanese Yen Short 907
109 Yen to $1 Slightly positive Slightly negative
Mexican Peso Short 4,401
20 Peso to $1 Slightly positive Neutral
Norwegian Krone Long —
— Neutral Neutral
Swedish Krona Long —
— Neutral Slightly positive
Swiss Franc Short —
— Neutral Neutral

The assets and liabilities in all our foreign entities are translated at the foreign exchange rate in effect at the balance sheet date. Translation gains and losses are reflected as a component of “accumulated other comprehensive loss, net” in the shareholders’ equity section of the accompanying consolidated balance sheets. Revenues and expenses in all of our foreign entities are translated at the average foreign exchange rate in effect for each month of the quarter. Certain assets and liabilities related to intercompany positions reported on our consolidated balance sheet that are denominated in a currency other than the entity’s functional currency are translated at the foreign exchange rates at the balance sheet date and the associated gains and losses are included in net income.

We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials, including steel, aluminum, petroleum-based resins, certain rare earth metals and diesel fuel. In addition, we are a purchaser of components and parts containing various commodities, including steel, aluminum, rubber and others, which are integrated into the Company’s end products. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We generally buy these commodities and components based upon market prices that are established with the vendor as part of the purchase process and from time to time will enter into derivative contracts

~~to hedge a portion of the exposure to commodity risk. While we occasionally enter into these derivative contracts, at~~ ~~September 30, 2017~~, we do not have any open derivative contracts in place to hedge our diesel fuel exposure. Based on our current outlook for commodity prices, the total impact of commodities is expected to have a slightly negative impact on our gross margins for the remainder of ~~2017~~ ~~when compared to the same period in the prior year.~~

We are a party to a credit agreement with various lenders consisting of a $600 million revolving loan facility and a $750 million term loan facility. Interest accrues on the revolving loan at variable rates based on LIBOR or “prime” plus the applicable add-on percentage as defined in the agreement. At ~~September 30, 2017, we had an outstanding balance of zero on the revolving loan facility, and an outstanding balance of $690.0 million on the term loan facility.~~

Critical Accounting Policies

See our most recent Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 for a discussion of our critical accounting policies. There have been no material changes to our critical accounting policies discussed in such report.

Note Regarding Forward Looking Statements

~~Certain matters discussed in this~~This report ~~are~~contains not only historical information, but also “forward-looking statements” intended to qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These “forward-looking ~~statements,” including but not limited to the impact of foreign exchange rate movements on sales and net income, and commodity price changes on gross margins,~~statements” can generally be identified as such because the context of the statement will include words such as ~~the Company~~we or our management “believes,” “should,” “anticipates,” “expects,” “estimates” or words of similar import. Similarly, statements that describe ~~the Company’s~~our future plans or trends, objectives or goals, such as future sales, shipments, inventory levels, consumer demand, net income, net income per share, future cash flows and capital requirements, operational initiatives, pricing actions, tariffs, currency fluctuations, interest rates, and commodity costs, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements, are also forward-looking. Forward-looking statements may also be made from time to time in oral presentations, including telephone conferences and/or webcasts open to the public. ~~Shareholders, potential investors and others are cautioned that all forward-looking statements involve~~

Potential risks and uncertainties ~~that could cause results in future periods to differ materially from those anticipated by some~~include such factors as the severity and duration of the ~~statements made in this report, including~~supply-chain related constraints currently impacting the ~~risks and uncertainties described under the heading titled “Item 1A-Risk Factors” appearing in~~Company; the Company’s ~~Annual Report~~ability to successfully source necessary parts and materials on ~~Form 10-K for~~a timely basis; the ~~year ended December 31, 2016. In addition~~ability of the Company to manufacture and deliver products to dealers to meet demand; the ~~factors discussed above, among~~Company’s ability to identify and meet optimal dealer inventory levels; the Company’s ability to accurately forecast and sustain consumer demand; the Company’s ability to mitigate increasing input costs through pricing or other ~~factors that could cause actual results~~measures; the pandemic and the resulting impact on the Company’s business, supply chain, and the global economy; the Company’s ability to ~~differ materially are the following: future conduct of litigation processes; product recalls~~successfully implement its manufacturing operations strategy and ~~warranty expenses; overall economic conditions, including inflation and consumer confidence and spending; interruptions in informal~~ supply ~~arrangements; raw material, commodity and transportation costs; foreign currency exchange rate fluctuations;~~chain initiatives; product offerings, promotional activities and pricing strategies by competitors that make our products less attractive to consumers; our ability to strategically invest in innovation and new products, including as compared to our competitors; economic conditions that impact consumer spending or consumer credit including recessionary conditions; disruptions in manufacturing facilities; ~~the ability to provide products that respond to consumer’s needs and preferences; strategic partners’ sensitivity to economic conditions; acquisition integration~~product recalls and/or warranty expenses; product rework costs; impact of changes in Polaris stock price on incentive compensation plan costs; foreign currency exchange rate fluctuations; environmental and product safety regulatory activity; ~~appropriate levels~~effects of ~~dealer~~weather; commodity costs; freight and ~~distributor relationships;~~tariff costs (tariff relief or ability to mitigate tariffs); changes to international trade policies and agreements; uninsured product liability and class action claims and other litigation expenses incurred due to the nature of our business; uncertainty in the retail and wholesale credit ~~markets and relationships with Performance Finance, Sheffield Financial and Synchrony Bank; the ability to protect our intellectual property; the ability to mange our international operations; effects~~markets; performance of ~~weather; impairment of goodwill or trade names; the ability to comply with our outstanding debt agreements;~~affiliate partners; changes in tax policy; ~~attracting~~relationships with dealers and ~~retaining skilled employees;~~suppliers; and ~~disruptions~~the general overall global economic, social and political environment.

The risks and uncertainties discussed in this report are not exclusive and other factors that we may consider immaterial or ~~breaches~~do not anticipate may emerge as significant risks and uncertainties.

Any forward-looking statements made in this report or otherwise speak only as of ~~information technology systems. The Company does not~~the date of such statement, and we undertake ~~any duty~~no obligation to ~~any person~~update such statements to ~~provide updates to its~~reflect actual results or changes in factors or assumptions affecting such forward-looking statements. We advise you, however, to consult any further disclosures made on related subjects in future quarterly reports on Form 10-Q and current reports on Form 8-K that are filed with or furnished to the Securities and Exchange Commission.

Item 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 for a complete discussion on the Company’s market risk. There have been no material changes in market risk from those disclosed in the Company’s Form

Table of Contents

10-K for the year ended December 31, ~~2016.~~2022. Refer below for further discussion on commodity cost risk, foreign currency exchange rate risk, and interest rate risk.

Inflation:

We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials, including steel, aluminum, petroleum-based resins, certain rare earth metals and diesel fuel. In addition, we are a purchaser of components and parts containing various commodities, including steel, aluminum, rubber and others, which are integrated into our end products. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We generally buy these commodities and components based upon market prices that are established with the vendor as part of the purchase process. Based on our current outlook for commodity prices, the total impact of commodities, including tariff costs, is expected to have a positive impact on our gross profit margins for full-year 2023 when compared to 2022.

Foreign Exchange Rates:

The changing relationships of the U.S. dollar to foreign currencies can have a material impact on our financial results.

Euro: We have operations in the Eurozone through wholly owned subsidiaries and distributors. We also purchase components from certain suppliers directly for our U.S. operations in transactions denominated in Euros. Fluctuations in the Euro to U.S. dollar exchange rate impacts sales, cost of sales, and net income.

Canadian Dollar: We operate in Canada through a wholly owned subsidiary. The relationship of the U.S. dollar in relation to the Canadian dollar impacts both sales and net income.

Other currencies: We operate in various countries, principally in Europe, Mexico and Australia, through wholly owned subsidiaries. We also sell to certain distributors in other countries. We also purchase components from certain suppliers directly for our U.S. operations in transactions denominated in these foreign currencies. The relationship of the U.S. dollar in relation to these other currencies impacts sales, cost of sales and net income.

We actively manage our exposure to fluctuating foreign currency exchange rates by entering into foreign exchange hedging contracts. A portion of our foreign currency exposure is mitigated with the following open foreign currency hedging contracts as of March 31, 2023:

Foreign Currency

Foreign currency hedging contracts

Currency Position

Notional amounts (in millions of U.S. Dollars)

Average exchange rate of open contracts

Australian Dollar

Long

15.6

$0.69 to 1 AUD

Canadian Dollar

Long

94.7

$0.74 to 1 CAD

Mexican Peso

Short

113.1

20 Peso to $1

During the quarter ended March 31, 2023, after consideration of the existing foreign currency hedging contracts, foreign currencies had a negative impact on net income compared to 2022. We expect currencies to have a negative impact on full-year net income from continuing operations in 2023 compared to 2022.

The assets and liabilities in all our international entities are translated at the foreign exchange rate in effect at the balance sheet date. Translation gains and losses are reflected as a component of accumulated other comprehensive loss, net in the shareholders’ equity section of the consolidated balance sheets. Revenues and expenses in all of our international entities are translated at the average foreign exchange rate in effect for each month of the year. Certain assets and liabilities related to intercompany positions reported on our consolidated balance sheet that are denominated in a currency other than the entity’s functional currency are translated at the foreign exchange rates at the balance sheet date and the associated gains and losses are included in net income.

Interest Rates:

We are a party to an unsecured credit agreement with various lenders consisting of a $1.0 billion revolving loan facility, a $1.2 billion term loan facility, and a $500 million incremental term loan. Interest accrues on the revolving loan, term loans, and the incremental term loan at variable rates based on adjusted Term SOFR plus the applicable add-on percentage as defined. As of March 31, 2023, there was $371.0 million outstanding on the revolving loan, $816.0 million outstanding on the term loan, and $500 million outstanding on the incremental term loan. We enter into interest rate swaps in order to maintain a balanced risk of fixed and floating interest rates associated with our debt. We expect interest rates to have a negative impact on full-year net income from continuing operations in 2023 compared to 2022.

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Item 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and its ~~Executive 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 of the Securities Exchange Act of ~~1934 Rule 13a-15)~~1934) as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures were effective to ensure that

information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to the Company’s management, including its Chief Executive Officer and ~~Executive Vice President — Finance and~~ Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

Changes in Internal Controls

During the fourth quarter of 2016, we completed the acquisition of TAP Automotive Holdings, LLC ("TAP"). Prior to the acquisition, TAP was a privately-held company and has not been subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements to which public reporting companies may be subject to. As part of our ongoing integration activities, we are continuing to incorporate our controls and procedures into TAP and to augment our company-wide controls to reflect the risks inherent in an acquisition of this type. Our report on our internal control over financial reporting in the Annual Report on Form 10-K for the year ending December 31, 2016 excluded the acquired TAP subsidiaries. However, our report on our internal control over financial reporting in the Annual Report on Form 10-K for the year ending December 31, 2017 will include the acquired TAP subsidiaries.

~~Other than the change noted above, there~~There have been no changes in the Company’s internal ~~controls~~control over financial reporting during the ~~period~~latest fiscal quarter covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal ~~controls~~control over financial reporting.

Part II OTHER INFORMATION

Item 1 – LEGAL PROCEEDINGS

We are involved in a number of legal proceedings incidental to our business, none of which is presently expected to have a material effect on our financial position, results of operations or cash flows, or the financial results of our business.

~~Class action lawsuit. In~~As of the date hereof, we are party to putative class actions brought by the same plaintiff’s counsel and largely repeating the same allegations regarding various state consumer protection laws focused on rollover protection structures’ certifications for various Polaris off-road vehicles sold in California and Oregon. The first case brought related to this matter—Guzman—was first reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The district court granted summary judgment against both plaintiffs’ claims, which the plaintiffs appealed. The Ninth Circuit issued two rulings in September 2022 that reversed the district court’s summary judgment rulings and ~~October 2016, investors filed two purported~~remanded the case to the district court with instructions to dismiss one plaintiff’s claims without prejudice. The plaintiff whose claims were dismissed without prejudice refiled a putative class action ~~complaints~~in California State Court under the name Albright. The second case—Hellman/Berlanga—was first reported in the ~~United States District Court~~Company’s quarterly report for the ~~District~~period ended June 30, 2021. Additional similar putative class actions on behalf of ~~Minnesota naming~~certain plaintiffs dismissed from the ~~Company~~Hellman/Berlanga case have been filed in Texas (Lollar), Nevada (Mitchell), and ~~two of its executive officers as defendants. On December 12, 2016,~~Oregon (Artoff), though the ~~District Court consolidated~~Lollar and Mitchell matters have since been dismissed, and another plaintiff from the ~~two actions and appointed a lead plaintiff and lead counsel. In a later order,~~Hellman/Berlanga matter, Michael Hellman, has been dismissed.

As previously reported in the ~~court set a date of March 14, 2017,~~Company’s quarterly report on Form 10-Q for the ~~lead plaintiff to file a consolidated amended complaint or to designate one~~period ended September 30, 2021, the district court in In re Polaris dismissed half of the ~~filed complaints as~~plaintiffs and their claims related to alleged fire hazards in certain Polaris products. Plaintiffs’ counsel voluntarily dismissed the ~~operative pleading.~~remaining plaintiffs to appeal. The Eighth Circuit affirmed dismissal of the claims brought by plaintiffs who had appealed. On ~~March 14, 2017,~~April 28, 2022, the ~~lead plaintiff~~In re Polaris plaintiffs’ counsel filed a ~~consolidated amended complaint against the Company and six current or former executives~~new, substantially similar putative class action in California State Court, seeking damages for alleged ~~violations~~economic loss: James DeBiasio v. Polaris Industries Inc. (County of Los Angeles, Ca.). We removed the matter to federal ~~securities laws. The lead~~court (C.D. Cal.) in June 2022 and have moved to dismiss the plaintiff’s claims; plaintiff seeks to represent a class of persons who purchased or acquired Polaris securities during the time period from February 20, 2015 through September 11, 2016. The amended complaint alleges that, during the proposed class period, defendants made materially false or misleading public statements about the Company’s business, operations, forecasts, and compliance policies relating to certain of its ORV products and product recalls. The amended complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and seeks damages in an unspecified amount, pre-judgment and post-judgment interest, and an award of attorneys’ fees and expenses. In May 2017, the Company and the other defendants filed a motion to remand the case. The district court denied plaintiff’s motion to remand and granted our motion to dismiss, ~~the amended complaint. The Court had a hearing on the motion on October 4, 2017. By order entered October 13, 2017, the Court dismissed the amended complaint with prejudice.~~

~~Shareholder derivative lawsuit.~~On August 22, 2017, a shareholder of the Company filed a purported derivative complaint in the United States District Court for the District of Minnesota naming 14 present and/or former officers and directors of the Company as defendants. The complaint rests upon substantially the same events as the amended complaint in the class action described above. The complaint asserts claims for breach of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement. For relief, the complaint seeks damages in an unspecified amount, corporate governance changes, disgorgement and restitution of benefits and compensation paid, and an award of attorneys’ fees and expenses. Plaintiff has until November 13, 2017allowing plaintiff to file an amended complaint. We moved to dismiss plaintiff’s amended complaint, ~~if Plaintiff chooses,~~which the Court denied in March 2023.

As previously reported in the Company’s quarterly report on Form 10-Q for the period ended September 30, 2021, the district court in Johannessohn denied class certification related to plaintiffs’ claims of excessive heat hazards in Sportsman ATVs. The Eighth Circuit subsequently affirmed that denial. On June 13, 2022, the Johannessohn plaintiffs’ counsel filed a new, substantially similar putative class action in Minnesota state court, seeking damages for alleged economic loss: Jay Miller, individually and ~~defendants~~on behalf of all others similarly situated v. Polaris Inc. (4th Dist. Minn.). After we moved to dismiss, the Miller court dismissed plaintiff’s class claims with prejudice, leaving only his individual claims for alleged economic loss. The parties to the Johannessohn and Miller cases, as well as the parties to two other related cases filed by the Johannessohn

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plaintiffs’ counsel against the Company in Minnesota federal court (McClure and Herron), have ~~until December 13, 2017~~agreed in principle to ~~respond.~~settle those matters on a non-class basis. That settlement is not yet final.

With respect to each of these putative class action lawsuits, we are unable to provide any reasonable evaluation of the likelihood that a loss will be incurred or any reasonable estimate of the range of possible loss.

Item 1A – RISK FACTORS

Please consider the factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes or additions to our risk factors discussed ~~in our fiscal 2016 Annual Report filed on Form 10-K. Please consider the factors discussed in “Part I, Item 1A. Risk Factors”~~ in such report, which could materially affect the Company’s business, financial condition, or future results.

Item 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

This table provides certain information with respect to Polaris Inc.’s purchases of its common stock during the first quarter of 2023:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (1)
January 1 — 31, 2023	—	$	—	—	$	349,109,019
February 1 — 28, 2023	255,000	$	116.77	255,000	$	319,335,924
March 1 — 31, 2023	165,000	$	113.93	165,000	$	300,539,235
Total / Average	420,000	$	115.65	420,000

Period
Total
Number of
Shares
Purchased

Average
Price
Paid
per Share

Total
Number of
Shares
Purchased
as Part of
Publicly
Announced
Program

Maximum
Number of
Shares
That May
Yet Be
Purchased
Under the
Program (1)
July 1 — 31, 2017 150,000
$ 90.80
150,000
6,555,000
August 1 — 31, 2017 104,000
$ 89.91
104,000
6,451,000
September 1 — 30, 2017 3,000
$ 96.15
3,000
6,448,000
Total 257,000
$ 90.50
257,000
6,448,000

(1) ~~The~~In April 2021, the Company’s Board of Directors ~~has~~ authorized the ~~cumulative repurchase~~purchase of up to ~~an aggregate of 86.5 million shares~~$1.0 billion of the Company’s common stock (the “Program”)~~. Of~~, which replaced the previous share repurchase program. As of March 31, 2023, the approximate value of shares that ~~total,~~ ~~80.1 million~~ ~~shares have been repurchased cumulatively from 1996 through~~ ~~September 30, 2017~~.may yet to be purchased pursuant to the Program is $300.5 million. The Program does not have an expiration date.

~~Item 4 – MINE SAFETY DISCLOSURES~~

~~Not applicable.~~

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Item 6 – EXHIBITS

~~A list of exhibits to this Form 10-Q is set forth on the Exhibit Index and is incorporated herein by reference.~~

~~Exhibit Index~~



Exhibit Number						Description

3.a						Restated Articles of Incorporation of Polaris ~~Industries~~ Inc. ~~(the “Company”)~~, effective ~~April 28, 2017,~~as of July 29, 2019, incorporated by reference to Exhibit ~~3.b~~3.1 to the Company’s Current Report on Form 8-K filed ~~May 2, 2017.~~July 29, 2019.

3.b						Bylaws of ~~the Company,~~Polaris Inc., as amended and restated on ~~April~~July 29, ~~2010,~~2019, incorporated by reference to Exhibit 33.2 to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the quarter ended June 30, 2010.~~8-K filed July 29, 2019.

10.a						Form of Nonqualified Stock Option Award Agreement (2023) made under the Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and Restated April 30, 2020).*

10.b						Form of Nonqualified Stock Option Award Agreement (2023) entered into with Kenneth J. Pucel, made under the Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and Restated April 30, 2020).*

10.c						Form of Restricted Stock Award Agreement (2023) made under the Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and Restated April 30, 2020).*

10.d						Form of Restricted Stock Award Agreement (2023) entered into with Kenneth J. Pucel, made under the Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and Restated April 30, 2020).*

10.e						Form of Performance Restricted Stock Unit Award Agreement (2023) made under the Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and Restated April 30, 2020).*

10.f						Form of Performance Restricted Stock Unit Award Agreement (2023) entered into with Kenneth J. Pucel, made under the Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and Restated April 30, 2020).*

31.a						Certification of Chief Executive Officer required by Exchange Act Rule 13a-14(a).

31.b						Certification of Chief Financial Officer required by Exchange Act Rule 13a-14(a).

32.a						Certification furnished pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.b						Certification furnished pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						The following financial information from Polaris ~~Industries~~ Inc.’s Quarterly Report on Form 10-Q for the period ended ~~September 30, 2017,~~March 31, 2023, filed with the SEC on ~~October 26, 2017,~~April 25, 2023, formatted in ~~Extensible~~Inline eXtensible Business Reporting Language ~~(XBRL)~~(iXBRL): (i) the Consolidated Balance Sheets ~~at September 30, 2017~~as of March 31, 2023 and December 31, ~~2016,~~2022, (ii) the Consolidated Statements of Income for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, (iii) the Consolidated Statements of Comprehensive Income for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, (iv) the Consolidated Statements of Equity for the three month periods ended March 31, 2023 and 2022, (v) the Consolidated Statements of Cash Flows for the ~~nine~~three month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, and ~~(v)~~(vi) Notes to Consolidated Financial Statements.

104						The cover page from the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2023 formatted in iXBRL.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



				POLARIS INC. (Registrant)

Date:		April 25, 2023		~~POLARIS INDUSTRIES INC.~~ ~~(Registrant)~~/s/ MICHAEL T. SPEETZEN

~~Date:~~	~~October 26, 2017~~		~~/s/ SCOTT~~ ~~W. WINE~~
		~~Scott W. Wine~~ ~~Chairman and~~ Michael T. Speetzen Chief Executive Officer (Principal Executive Officer)

Date:		April 25, 2023		/s/ ROBERT P. MACK

~~Date:~~	~~October 26, 2017~~		~~/s/ MICHAEL~~ ~~T. SPEETZEN~~
		~~Michael T. Speetzen~~ ~~Executive Vice President — Finance~~ ~~and~~ Robert P. Mack Chief Financial Officer (Principal Financial and ~~Chief~~ Accounting Officer)

2833

POLARIS INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)

	September 30, 2017			December 31, 2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	132,260		$	127,325
Trade receivables, net	184,074			174,832
Inventories, net	841,922			746,534
Prepaid expenses and other	80,859			91,636
Income taxes receivable	9,535			50,662
Total current assets	1,248,650			1,190,989
Property and equipment, net	735,441			727,596
Investment in finance affiliate	70,910			94,009
Deferred tax assets	191,287			188,471
Goodwill and other intangible assets, net	784,616			792,979
Other long-term assets	102,162			105,553
Total assets	$	3,133,066		$	3,099,597
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of debt, capital lease obligations and notes payable	$	27,835		$	3,847
Accounts payable	385,858			273,742
Accrued expenses:
Compensation	148,280			122,214
Warranties	112,085			119,274
Sales promotions and incentives	192,568			158,562
Dealer holdback	117,934			117,574
Other	183,030			162,432
Income taxes payable	27,448			2,106
Total current liabilities	1,195,038			959,751
Long-term income taxes payable	22,036			26,391
Capital lease obligations	18,451			17,538
Long-term debt	873,698			1,120,525
Deferred tax liabilities	9,366			9,127
Other long-term liabilities	107,182			90,497
Total liabilities	$	2,225,771		$	2,223,829
Deferred compensation	$	11,331		$	8,728
Shareholders’ equity:
Preferred stock $0.01 par value, 20,000 shares authorized, no shares issued and outstanding	—			—
Common stock $0.01 par value, 160,000 shares authorized, 62,540 and 63,109 shares issued and outstanding, respectively	$	625		$	631
Additional paid-in capital	688,798			650,162
Retained earnings	250,544			300,084
Accumulated other comprehensive loss, net	(44,003		)	(83,837		)
Total shareholders’ equity	895,964			867,040
Total liabilities and shareholders’ equity	$	3,133,066		$	3,099,597



	Three months ended September 30,					Nine months ended September 30,
	2017			2016		2017			2016
Net income	$	81,888		$	32,312	$	141,018		$	150,367
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax benefit (expense) of ($20) and ($455) in 2017 and $13 and $41 in 2016	10,606			1,528		41,042			490
Unrealized gain (loss) on derivative instruments, net of tax benefit (expense) of $99 and $748 in 2017 and ($1,570) and $2,748 in 2016	(167		)	2,638		(1,208		)	(4,621		)
Comprehensive income	$	92,327		$	36,478	$	180,852		$	146,236



	Fair Value Measurements as of September 30, 2017
Asset (Liability)	Total			Level 1			Level 2			Level 3
Non-qualified deferred compensation assets	$	51,959		$	51,959		—			—
Total assets at fair value	$	51,959		$	51,959		—			—
Non-qualified deferred compensation liabilities	$	(51,959	)	$	(51,959	)	—			—
Foreign exchange contracts, net	(1,685		)	—			$	(1,685	)	—
Total liabilities at fair value	$	(53,644	)	$	(51,959	)	$	(1,685	)	—

	Fair Value Measurements as of December 31, 2016
Asset (Liability)	Total			Level 1			Level 2			Level 3
Non-qualified deferred compensation assets	$	49,330		$	49,330		—			—
Foreign exchange contracts, net	298			—			$	298		—
Total assets at fair value	$	49,628		$	49,330		$	298		—
Non-qualified deferred compensation liabilities	$	(49,330	)	$	(49,330	)	—			—
Total liabilities at fair value	$	(49,330	)	$	(49,330	)	—			—



Cash and cash equivalents	$	3,017
Trade receivables	18,214
Inventory	145,612
Property, plant and equipment	32,814
Customer relationships	87,000
Trademarks / trade names	175,500
Goodwill	264,324
Other assets	18,578
Deferred revenue	(7,944		)
Other liabilities assumed	(65,750		)
Total fair value of net assets acquired	671,365
Less cash acquired	(3,017		)
Total consideration for acquisition, less cash acquired	$	668,348



	Three months ended September 30, 2016		Nine months ended September 30, 2016
Net sales	$	1,367,944	$	3,867,221
Net income	$	36,603	$	165,670
Basic earnings per share	$	0.57	$	2.56
Diluted earnings per share	$	0.56	$	2.53



	Nine months ended September 30, 2017
Goodwill, beginning of period	$	421,563
Goodwill from businesses acquired	—
Currency translation effect on foreign goodwill balances	9,203
Goodwill, end of period	$	430,766



	Total estimated life (years)	September 30, 2017			December 31, 2016
Non-amortizable—indefinite lived:
Brand names		$	232,514		$	229,121
Amortizable:
Non-compete agreements	5	540			540
Dealer/customer related	5-10	169,023			164,837
Developed technology	5-7	20,849			26,048
Total amortizable		190,412			191,425
Less: Accumulated amortization		(69,076		)	(49,130		)
Net amortized other intangible assets		121,336			142,295
Total other intangible assets, net		$	353,850		$	371,416



	Foreign Currency Items			Cash Flow Hedging Derivatives			Accumulated Other Comprehensive Loss
Balance as of December 31, 2016	$	(84,133	)	$	296		$	(83,837	)
Reclassification to the statement of income	—			(2,255		)	(2,255		)
Change in fair value	41,042			1,047			42,089
Balance as of September 30, 2017	$	(43,091	)	$	(912	)	$	(44,003	)



Derivatives in Cash Flow Hedging Relationships	Location of (Gain) Loss Reclassified from Accumulated OCI into Income	Three months ended September 30,						Nine months ended September 30,
Derivatives in Cash Flow Hedging Relationships		2017			2016			2017			2016
Foreign currency contracts	Other expense, net	$	(174	)	$	(3,002	)	$	2,433		$	(579	)
Foreign currency contracts	Cost of sales	258			(838		)	(178		)	(1,687		)
Total		$	84		$	(3,840	)	$	2,255		$	(2,266	)



Foreign Currency	Notional Amounts (in U.S. Dollars)		Net Unrealized Gain (Loss)
Australian Dollar	$	27,947	$	(308	)
Canadian Dollar	136,019		(1,697		)
Japanese Yen	907		(18		)
Mexican Peso	4,401		338
Total	$	169,274	$	(1,685	)



	Carrying Values of Derivative Instruments as of September 30, 2017
	Fair Value— Assets		Fair Value— (Liabilities)			Derivative Net Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts(1)	$	802	$	(2,487	)	$	(1,685	)
Total derivatives designated as hedging instruments	$	802	$	(2,487	)	$	(1,685	)
Total derivatives	$	802	$	(2,487	)	$	(1,685	)



	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Sales
ORV/Snowmobiles	$	1,007,392		$	895,550		$	2,577,003		$	2,402,985
Motorcycles	155,059			181,181			473,345			594,840
Global Adjacent Markets	91,575			78,485			280,152			243,553
Aftermarket	224,700			29,851			666,928			57,462
Total sales	$	1,478,726		$	1,185,067		$	3,997,428		$	3,298,840
Gross profit
ORV/Snowmobiles	$	296,904		$	221,595		$	776,013		$	656,076
Motorcycles	10,354			20,301			11,589			86,475
Global Adjacent Markets	15,983			21,828			65,297			66,163
Aftermarket	63,239			10,591			164,721			18,272
Corporate	(22,518		)	(13,545		)	(60,781		)	(34,135		)
Total gross profit	$	363,962		$	260,770		$	956,839		$	792,851



	Contract termination charges			Inventory charges			Other costs			Total
Reserves balance as of January 1, 2017	—			—			—			—
Expenses	$	19,196		$	12,680		$	8,495		$	40,371
Cash payments / scrapped inventory	(16,616		)	(8,892		)	(6,805		)	(32,313		)
Reserves balance as of September 30, 2017	$	2,580		$	3,788		$	1,690		$	8,058



	Percent change in total Company sales compared to corresponding period of the prior year
	Three months ended		Nine months ended
	September 30, 2017		September 30, 2017
Volume	6	%	2	%
Product mix and price	2		—
Acquisitions	16		19
Currency	1		—
	25	%	21	%



	Three months ended September 30,								Nine months ended September 30,
($ in millions except per share data)	2017			2016			Change 2017 vs. 2016		2017			2016			Change 2017 vs. 2016
Interest expense	$	8.5		$	4.1		110	%	$	24.4		$	10.7		128	%
Equity in loss of other affiliates	$	1.6		$	1.8		(11	)%	$	4.8		$	5.4		(11	)%
Other expense (income), net	$	(2.4	)	$	5.7		(142	)%	$	7.1		$	7.6		(7	)%

Income before taxes	$	109.2		$	45.8		138	%	$	200.8		$	227.8		(12	)%
Provision for income taxes	$	27.3		$	13.5		102	%	$	59.8		$	77.4		(23	)%
Percentage of income before taxes	25.0		%	29.5		%	-451 basis		29.8		%	34.0		%	-420 basis
							points								points
Net income	$	81.9		$	32.3		153	%	$	141.0		$	150.4		(6	)%
Diluted net income per share:	$	1.28		$	0.50		156	%	$	2.21		$	2.30		(4	)%
Weighted average diluted shares outstanding	63.9			65.0			(2	)%	63.9			65.4			(2	)%



Foreign Currency		Foreign currency hedging contracts			Currency impact on net income compared to the prior year period
Foreign Currency	Currency Position	Notional amounts (in thousands of U.S. Dollars)		Average exchange rate of open contracts	Third quarter 2017	Estimated remainder of 2017
Australian Dollar (AUD)	Long	$	27,947	$0.77 to 1 AUD	Slightly positive	Neutral
Canadian Dollar (CAD)	Long	136,019		$0.78 to 1 CAD	Slightly positive	Neutral
Euro	Long	—		—	Slightly positive	Neutral
Japanese Yen	Short	907		109 Yen to $1	Slightly positive	Slightly negative
Mexican Peso	Short	4,401		20 Peso to $1	Slightly positive	Neutral
Norwegian Krone	Long	—		—	Neutral	Neutral
Swedish Krona	Long	—		—	Neutral	Slightly positive
Swiss Franc	Short	—		—	Neutral	Neutral



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased Under the Program (1)
July 1 — 31, 2017	150,000	$	90.80	150,000	6,555,000
August 1 — 31, 2017	104,000	$	89.91	104,000	6,451,000
September 1 — 30, 2017	3,000	$	96.15	3,000	6,448,000
Total	257,000	$	90.50	257,000	6,448,000

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934