UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, ~~2022~~2023


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

For the transition period from to

Commission File Number 1-11411

POLARIS 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

(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 every Interactive Data File required to be submitted 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 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.


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	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

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

As of April ~~19, 2022, 59,497,259~~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, ~~2022~~2023


			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	7
		Notes to Consolidated Financial Statements	8
	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
		Results of Operations	21
		Liquidity and Capital Resources	25
		~~Inflation and Foreign Exchange Rates~~	2726
		Critical Accounting Policies	28
		Note Regarding Forward Looking Statements	28
	Item 3 – Quantitative and Qualitative Disclosures About Market Risk		2928
	Item 4 – Controls and Procedures		2930

Part II OTHER INFORMATION
	Item 1 – Legal Proceedings		2930
	Item 1A – Risk Factors		3031
	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		3031
	Item 6 – Exhibits		3132

SIGNATURES			3233

Table of Contents

Part I FINANCIAL INFORMATION

Item 1 – FINANCIAL STATEMENTS

POLARIS INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	375.4	$	509.2	Cash and cash equivalents	$	322.9	$	324.5
Trade receivables, net	Trade receivables, net	251.1		240.5		Trade receivables, net	324.6		343.0
Inventories, net	Inventories, net	1,879.7		1,644.8		Inventories, net	1,947.2		1,896.1
Prepaid expenses and other	Prepaid expenses and other	146.7		160.5		Prepaid expenses and other	190.1		183.7
Income taxes receivable	Income taxes receivable	2.2		4.0		Income taxes receivable	2.5		20.3
Total current assets	Total current assets	2,655.1		2,559.0		Total current assets	2,787.3		2,767.6
Property and equipment, net	Property and equipment, net	978.2		975.4		Property and equipment, net	1,058.4		1,018.4
Investment in finance affiliate	Investment in finance affiliate	33.3		49.3		Investment in finance affiliate	96.5		93.1

Deferred tax assets	Deferred tax assets	154.5		163.6		Deferred tax assets	221.2		210.5
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	1,029.4		1,037.5		Goodwill and other intangible assets, net	907.7		910.6
Operating lease assets	Operating lease assets	187.0		165.2		Operating lease assets	111.6		111.0
Other long-term assets	Other long-term assets	91.4		97.8		Other long-term assets	107.2		106.7
Total assets	Total assets	$	5,128.9	$	5,047.8	Total assets	$	5,289.9	$	5,217.9
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of debt, finance lease obligations and notes payable		$	553.3	$	553.3
Current financing obligations						Current financing obligations	$	553.6	$	553.6
Accounts payable	Accounts payable	978.5		797.4		Accounts payable	870.1		847.6
Accrued expenses:
Compensation		118.9		223.9
Warranties		128.3		135.1
Sales promotions and incentives		79.1		96.9
Dealer holdback		90.6		98.9
Other		244.3		268.1
Current operating lease liabilities		43.5		39.3
Income taxes payable		14.4		17.2
Accrued expenses						Accrued expenses	832.0		896.8
Other current liabilities						Other current liabilities	42.7		30.6
Total current liabilities	Total current liabilities	2,250.9		2,230.1		Total current liabilities	2,298.4		2,328.6
Long-term income taxes payable		13.7		13.3
Finance lease obligations		11.5		12.1
Long-term debt		1,382.5		1,235.3
Deferred tax liabilities		5.4		5.5
Long-term operating lease liabilities		146.2		128.5
Long-term financing obligations						Long-term financing obligations	1,549.3		1,504.2
Other long-term liabilities	Other long-term liabilities	186.7		185.5		Other long-term liabilities	273.6		271.0
Total liabilities	Total liabilities	$	3,996.9	$	3,810.3	Total liabilities	$	4,121.3	$	4,103.8
Deferred compensation	Deferred compensation	$	11.4	$	11.2	Deferred compensation	$	13.8	$	12.6
Shareholders’ equity:	Shareholders’ equity:					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, 59.5 and 60.4 shares issued and outstanding, respectively		$	0.6	$	0.6
Preferred stock $0.01 par value per share, 20.0 shares authorized, no shares issued and outstanding						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						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	Additional paid-in capital	1,142.8		1,143.8		Additional paid-in capital	1,168.9		1,152.1
Retained earnings	Retained earnings	45.0		157.3		Retained earnings	57.3		33.8
Accumulated other comprehensive loss, net	Accumulated other comprehensive loss, net	(69.8)		(77.4)		Accumulated other comprehensive loss, net	(74.7)		(87.5)
Total shareholders’ equity	Total shareholders’ equity	1,118.6		1,224.3		Total shareholders’ equity	1,152.1		1,099.0
Noncontrolling interest	Noncontrolling interest	2.0		2.0		Noncontrolling interest	2.7		2.5
Total equity	Total equity	1,120.6		1,226.3		Total equity	1,154.8		1,101.5
Total liabilities and equity	Total liabilities and equity	$	5,128.9	$	5,047.8	Total liabilities and equity	$	5,289.9	$	5,217.9

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

Table of Contents

POLARIS INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)


		Three months ended March 31,						Three months ended March 31,
			2022		2021				2023		2022
Sales	Sales		$	1,956.8	$	1,951.1	Sales		$	2,179.7	$	1,781.5
Cost of sales	Cost of sales		1,560.5		1,470.6		Cost of sales		1,710.5		1,428.6
Gross profit	Gross profit		396.3		480.5		Gross profit		469.2		352.9
Operating expenses:	Operating expenses:						Operating expenses:
Selling and marketing	Selling and marketing		143.2		145.9		Selling and marketing		137.6		111.6
Research and development	Research and development		82.8		79.5		Research and development		96.5		80.8
General and administrative	General and administrative		86.9		87.1		General and administrative		90.8		71.7
Total operating expenses	Total operating expenses		312.9		312.5		Total operating expenses		324.9		264.1
Income from financial services	Income from financial services		11.4		16.2		Income from financial services		16.8		11.4
Operating income	Operating income		94.8		184.2		Operating income		161.1		100.2
Non-operating expense:	Non-operating expense:						Non-operating expense:
Interest expense	Interest expense		11.8		11.5		Interest expense		28.3		11.8
Other (income) expense, net	Other (income) expense, net		(3.1)		(2.5)		Other (income) expense, net		(12.4)		(3.3)

Income before income taxes			86.1		175.2
Income from continuing operations before income taxes							Income from continuing operations before income taxes		145.2		91.7
Provision for income taxes	Provision for income taxes		16.2		41.0		Provision for income taxes		31.6		17.6
Net income from continuing operations							Net income from continuing operations		113.6		74.1
Loss from discontinued operations, net of tax							Loss from discontinued operations, net of tax		—		(4.2)

Net income	Net income		69.9		134.2		Net income		113.6		69.9
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest		—		(0.1)		Net income attributable to noncontrolling interest		(0.2)		—
Net income attributable to Polaris Inc.	Net income attributable to Polaris Inc.		$	69.9	$	134.1	Net income attributable to Polaris Inc.		$	113.4	$	69.9
Net income per share attributable to Polaris Inc. common shareholders:

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

Net income (loss) per share attributable to Polaris Inc. common shareholders:							Net income (loss) per share attributable to Polaris Inc. common shareholders:
Basic	Basic		$	1.16	$	2.16	Basic
Continuing operations							Continuing operations		$	1.98	$	1.23
Discontinued operations							Discontinued operations		$	—	$	(0.07)
Basic							Basic		$	1.98	$	1.16
Diluted							Diluted
Continuing operations							Continuing operations		$	1.95	$	1.21
Discontinued operations							Discontinued operations		$	—	$	(0.07)
Diluted	Diluted		$	1.14	$	2.11	Diluted		$	1.95	$	1.14
Weighted average shares outstanding:	Weighted average shares outstanding:						Weighted average shares outstanding:
Basic	Basic		60.3		62.0		Basic		57.4		60.3
Diluted	Diluted		61.2		63.4		Diluted		58.1		61.2

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

Table of Contents

POLARIS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

Three months ended March 31,
2022 2021
Net income $ 69.9 $ 134.2
Other comprehensive income, net of tax:
Foreign currency translation adjustments (0.8) (15.6)
Unrealized gain on derivative instruments 8.3 1.4
Retirement plan and other activity 0.1 0.1
Comprehensive income 77.5 120.1
Comprehensive income attributable to noncontrolling interest — (0.1)
Comprehensive income attributable to Polaris Inc. $ 77.5 $ 120.0


	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.

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			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
Balance, December 31, 2022															Balance, December 31, 2022	57.0	$	0.6	$	1,152.1	$	33.8	$	(87.5)	$	2.5	$	1,101.5
Employee stock compensation	Employee stock compensation	0.4	—		13.3		—		—		—		13.3		Employee stock compensation	0.3	—		14.7		—		—		—		14.7
Deferred compensation	Deferred compensation	—	—		(0.7)		0.5		—		—		(0.2)		Deferred compensation	—	—		(0.1)		(1.1)		—		—		(1.2)
Proceeds from stock issuances under employee plans	Proceeds from stock issuances under employee plans	0.2	—		13.9		—		—		—		13.9		Proceeds from stock issuances under employee plans	0.1	—		13.2		—		—		—		13.2
Cash dividends declared (1)	Cash dividends declared (1)	—	—		—		(37.9)		—		—		(37.9)		Cash dividends declared (1)	—	—		—		(37.0)		—		—		(37.0)
Repurchase and retirement of common shares	Repurchase and retirement of common shares	(1.5)	—		(27.5)		(144.8)		—		—		(172.3)		Repurchase and retirement of common shares	(0.5)	—		(11.0)		(51.8)		—		—		(62.8)

Net income	Net income	—	—		—		69.9		—		—		69.9		Net income	—	—		—		113.4		—		0.2		113.6

Other comprehensive income		—	—		—		—		7.6		—		7.6
Balance, March 31, 2022		59.5	0.6		1,142.8		45.0		(69.8)		2.0		1,120.6
Other comprehensive loss															Other comprehensive loss	—	—		—		—		12.8		—		12.8
Balance, March 31, 2023															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			Number of Shares	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (loss)		Non Controlling Interest		Total Equity
Balance, December 31, 2020		61.9	$	0.6	$	983.9	$	218.4	$	(58.4)	$	0.3	$	1,144.8
Balance, December 31, 2021															Balance, December 31, 2021	60.4	$	0.6	$	1,143.8	$	157.3	$	(77.4)	$	2.0	$	1,226.3
Employee stock compensation	Employee stock compensation	0.3	—		8.9		—		—		—		8.9		Employee stock compensation	0.4	—		13.3		—		—		—		13.3
Deferred compensation	Deferred compensation	—	—		(0.5)		(5.1)		—		—		(5.6)		Deferred compensation	—	—		(0.7)		0.5		—		—		(0.2)
Proceeds from stock issuances under employee plans	Proceeds from stock issuances under employee plans	1.5	—		129.3		—		—		—		129.3		Proceeds from stock issuances under employee plans	0.2	—		13.9		—		—		—		13.9
Cash dividends declared (1)	Cash dividends declared (1)	—	—		—		(38.6)		—		—		(38.6)		Cash dividends declared (1)	—	—		—		(37.9)		—		—		(37.9)
Repurchase and retirement of common shares	Repurchase and retirement of common shares	(2.5)	—		(39.1)		(260.0)		—		—		(299.1)		Repurchase and retirement of common shares	(1.5)	—		(27.5)		(144.8)		—		—		(172.3)

Net income	Net income	—	—		—		134.1		—		0.1		134.2		Net income	—	—		—		69.9		—		—		69.9
Contributions		—	—		—		—		—		1.2		1.2
Other comprehensive loss	Other comprehensive loss	—	—		—		—		(14.1)		—		(14.1)		Other comprehensive loss	—	—		—		—		7.6		—		7.6
Balance, March 31, 2021		61.2	0.6		1,082.5		48.8		(72.5)		1.6		1,061.0
Balance, March 31, 2022															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 and a $0.63 dividend per share for the three month period ended March 31, 2021.~~2022.

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

Table of Contents

POLARIS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


		Three months ended March 31,					Three months ended March 31,
		2022		2021			2023		2022
Operating Activities:	Operating Activities:					Operating Activities:
Net income	Net income	$	69.9	$	134.2	Net income	$	113.6	$	69.9
Loss from discontinued operations, net of tax						Loss from discontinued operations, net of tax	—		4.2

Adjustments to reconcile net income to net cash provided by (used for) operating activities:	Adjustments to reconcile net income to net cash provided by (used for) operating activities:					Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization	Depreciation and amortization	61.3		59.6		Depreciation and amortization	61.8		56.6
Noncash compensation	Noncash compensation	13.3		8.9		Noncash compensation	14.7		13.3
Noncash income from financial services	Noncash income from financial services	(2.3)		(2.6)		Noncash income from financial services	(8.7)		(2.3)
Deferred income taxes	Deferred income taxes	9.4		19.1		Deferred income taxes	(10.5)		9.4

Other, net						Other, net	(0.7)		(0.8)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Trade receivables	Trade receivables	(10.4)		14.2		Trade receivables	19.1		(12.0)
Inventories	Inventories	(234.9)		(169.7)		Inventories	(47.6)		(220.3)
Accounts payable	Accounts payable	181.7		90.7		Accounts payable	20.3		180.1
Accrued expenses	Accrued expenses	(161.3)		(114.0)		Accrued expenses	(65.2)		(159.2)
Income taxes payable/receivable	Income taxes payable/receivable	(0.5)		15.6		Income taxes payable/receivable	29.5		(0.4)
Prepaid expenses and others, net	Prepaid expenses and others, net	24.7		—		Prepaid expenses and others, net	(2.1)		23.1
Net cash provided by (used for) operating activities of continuing operations						Net cash provided by (used for) operating activities of continuing operations	124.2		(38.4)
Net cash used for operating activities of discontinued operations						Net cash used for operating activities of discontinued operations	—		(10.7)
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	(49.1)		56.0		Net cash provided by (used for) operating activities	124.2		(49.1)
Investing Activities:	Investing Activities:					Investing Activities:
Purchase of property and equipment	Purchase of property and equipment	(57.4)		(45.4)		Purchase of property and equipment	(94.4)		(55.8)
Investment in finance affiliate, net	Investment in finance affiliate, net	18.2		15.2		Investment in finance affiliate, net	5.3		18.2

Net cash used for investing activities of continuing operations						Net cash used for investing activities of continuing operations	(89.1)		(37.6)
Net cash used for investing activities of discontinued operations						Net cash used for investing activities of discontinued operations	—		(1.6)
Net cash used for investing activities	Net cash used for investing activities	(39.2)		(30.2)		Net cash used for investing activities	(89.1)		(39.2)
Financing Activities:	Financing Activities:					Financing Activities:
Borrowings under debt arrangements		568.0		95.4
Repayments under debt arrangements		(420.2)		(111.3)
Borrowings under financing obligations						Borrowings under financing obligations	573.4		568.0
Repayments under financing obligations						Repayments under financing obligations	(528.4)		(420.2)
Repurchase and retirement of common shares	Repurchase and retirement of common shares	(172.3)		(299.1)		Repurchase and retirement of common shares	(62.8)		(172.3)
Cash dividends to shareholders	Cash dividends to shareholders	(37.9)		(38.6)		Cash dividends to shareholders	(37.0)		(37.9)
Proceeds from stock issuances under employee plans	Proceeds from stock issuances under employee plans	13.9		129.3		Proceeds from stock issuances under employee plans	13.2		13.9

Net cash used for financing activities	Net cash used for financing activities	(48.5)		(224.3)		Net cash used for financing activities	(41.6)		(48.5)
Impact of currency exchange rates on cash balances	Impact of currency exchange rates on cash balances	(0.3)		(4.3)		Impact of currency exchange rates on cash balances	4.9		(0.3)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(137.1)		(202.8)		Net decrease in cash, cash equivalents and restricted cash	(1.6)		(137.1)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	529.1		657.5		Cash, cash equivalents and restricted cash at beginning of period	339.7		529.1
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	392.0	$	454.7	Cash, cash equivalents and restricted cash at end of period	$	338.1	$	392.0

Supplemental Cash Flow Information:	Supplemental Cash Flow Information:					Supplemental Cash Flow Information:
Interest paid on debt borrowings	Interest paid on debt borrowings	$	14.8	$	13.7	Interest paid on debt borrowings	$	31.8	$	14.8
Income taxes paid	Income taxes paid	$	10.1	$	6.9	Income taxes paid	$	12.2	$	10.1
Leased assets obtained for operating lease liabilities	Leased assets obtained for operating lease liabilities	$	28.6	$	2.7	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:	The following presents the classification of cash, cash equivalents and restricted cash within the consolidated balance sheets:					The following presents the classification of cash, cash equivalents and restricted cash within the consolidated balance sheets:
Cash and cash equivalents	Cash and cash equivalents	$	375.4	$	432.4	Cash and cash equivalents	$	322.9	$	367.1
Current assets held for sale						Current assets held for sale	—		8.3
Other long-term assets	Other long-term assets	16.6		22.3		Other long-term assets	15.2		16.6
Total	Total	$	392.0	$	454.7	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 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, ~~2021~~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, ~~(loss),~~ comprehensive income, ~~(loss),~~ equity, or cash flows, as previously reported. ~~See further information~~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 ~~10.~~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, ~~and~~ 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, ~~and~~ interest rate transactions, and commodity transactions.

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


		Fair Value Measurements as of March 31, 2022									Input Level	March 31, 2023		December 31, 2022
Asset (Liability)		Total		Level 1		Level 2		Level 3
Assets										Assets
Non-qualified deferred compensation assets	Non-qualified deferred compensation assets	$	49.4	$	49.4	$	—	$	—	Non-qualified deferred compensation assets	Level 1	$	40.4	$	39.8
Foreign exchange contracts, net	Foreign exchange contracts, net	4.3		—		4.3		—		Foreign exchange contracts, net	Level 2	$	11.6	$	8.4
Interest rate contracts, net	Interest rate contracts, net	0.9		—		0.9		—		Interest rate contracts, net	Level 2	$	—	$	5.9
Total assets at fair value		$	54.6	$	49.4	$	5.2	$	—
Commodity contracts, net										Commodity contracts, net	Level 2	$	0.9	$	—
Liabilities										Liabilities
Non-qualified deferred compensation liabilities	Non-qualified deferred compensation liabilities	$	(49.4)	$	(49.4)	$	—	$	—	Non-qualified deferred compensation liabilities	Level 1	$	(40.4)	$	(39.8)
Interest rate contracts, net										Interest rate contracts, net	Level 2	$	(0.4)	$	—

Total liabilities at fair value		$	(49.4)	$	(49.4)	$	—	$	—

		Fair Value Measurements as of December 31, 2021
Asset (Liability)		Total		Level 1		Level 2		Level 3
Non-qualified deferred compensation assets		$	52.4	$	52.4	$	—	$	—
Foreign exchange contracts, net		2.1		—		2.1		—
Total assets at fair value		$	54.5	$	52.4	$	2.1	$	—
Non-qualified deferred compensation liabilities		$	(52.4)	$	(52.4)	$	—	$	—

Interest rate contracts, net		(7.8)		—		(7.8)		—
Total liabilities at fair value		$	(60.2)	$	(52.4)	$	(7.8)	$	—

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, finance lease~~financing obligations ~~and notes payable,~~ approximate their fair ~~values.~~values due to their short-term nature. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair value of the Company’s current and long-term ~~debt, finance lease~~financing obligations ~~and notes payable~~ was approximately ~~$1,987.6~~$2,117.6 million and ~~$1,870.0~~$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, finance lease~~financing obligations ~~and notes payable including current maturities~~ was ~~$1,947.3~~$2,102.9 million and ~~$1,800.7~~$2,057.8 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~Inventories.~~ Inventory costs include material, labor and manufacturing overhead costs, including depreciation expense associated with the manufacture and distribution of the Company’s products. Inventories are stated at the lower of cost or net realizable value with substantially all inventories recorded using the first-in, first-out method. Finished goods include products that are completed and ready for sale or substantially completed as the product has gone through the primary manufacturing and assembly process. The major components of inventories are as follows (in millions):

March 31, 2022 December 31, 2021
Raw materials and purchased components $ 851.2 $ 720.2
Service parts, garments and accessories 481.8 417.7
Finished goods 627.9 588.2
Less: reserves (81.2) (81.3)
Inventories, net $ 1,879.7 $ 1,644.8

Property and equipment. ~~Property and equipment is stated at cost.~~ Depreciation is determined using the straight-line method over the estimated useful life of the respective assets, ranging from 10-40 years for buildings and improvements and from 1-7 years for equipment and tooling. Depreciation of assets recorded under finance leases is included within depreciation expense. Fully-depreciated tooling is eliminated from the accounting records annually. The Company recorded $54.4expense was $57.4 million and ~~$49.2~~$51.6 million ~~of depreciation expense~~ for the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~

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~~The major components of property and equipment are as follows (in millions):~~

March 31, 2022 December 31, 2021
Land, buildings and improvements $ 535.2 $ 532.2
Equipment and tooling 1,720.9 1,672.2
2,256.1 2,204.4
Less: accumulated depreciation (1,277.9) (1,229.0)
Property and equipment, net $ 978.2 $ 975.4

2022. Substantially all of the Company’s property and equipment is located in North America.

Product warranties. The Company typically provides a limited warranty for its vehicles and boats for a period of six months to ten years, depending on the product. The Company provides longer warranties in certain geographical markets as determined by local regulations and customary practice and may also provide longer warranties related to certain promotional programs. The Company’s standard warranties require the Company, generally through its dealer network, to repair or replace defective products during such warranty periods. 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. The Company records these amounts as a liability in the consolidated balance sheet until they are ultimately paid. Adjustments to the warranty reserve are made based on actual claims experience in order to properly estimate the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The warranty reserve includes the estimated costs related to recalls, which are accrued when probable and estimable. Factors that could have an impact on the warranty reserve include the following: changes in manufacturing quality, shifts in product mix, changes in warranty coverage periods, impacts on product usage (including weather), product recalls, and changes in sales volume.

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

Three months ended March 31,
2022 2021
Balance at beginning of period $ 135.1 $ 140.8
Additions charged to expense 27.1 34.6
Warranty claims paid, net (33.9) (35.5)
Balance at end of period $ 128.3 $ 139.9

~~Divestitures.~~

On October 26, 2021, the Company announced plans to divest its Global Electric Motorcar (GEM) and Taylor-Dunn businesses in an effort to more strategically allocate the Company’s resources. The Company completed the sale on December 31, 2021. The sale resulted in a loss of $36.8 million. The 2021 financial results of these businesses are reflected in the Corporate segment.


	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.

~~Reference Rate Reform.~~ ~~In March 2020, the FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~. This ASU provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The FASB also issued ASU 2021-01, ~~Reference Rate Reform (Topic 848): Scope~~ in January 2021, which adds implementation guidance to clarify which optional expedients in Topic 848 may be applied to derivative instruments that do not reference LIBOR or a reference rate that is expected to be discontinued, but that are being modified as a result of the discounting transition. The Company adopted ASU 2020-04 and ASU 2021-01 on January 1, 2022. The adoption of the ASUs did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows.

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

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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 2.3. Revenue Recognition

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a ~~customer (primarily dealers and distributors).~~customer. Revenue is measured based on the amount of consideration that the Company

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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, 2022													Three months ended March 31, 2023
		Off-Road		On-Road		Marine		Aftermarket		Corporate		Total			Off Road		On Road		Marine		Total
Revenue by product type	Revenue by product type													Revenue by product type
Wholegoods	Wholegoods	$	1,000.5	$	180.5	$	211.5	$	—	$	—	$	1,392.5	Wholegoods	$	1,250.4	$	267.2	$	264.4	$	1,782.0
PG&A	PG&A	308.2		38.6		—		217.5		—		564.3		PG&A	341.4		56.3		—		397.7
Total revenue	Total revenue	$	1,308.7	$	219.1	$	211.5	$	217.5	$	—	$	1,956.8	Total revenue	$	1,591.8	$	323.5	$	264.4	$	2,179.7

Revenue by geography	Revenue by geography													Revenue by geography
United States	United States	$	1,002.6	$	96.4	$	207.1	$	208.0	$	—	$	1,514.1	United States	$	1,279.8	$	157.6	$	257.2	$	1,694.6
Canada	Canada	133.7		4.9		4.4		9.5		—		152.5		Canada	128.4		12.4		6.8		147.6
EMEA	EMEA	122.7		99.6		—		—		—		222.3		EMEA	117.7		134.9		—		252.6
APLA	APLA	49.7		18.2		—		—		—		67.9		APLA	65.9		18.6		0.4		84.9
Total revenue	Total revenue	$	1,308.7	$	219.1	$	211.5	$	217.5	$	—	$	1,956.8	Total revenue	$	1,591.8	$	323.5	$	264.4	$	2,179.7

		Three months ended March 31, 2021													Three months ended March 31, 2022
		Off-Road		On-Road		Marine		Aftermarket		Corporate		Total			Off Road		On Road		Marine		Total
Revenue by product type	Revenue by product type													Revenue by product type
Wholegoods	Wholegoods	$	992.1	$	196.9	$	198.7	$	—	$	11.5	$	1,399.2	Wholegoods	$	1,000.5	$	180.5	$	211.5	$	1,392.5
PG&A	PG&A	286.2		32.4		—		229.8		3.5		551.9		PG&A	341.6		47.4		—		389.0
Total revenue	Total revenue	$	1,278.3	$	229.3	$	198.7	$	229.8	$	15.0	$	1,951.1	Total revenue	$	1,342.1	$	227.9	$	211.5	$	1,781.5

Revenue by geography	Revenue by geography													Revenue by geography
United States	United States	$	1,002.2	$	99.2	$	193.4	$	219.8	$	14.3	$	1,528.9	United States	$	1,033.4	$	104.2	$	207.1	$	1,344.7
Canada	Canada	113.0		5.8		5.3		10.0		—		134.1		Canada	136.3		5.9		4.4		146.6
EMEA	EMEA	112.6		105.8		—		—		0.2		218.6		EMEA	122.7		99.6		—		222.3
APLA	APLA	50.5		18.5		—		—		0.5		69.5		APLA	49.7		18.2		—		67.9
Total revenue	Total revenue	$	1,278.3	$	229.3	$	198.7	$	229.8	$	15.0	$	1,951.1	Total revenue	$	1,342.1	$	227.9	$	211.5	$	1,781.5

~~Off-Road, On-Road, and Marine segments~~

~~Wholegood vehicles, boats, and parts, garments and accessories.~~For the majority of wholegood vehicles, boats, and Parts, Garments, and Accessories (“PG~~&A,~~&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 ~~dealers and their~~ 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

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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 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.

~~Aftermarket segment~~

The Company’s Aftermarket products are sold through dealer, distributor, retail, and e-commerce channels. The Company transfers control and recognizes a sale when products are shipped or delivered 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 and their customers. Payment terms vary by customer but typically range from due upon delivery (or point-of-sale) to 180 days after delivery.

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.

~~Service revenue.~~ ~~The Company offers installation services for parts that it sells. Service revenues are recognized upon completion of the service.~~

Contract Liabilities

Contract liabilities relate to deferred revenue recognized for 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 finances its self-insured risks related to ESCs. The premiums for ESCs are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. Warranty costs are recognized as incurred.

The ~~Company expects to recognize approximately $46.0 million of the unearned amount over the next 12 months and $86.8 million thereafter. The~~ activity in the deferred revenue reserve during the periods presented was as follows (in millions):


		Three months ended March 31,						Three months ended March 31,
			2022		2021				2023		2022
Balance at beginning of period	Balance at beginning of period		$	126.4	$	107.1	Balance at beginning of period		$	111.1	$	108.3
New contracts sold	New contracts sold		18.2		20.6		New contracts sold		13.7		15.5
Less: reductions for revenue recognized			(11.8)		(11.1)
Revenue recognized on existing contracts							Revenue recognized on existing contracts		(13.3)		(8.9)
Balance at end of period ~~(1)~~	Balance at end of period ~~(1)~~		$	132.8	$	116.6	Balance at end of period ~~(1)~~		$	111.5	$	114.9

~~(1)~~ The ~~unamortized ESC premiums~~Company expects to recognize approximately $35.6 million of the unearned amount over the next 12 months, which is recorded in other current liabilities ~~totaled $46.0 million and $40.8~~as of March 31, 2023, compared to $36.8 million as of March 31, ~~2022 and 2021, respectively, while the~~2022. The amount recorded in other long-term liabilities totaled ~~$86.8~~$75.9 million and ~~$75.8~~$78.1 million as of March 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

Note 4. Divestitures and Discontinued Operations

2022 Divestitures.

On July 1, 2022, the Company completed the sale of its TAP business, an aftermarket parts business, for a sales price, net of post-closing purchase price adjustments, of $42.2 million. TAP is a vertically integrated manufacturer, distributor, retailer, and installer of off-road Jeep and truck parts and accessories. The transaction included TAP’s full portfolio of 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 TAP have been presented as discontinued operations. TAP was historically included within the 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 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. The comparative 2022 segment results were reclassified for comparability.

Results of discontinued operations were as follows (in 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)

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Note 3.5. Share-Based Compensation

The amount of compensation cost for share-based awards 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.

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


		Three months ended March 31,						Three months ended March 31,
			2022		2021				2023		2022
Option awards	Option awards		$	5.1	$	3.0	Option awards		$	5.8	$	5.1
Other share-based awards	Other share-based awards		5.5		6.6		Other share-based awards		6.2		5.5
Total share-based compensation before tax	Total share-based compensation before tax		10.6		9.6		Total share-based compensation before tax		12.0		10.6
Tax benefit	Tax benefit		2.6		2.3		Tax benefit		2.8		2.6
Total share-based compensation expense included in net income	Total share-based compensation expense included in net income		$	8.0	$	7.3	Total share-based compensation expense included in net income		$	9.2	$	8.0

In addition to the above share-based compensation expenses, 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.

As of March 31, ~~2022,~~2023, there was ~~$84.0~~$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 ~~1.8~~2.0 years. Included in unrecognized share-based compensation expense was approximately ~~$11.1~~$11.0 million related to stock options and ~~$72.9~~$68.4 million related to restricted stock.

Note 4.6. Financing Agreements

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


		Average interest rate as of March 31, 2022	Maturity	March 31, 2022		December 31, 2021			Average interest rate as of March 31, 2023	Maturity	March 31, 2023		December 31, 2022
Incremental term loan								Incremental term loan	6.16%	December 2023	500.0		500.0
Revolving loan facility	Revolving loan facility	1.46%	June 2026	$	160.0	$	—	Revolving loan facility	5.34%	June 2026	$	371.0	$	312.9
Term loan facility	Term loan facility	1.58%	June 2026	864.0		876.0		Term loan facility	6.16%	June 2026	816.0		828.0
Incremental term loan		1.33%	December 2022	500.0		500.0
Senior notes—fixed rate	Senior notes—fixed rate	4.23%	July 2028	350.0		350.0		Senior notes—fixed rate	4.23%	July 2028	350.0		350.0
Finance lease obligations	Finance lease obligations	5.21%	Various through 2029	12.9		13.5		Finance lease obligations	5.22%	Various through 2029	11.2		11.4
Notes payable and other	Notes payable and other	4.25%	Various through 2030	67.1		68.3		Notes payable and other	4.26%	Various through 2030	60.1		61.4
Debt issuance costs	Debt issuance costs			(6.7)		(7.1)		Debt issuance costs			(5.4)		(5.9)
Total debt, finance lease obligations, and notes payable				$	1,947.3	$	1,800.7
Less: current maturities				553.3		553.3
Total long-term debt, finance lease obligations, and notes payable				$	1,394.0	$	1,247.4
Total financing obligations								Total financing obligations			$	2,102.9	$	2,057.8
Less: Current financing obligations								Less: Current financing obligations			553.6		553.6
Long-term financing obligations								Long-term financing obligations			$	1,549.3	$	1,504.2

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.

The Company maintains an unsecured credit facility which consists of a term loan facility (the “Term Loan Facility”) and a revolving loan facility (the “Revolving Loan Facility”). In July 2018, the Company amended its unsecured credit facility to increase its Term Loan Facility to $1,180 million, of which ~~$864~~$816.0 million was outstanding as of March 31, ~~2022.~~2023. In June 2021, the Company further amended its unsecured credit facility to increase its Revolving Loan Facility to $1.0 billion, of which $371.0 million was outstanding as of March 31, 2023, and extend the maturity date to June 2026. Interest is charged at rates based on ~~a LIBOR or “prime” base rate.~~adjusted Term SOFR.

OnIn December ~~17,~~ 2021, the Company amended the credit facility to provide an unsecured incremental 364-day term loan (the “Incremental Term Loan”) in the amount of ~~$500.0 million. The incremental term loan,~~$500 million, which was fully drawn on ~~closing, is~~closing. In December 2022, the Company further amended its unsecured ~~and matures on~~credit facility to extend the maturity date of the Incremental Term Loan to December ~~16, 2022.~~15, 2023. There are no required principal payments prior to the maturity date. In addition to the payment of the ~~$500.0~~$500 million Incremental Term Loan, the Company is required to make principal payments under the Term Loan Facility totaling ~~$45~~$45.0 million over the next 12 months. These payments are classified as current maturities in the consolidated balance sheets.

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

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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. The Company was in compliance with all such covenants as of March 31, ~~2022.~~

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2023.

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 the consolidated statements of income over the expected remaining terms of the related debt.

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, the Company has committed to make a series of deferred payments to the former owners following the closing date of the merger through July 2030. The original discounted payable was for $76.7 million, of which ~~$61.0~~$55.3 million was outstanding as of March 31, ~~2022.~~2023. The outstanding balance is included in long-term ~~debt~~financing obligations and current ~~portion of long-term debt~~financing obligations in the consolidated balance sheets.

Note 5.7. Goodwill and Other Intangible Assets

Goodwill and other intangible assets, net of accumulated amortization, as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 are as follows (in millions):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Goodwill	Goodwill	$	390.3	$	391.3	Goodwill	$	387.5	$	386.2
Other intangible assets, net	Other intangible assets, net	639.1		646.2		Other intangible assets, net	520.2		524.4
Total goodwill and other intangible assets, net	Total goodwill and other intangible assets, net	$	1,029.4	$	1,037.5	Total goodwill and other intangible assets, net	$	907.7	$	910.6

The changes in the carrying amount of goodwill by reportable segment for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 are as follows (in millions):

Off-Road On-Road Marine Aftermarket Total
Goodwill 111.7 52.5 227.1 270.3 $ 661.6
Accumulated goodwill impairment losses — — — (270.3) (270.3)
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)
Goodwill 111.9 51.3 227.1 270.3 660.6
Accumulated goodwill impairment losses — — — (270.3) (270.3)
Balance as of March 31, 2022 $ 111.9 $ 51.3 $ 227.1 $ — $ 390.3


	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 Aftermarket Total
Goodwill 111.6 58.6 227.1 270.3 $ 667.6
Accumulated goodwill impairment losses — — — (270.3) (270.3)
Balance as of December 31, 2020 $ 111.6 $ 58.6 $ 227.1 $ — $ 397.3
Currency translation effect on foreign goodwill balances (0.1) (3.5) — — (3.6)
Goodwill 111.5 55.1 227.1 270.3 664.0
Accumulated goodwill impairment losses — — — (270.3) (270.3)
Balance as of March 31, 2021 $ 111.5 $ 55.1 $ 227.1 $ — $ 393.7


	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.

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

Weighted-average useful life (years) March 31, 2022 December 31, 2021
Non-amortizable—indefinite lived:
Brand/trade names $ 329.8 $ 330.1
Amortizable:
Non-compete agreements 4 2.6 2.6
Dealer/customer related 18 424.1 437.6
Developed technology 7 2.9 9.9
Total amortizable 17 429.6 450.1
Less: Accumulated amortization (120.3) (134.0)
Net amortized other intangible assets 309.3 316.1
Total other intangible assets, net $ 639.1 $ 646.2


		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

Amortization expense for intangible assets was ~~$6.9~~$4.4 million and ~~$8.7~~$5.0 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Estimated future amortization expense for identifiable intangible assets during the ~~remainder of 2022 through 2027~~next five years is as ~~follows: 2022 (remainder), $19.4 million; 2023, $25.1 million; 2024, $25.0 million; 2025, $25.0 million; 2026, $23.8 million; 2027, $17.7 million; and after 2027, $173.3 million.~~ 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

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 impairments of intangible assets.

Note 6.8. Shareholders’ Equity

During the three months ended March 31, ~~2022,~~2023, the Company paid ~~$172.3~~$62.8 million to repurchase approximately ~~1.5~~0.5 million shares of its common stock. As of March 31, ~~2022,~~2023, the Board of Directors has authorized the Company to repurchase up to an additional ~~$681.7~~$300.5 million of 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 and subject to the restrictions on share repurchases set forth in the incremental amendment.

The Company paid a regular cash dividend of ~~$0.64~~$0.65 per share on March 15, ~~2022~~2023 to holders of record at the close of business on March 1, ~~2022.~~2023. Cash dividends declared and paid per common share for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, were as follows:

Three months ended March 31,
2022 2021
Cash dividends declared and paid per common share $ 0.64 $ 0.63


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

Net income per share

Basic 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”), the ESOP and deferred stock units under the 2007 Omnibus Incentive Plan (“Omnibus Plan”). Diluted income per share is computed under the treasury stock method and is calculated to compute the dilutive effect of outstanding stock options and certain share-based awards issued under the Omnibus Plan. A reconciliation of these amounts is as follows (in millions):


		Three months ended March 31,				Three months ended March 31,
			2022	2021			2023	2022
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding		59.9	61.6	Weighted average number of common shares outstanding		57.0	59.9
Director Plan and deferred stock units	Director Plan and deferred stock units		0.2	0.3	Director Plan and deferred stock units		0.2	0.2
ESOP	ESOP		0.2	0.1	ESOP		0.2	0.2
Common shares outstanding—basic	Common shares outstanding—basic		60.3	62.0	Common shares outstanding—basic		57.4	60.3
Dilutive effect of restricted stock units	Dilutive effect of restricted stock units		0.5	0.6	Dilutive effect of restricted stock units		0.4	0.5
Dilutive effect of stock option awards	Dilutive effect of stock option awards		0.4	0.8	Dilutive effect of stock option awards		0.3	0.4
Common and potential common shares outstanding—diluted	Common and potential common shares outstanding—diluted		61.2	63.4	Common and potential common shares outstanding—diluted		58.1	61.2

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During the three months ended March 31, ~~2022,~~2023, the number of options that were not included in the computation of diluted income per share because the option exercise price was greater than the market price, and therefore, the effect would have been anti-dilutive was ~~1.3~~1.7 million compared to ~~1.0~~1.3 million for the same period in ~~2021.~~2022.

Accumulated other comprehensive loss

Changes in the accumulated other comprehensive loss balance were as follows (in millions):


		Foreign Currency Translation		Cash Flow Hedging Derivatives		Retirement Plan and Other Activity		Accumulated Other Comprehensive Loss			Foreign Currency Translation		Cash Flow Hedging Derivatives		Retirement Plan Activity		Accumulated Other Comprehensive Loss
Balance as of December 31, 2021		$	(69.5)	$	(4.4)	$	(3.5)	$	(77.4)
Balance as of December 31, 2022										Balance as of December 31, 2022	$	(94.8)	$	10.5	$	(3.2)	$	(87.5)
Reclassification to the statement of income	Reclassification to the statement of income	—		0.7		0.1		0.8		Reclassification to the statement of income	—		(6.0)		0.1		(5.9)
Change in fair value	Change in fair value	(0.8)		7.6		—		6.8		Change in fair value	14.1		4.6		—		18.7
Balance as of March 31, 2022		$	(70.3)	$	3.9	$	(3.4)	$	(69.8)
Balance as of March 31, 2023										Balance as of March 31, 2023	$	(80.7)	$	9.1	$	(3.1)	$	(74.7)

~~The table below provides~~See Note 11 for the amount of gains and losses, net of tax, reclassified from accumulated other comprehensive loss into the statements of income for cash flow derivatives designated as hedging ~~instruments and retirement plan activity for the three months ended March 31, 2022 and 2021 (in millions):~~

Derivatives in Cash Flow Hedging Relationships and Other Activity Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Three months ended March 31,
2022 2021
Foreign currency contracts Other (income) expense, net $ 0.9 $ (0.7)
Foreign currency contracts Cost of sales 0.3 0.6
Interest rate contracts Interest expense (1.9) (2.0)
Retirement plan activity Operating expenses (0.1) (0.1)
Total $ (0.8) $ (2.2)

The net amount of the existing gains or losses as of March 31, 2022 that is expected to be reclassified into the statements of income within the next 12 months is not expected to be material. See Note 9 for further information regarding derivative activities.instruments.

Note 7.9. Financial Services Arrangements

Polaris Acceptance, a joint venture between 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 the Company’s United States sales of snowmobiles, off-road vehicles (“ORV”), motorcycles, and related PG&A, whereby the Company receives payment within a few days of shipment of the product.

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. The Company’s allocable share of the income of Polaris Acceptance has been included as a component of income from financial services in the consolidated statements of income. The partnership agreement is effective through February 2027.

The Company’s total investment in Polaris Acceptance of ~~$33.3~~$96.5 million as of March 31, ~~2022~~2023 is accounted for under the equity method and is recorded in investment in finance affiliate in the consolidated balance sheets. As of March 31, ~~2022,~~2023, the outstanding amount of net receivables financed for dealers under this arrangement was ~~$525.5 million, which included $412.8 million in the Polaris Acceptance portfolio and $112.7 million of receivables within the Securitization Facility (“Securitized Receivables”).~~$1,358.1 million.

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 ~~2022,~~2023, the potential 15 percent aggregate repurchase obligation is approximately ~~$69.2~~$110.5 million.

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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, ~~2022,~~2023, the potential aggregate repurchase obligation was approximately ~~$177.6~~$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 ~~2022,~~2023, the potential aggregate repurchase obligations are approximately ~~$21.8~~$24.4 million.

The Company’s financial exposure under 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 these agreements during the periods presented.

The Company has agreements with third-party financing companies to provide financing options to end consumers of the Company’s products. 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 consolidated statements of income.

Note 8.10. Commitments and Contingencies

Product liability. The Company is subject to product liability claims in the normal course of business. ~~The~~In 2012, the Company ~~carries~~began purchasing excess insurance coverage for product liability claims. The Company self-insures product liability claims

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before the policy date and up to the purchased 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 estimable. The Company utilizes historical trends and actuarial analysis, along with an analysis of current claims, to assist in determining the appropriate loss reserve levels. As of March 31, ~~2022,~~2023, the Company had an accrual of ~~$74.9~~$113.1 million for the probable payment of pending claims related to product liability litigation associated with the Company’s products. This accrual is included as a component of other accrued expenses in the consolidated balance sheets.

Litigation. The Company is a defendant in lawsuits and subject to other claims arising in the normal course of business, including matters related to intellectual property, commercial matters, employment, and product liability claims. In addition, as of March 31, ~~2022,~~2023, the Company is party to 2 putative class actions pending against the Company in the United ~~States. These class actions allege that the Company violated various California consumer protection laws related to rollover protection structure certification~~States which are described in ~~California, Oregon, Nevada, and Texas.~~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 the Company will have a material adverse effect on the Company’s financial position, results of operations, or cash flows. However, in many of these matters, it is inherently difficult to determine whether a loss is probable or reasonably possible or to estimate the size or range of the possible loss given the variety of potential outcomes of actual and 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.

Regulatory. In the 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 applicable regulations could result in fines, penalties or other costs.

Note 9.11. Derivative Instruments and Hedging Activities

The Company is exposed to certain risks ~~relating to its ongoing business operations. The primary risks managed by using derivative instruments are~~from fluctuations in foreign currency risk and interest rate risk. Derivative contracts on various currencies are entered into in order to manage foreign currency exposures associated with certain product sourcing activities and intercompany cash flows. Interest rate swaps are entered into in order to maintain a balanced risk of fixed and floatingexchange rates, interest rates, ~~associated with~~and commodity prices. To reduce its exposure to such risks, the ~~Company’s debt.~~

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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~~selectively uses ~~a centralized currency management operation to take advantage of potential opportunities to naturally offset foreign currency exposures.~~derivative financial instruments. The decision of whether and when to execute derivative instruments, 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 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.

AsThe Company conducts business in various locations throughout the world and is subject to market risk associated with certain product sourcing activities and intercompany cash flows due to changes in the value of ~~March 31, 2022~~foreign currencies in relation to its reporting currency, the 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 ~~December 31, 2021,~~to reduce the variability of certain cash flows at the subsidiary level. The Company ~~had~~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. The Company utilizes foreign currency exchange contracts to mitigate the ~~following~~effects of foreign currency exchange rate fluctuations related to the Australian dollar, Canadian dollar, and Mexican peso. The Company's foreign currency exchange contracts generally have maturities of less than one year. The Company’s open foreign currency contracts, ~~(in millions):~~

March 31, 2022 December 31, 2021
Foreign Currency Notional Amounts
(in U.S. Dollars) Net Unrealized
Gain (Loss) Notional Amounts
(in U.S. Dollars) Net Unrealized
Gain (Loss)
Australian Dollar $ 26.7 $ (0.3) $ 20.3 $ 0.4
Canadian Dollar 149.8 (0.8) 121.1 0.6
Mexican Peso 81.9 5.4 87.9 1.1
Total $ 258.4 $ 4.3 $ 229.3 $ 2.1

~~These contracts,~~ with maturities through ~~September 2023,~~June 2024, met the criteria for cash flow ~~hedges,~~hedges.

The Company manages its interest rate risk by balancing its exposure to fixed and are recorded in other current assets or other current liabilities in the consolidated balance sheet. The unrealized gains or losses, after tax, are recorded as a component of accumulated other comprehensive loss in shareholders’ equity.

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 ~~transactions,~~contracts, the Company pays interest based upon a fixed rate and receives variable rate interest payments based on ~~the one-month LIBOR.~~

~~As of March 31, 2022 and December 31, 2021, the Company had the following open interest rate swap contracts (in millions):~~

March 31, 2022 December 31, 2021
Effective Date Termination Date Notional Amounts Net Unrealized
Gain (Loss) Notional Amounts Net Unrealized
Gain (Loss)
September 30, 2019 September 30, 2023 150.0 (1.8) 150.0 (5.8)
March 3, 2020 February 28, 2023 400.0 2.7 400.0 (2.0)
Total $ 550.0 $ 0.9 $ 550.0 $ (7.8)

adjusted Term SOFR. These contracts, with maturities through ~~September 2023,~~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 ~~recorded~~included in ~~other current assets or other current liabilities~~accrued expenses in the consolidated balance ~~sheet.~~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.

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~~The table below summarizes the carrying values of derivative instruments as of March 31, 2022 and December 31, 2021 (in millions):~~

Carrying Values of Derivative Instruments as of March 31, 2022
Fair Value—
Assets Fair Value—
(Liabilities) Derivative Net
Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts $ 5.6 $ (1.3) $ 4.3
Interest rate contracts 2.7 (1.8) 0.9
Total derivatives designated as hedging instruments $ 8.3 $ (3.1) $ 5.2

Carrying Values of Derivative Instruments as of December 31, 2021
Fair Value—
Assets Fair Value—
(Liabilities) Derivative Net
Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts $ 2.4 $ (0.3) $ 2.1
Interest rate contracts — (7.8) (7.8)
Total derivatives designated as hedging instruments $ 2.4 $ (8.1) $ (5.7)

~~Assets are included in prepaid expenses and other and liabilities are included in other accrued expenses in the consolidated balance sheets.~~ Gains and losses on 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 to the effective portion of derivative instruments designated as cash flow hedges included in accumulated other comprehensive loss for the three months ended~~ March 31, ~~2022 was $8.3 million compared~~2023 that is expected to ~~$1.4 million for the same respective period in 2021.~~

~~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 month period ended March 31, 2022.~~expected to be material.

Note ~~10.~~12. Segment Reporting

On January 1, 2022, the Company began management of its portfolio of businesses under a new basis ~~which is intended~~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 ~~create~~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 ~~simplified reporting structure~~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 ~~provide better focus~~the Off Road and ~~allow for resources to be best leveraged for future growth and profitability improvement. The comparative 2021~~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 and are comprised of various product offerings that serve multiple end markets. These results are not necessarily indicative of the results of 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 4three operating segments: 1) ~~Off-Road,~~Off Road, 2) ~~On-Road,~~On Road, and 3) Marine ~~and 4) Aftermarket~~ which are all reportable segments. The Corporate amounts include ~~revenues and costs of businesses that were divested in 2021, as well as~~ costs that are not allocated to segments, including certain unallocated manufacturing ~~costs.~~costs and the impacts from certain foreign currency transactions. Businesses that are presented as discontinued operations are excluded from the table below.

1918

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Segment sales and gross profit data ~~are~~is summarized as follows (in millions):


		Three months ended March 31,						Three months ended March 31,
			2022		2021				2023		2022
Sales	Sales						Sales
Off-Road			$	1,308.7	$	1,278.3
On-Road			219.1		229.3
Off Road							Off Road		$	1,591.8	$	1,342.1
On Road							On Road		323.5		227.9
Marine	Marine		211.5		198.7		Marine		264.4		211.5
Aftermarket			217.5		229.8
Corporate			—		15.0
Total sales	Total sales		$	1,956.8	$	1,951.1	Total sales		$	2,179.7	$	1,781.5
Gross profit	Gross profit						Gross profit
Off-Road			$	251.1	$	337.5
On-Road			37.6		30.0
Off Road							Off Road		$	331.6	$	258.7
On Road							On Road		69.2		41.2
Marine	Marine		46.5		46.4		Marine		61.5		46.5
Aftermarket			54.6		61.3
Corporate	Corporate		6.5		5.3		Corporate		6.9		6.5
Total gross profit	Total gross profit		$	396.3	$	480.5	Total gross profit		$	469.2	$	352.9

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

The following discussion pertains to the results of operations and financial position of Polaris Inc., a Minnesota corporation, for the three month period ended March 31, ~~2022~~2023 compared to the three month period ended March 31, ~~2021.~~2022. The terms “Polaris,” the “Company,” “we,” “us,” and “our” as used herein refer to the business and operations of Polaris 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”), including all-terrain vehicles (“ATV”) and side-by-side vehicles; military and commercial off-road vehicles; snowmobiles; motorcycles; moto-roadsters; quadricycles; boats; and related Parts, Garments and Accessories (“PG&A”), ~~as well as~~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. Unless otherwise noted, all “quarter” comparisons are from the first quarter of ~~2022~~2023 to the first quarter of ~~2021.~~2022. Estimates related to industry retail sales are unaudited and 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

The global spread of the novel coronavirus (COVID-19) ultimately heightened consumer demand across industries, while the impact of the pandemic as well as other disruptive events have impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The impact of these factors has affected our business segments, employees, dealers, suppliers, and customers in a variety of ways.

Throughout 2021 and through the first quarter of 2022, we have seen strong retail demand for our Powersports products and boats. Navigating difficulties associated with the global supply chain as we seek to satisfy retail demand has been challenging. Due to the dynamics of the COVID-19 pandemic, heightened demand, geopolitical events, and other natural disasters, our supply chain and manufacturing operations have experienced inefficiencies caused by production-limiting disruptions, including supplier labor shortages. These disruptions, and related costs from associated plant, production, and labor inefficiencies, are significant, widespread and impacting many manufacturers across various industries including Polaris. We expect supply chain-related headwinds and elevated commodity and logistics prices to continue throughout 2022. While we have made pricing changes to address the increase in these costs, manufacturing disruptions combined with the impact of these elevated commodity and logistics costs are expected to negatively affect the Company’s profitability. As a result of strong demand and supply chain disruptions, North American dealer inventory as of March 31, 2022 was down significantly compared to pre-pandemic levels as retail sales outpaced shipments. We expect that these factors will challenge our ability to replenish dealer inventory levels.

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First quarter sales totaled ~~$1,956.8~~$2,179.7 million, an increase of ~~$5.7 million~~22 percent from last year’s first quarter sales of ~~$1,951.1~~$1,781.5 million. Our first quarter sales to customers in North ~~American customers were approximately flat~~America increased 24 percent and our sales to customers outside of North America increased ~~one~~16 percent. The increase in sales in the quarter was driven primarily by increased ~~pricing~~shipments, favorable product mix, and ~~lower promotional costs, largely offset by lower shipments resulting from continued supply chain challenges.~~higher net pricing.

Our gross profit of ~~$396.3~~$469.2 million ~~decreased 18~~increased 33 percent from ~~$480.5~~$352.9 million in the comparable prior year first quarter. ~~The decrease in gross~~Gross profit, ~~was driven by higher input costs including logistics, components,~~as a percentage of sales, increased primarily due to increased shipments and ~~commodity prices, as well as plant inefficiencies related~~favorable product mix. Net income from continuing operations attributable to ~~supply chain constraints, partially offset by increased pricing and lower promotional costs. We reported net income~~Polaris of ~~$69.9~~$113.4 million, or ~~$1.14~~$1.95 per diluted share, compared to ~~2021~~2022 first quarter net income from continuing operations attributable to Polaris of ~~$134.1~~$74.1 million, or ~~$2.11~~$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 results of TAP have been presented as discontinued operations for all periods presented.

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Consolidated Results of Operations

The consolidated results of operations were as follows:


		Three months ended March 31,							Three months ended March 31,
($ in millions except percentages and share data)	($ in millions except percentages and share data)		2022			2021				Change 2022 vs. 2021		($ in millions except percentages and share data)	2023			2022			Change 2023 vs. 2022
Sales	Sales		$	1,956.8		$	1,951.1			—	%	Sales	$	2,179.7		$	1,781.5		22	%
Cost of sales	Cost of sales		$	1,560.5		$	1,470.6			6	%	Cost of sales	$	1,710.5		$	1,428.6		20	%
Gross profit	Gross profit		$	396.3		$	480.5			(18)	%	Gross profit	$	469.2		$	352.9		33	%
Percentage of sales	Percentage of sales		20.3		%	24.6		%		-438 bps		Percentage of sales	21.5		%	19.8		%	+172 bps
Operating expenses:	Operating expenses:											Operating expenses:
Selling and marketing	Selling and marketing		$	143.2		$	145.9			(2)	%	Selling and marketing	$	137.6		$	111.6		23	%
Research and development	Research and development		$	82.8		$	79.5			4	%	Research and development	$	96.5		$	80.8		19	%
General and administrative	General and administrative		$	86.9		$	87.1			—	%	General and administrative	$	90.8		$	71.7		27	%
Total operating expenses	Total operating expenses		$	312.9		$	312.5			—	%	Total operating expenses	$	324.9		$	264.1		23	%
Percentage of sales	Percentage of sales		16.0		%	16.0		%		-2 bps		Percentage of sales	14.9		%	14.8		%	+8 bps
Income from financial services	Income from financial services		$	11.4		$	16.2			(30)	%	Income from financial services	$	16.8		$	11.4		47	%
Operating income	Operating income		$	94.8		$	184.2			(49)	%	Operating income	$	161.1		$	100.2		61	%

Non-operating expense:	Non-operating expense:											Non-operating expense:
Interest expense	Interest expense		$	11.8		$	11.5			3	%	Interest expense	$	28.3		$	11.8		140	%

Other (income) expense, net	Other (income) expense, net		$	(3.1)		$	(2.5)			24	%	Other (income) expense, net	$	(12.4)		$	(3.3)		NM
Income before income taxes			$	86.1		$	175.2			(51)	%
Income from continuing operations before income taxes												Income from continuing operations before income taxes	$	145.2		$	91.7		58	%
Provision for income taxes	Provision for income taxes		$	16.2		$	41.0			(60)	%	Provision for income taxes	$	31.6		$	17.6		80	%
Effective income tax rate	Effective income tax rate		18.8		%	23.4		%		-456 bps		Effective income tax rate	21.7		%	19.2		%	+257 bps

Net income			$	69.9		$	134.2			(48)	%
Net income from continuing operations												Net income from continuing operations	$	113.6		$	74.1		53	%
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest		$	—		$	(0.1)			NM		Net income attributable to noncontrolling interest	$	(0.2)		$	—		NM
Net income attributable to Polaris Inc.			$	69.9		$	134.1			(48)	%
Net income from continuing operations attributable to Polaris Inc. shareholders												Net income from continuing operations attributable to Polaris Inc. shareholders	$	113.4		$	74.1		53	%

Diluted net income per share attributable to Polaris Inc. shareholders			$	1.14		$	2.11			(46)	%
Adjusted EBITDA												Adjusted EBITDA	$	238.1		$	164.0		45	%
Adjusted EBITDA Margin												Adjusted EBITDA Margin	10.9		%	9.2		%	+172 bps

Diluted net income from continuing operations per share attributable to Polaris Inc. shareholders												Diluted net income from continuing operations per share attributable to Polaris Inc. shareholders	$	1.95		$	1.21		61	%
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding		61.2			63.4				(3)	%	Weighted average diluted shares outstanding	58.1			61.2			(5)	%
NM = not meaningful	NM = not meaningful											NM = not meaningful

~~Sales:~~

Sales for the quarter were $1,956.8 million, a $5.7 million increase from $1,951.1 million of sales in the prior year first quarter, primarily driven by increased pricing and lower promotional costs, mostly offset by decreased shipments resulting

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Sales:

Sales for the quarter were $2,179.7 million, a 22 percent increase from ~~continued supply chain challenges.~~$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 consolidated sales change were as follows:


				Percent change in total Company sales compared to corresponding period of the prior year
				Three months ended

	March 31, ~~2022~~2023
Volume			~~(13)~~12		%
Product mix and price	11	14

Currency	(1)	~~(1)~~
			—22		%

Volume ~~caused~~drove a 1312 percent ~~decrease~~increase to sales for the quarter, primarily driven by ~~lower~~increased ORV and Indian Motorcycle ~~shipments, partially offset by higher snowmobile~~ shipments. Product mix and price contributed ~~a 14~~an 11 percent increase for the quarter primarily due to ~~lower promotional spending and increased~~favorable product ~~pricing.~~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,					Three months ended March 31,
($ in millions)	($ in millions)		2022		Percent of Total Sales			2021		Percent of Total Sales		Percent Change 2022 vs. 2021		($ in millions)	2023		Percent of Total Sales		2022		Percent of Total Sales		Percent Change 2022 vs. 2021
United States	United States		$	1,514.1	77	%		$	1,528.9	78	%	(1)	%	United States	$	1,694.6	78	%	$	1,344.7	76	%	26	%
Canada	Canada		152.5		8	%		134.1		7	%	14	%	Canada	147.6		7	%	146.6		8	%	1	%
Other countries	Other countries		290.2		15	%		288.1		15	%	1	%	Other countries	337.5		15	%	290.2		16	%	16	%
Total sales	Total sales		$	1,956.8	100	%		$	1,951.1	100	%	—	%	Total sales	$	2,179.7	100	%	$	1,781.5	100	%	22	%

Sales in the United States ~~decreased~~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 lower ORV and Indian Motorcycle shipments, mostly offset by higher snowmobile shipments, as well as higher PG&A sales. Sales in the United States represented 77 percent of total Company sales during the quarter.

~~Sales in Canada increased 14 percent during the quarter, primarily driven by increased snowmobile shipments.~~favorable product mix. Currency rate movements had an ~~immaterial~~unfavorable impact of six percentage points on ~~first quarter~~quarter-to-date sales. ~~Sales in Canada represented eight percent of total Company sales during the quarter.~~

Sales in other countries, primarily in Europe, increased ~~one~~16 percent during the quarter ~~primarily~~ driven by ~~increased ORV shipments.~~favorable product mix. Currency rate movements had an unfavorable impact of five percentage points on ~~first quarter sales. Sales in other countries represented 15 percent of total Company~~quarter-to-date sales, ~~during the quarter.~~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,							Three months ended March 31,
($ in millions)	($ in millions)				2022		Percent of Total Cost of Sales			2021		Percent of Total Cost of Sales			Percent Change 2022 vs. 2021		($ 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	Purchased materials and services				$	1,346.6	86	%		$	1,258.9	86	%		7	%	Purchased materials and services			$	1,430.9		84	%	$	1,215.1	85	%	18	%
Labor and benefits	Labor and benefits				142.3		9	%		137.8		9	%		3	%	Labor and benefits			186.1			11	%	142.3		10	%	31	%
Depreciation and amortization	Depreciation and amortization				44.5		3	%		39.3		3	%		13	%	Depreciation and amortization			49.0			3	%	44.1		3	%	11	%
Warranty costs	Warranty costs				27.1		2	%		34.6		2	%		(22)	%	Warranty costs			44.5			2	%	27.1		2	%	64	%
Total cost of sales	Total cost of sales				$	1,560.5	100	%		$	1,470.6	100	%		6	%	Total cost of sales			$	1,710.5		100	%	$	1,428.6	100	%	20	%
Percentage of sales	Percentage of sales		79.7	%			75.4	%		+438 bps				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, ~~partially offset by lower~~as well as increased warranty costs.

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Gross Profit:

Consolidated gross profit for the quarter, as a percentage of sales, ~~decreased~~increased primarily due to ~~higher input costs including logistics, components,~~increased shipments and ~~commodity prices, as well as plant inefficiencies related to supply chain constraints, partially offset by increased pricing and lower promotional costs.~~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, ~~was approximately flat compared to~~increased slightly during the ~~prior year first~~ quarter.

Income from Financial Services:

Income from financial services ~~decreased 30~~increased 47 percent for the quarter, primarily due to ~~lower retail credit income resulting from lower retail sales and lower penetration rates, as well as lower~~higher wholesale financing income from Polaris Acceptance driven by ~~lower~~higher dealer ~~inventory.~~inventory levels.

Interest Expense:

Interest expense increased ~~slightly~~for the quarter due to higher debt levels ~~partially offset by a lower blended~~and higher interest ~~rate during the quarter compared to the prior year quarter.~~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:

Income tax expense was $16.2 million, or 18.8% of income before income taxes, for the quarter ended March 31, 2022 compared with income tax expense of $41.0 million, or 23.4% of income before income taxes, for the quarter ended March 31, 2021. The ~~decrease~~increase in the effective income tax rate for the quarter is primarily due to ~~favorable income~~a decrease in excess tax benefits ~~from increases in various federal and~~related to share based compensation as well as state income tax ~~credits, including research~~audit adjustments recorded during the quarter.

Adjusted EBITDA:

Adjusted EBITDA, in absolute dollars, increased during the quarter primarily due to favorable product mix and ~~development~~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 ~~investment tax credits, as well as the beneficial impact~~increased shipments.

For information on how we define and calculate Adjusted EBITDA and a reconciliation of ~~favorable discrete adjustments on lower pretax earnings in the first quarter of 2022 as compared~~net income from continuing operations to ~~the first quarter of 2021.~~Adjusted EBITDA, see “Non-GAAP Financial Measures”.

Weighted average diluted shares outstanding:

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

Cash Dividends:

We paid a regular cash dividend of ~~$0.64~~$0.65 per common share on March 15, ~~2022~~2023 to holders of record at the close of business on March 1, ~~2022.~~2023.

Segment Results of Operations

On January 1, 2022, the Company began management of its portfolio of businesses under a new basis ~~which is intended~~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 ~~create~~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 ~~four~~three reportable segments, ~~Off-Road, On-Road, Marine,~~Off Road, On Road, and ~~Aftermarket.~~Marine. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit. The Corporate amounts include ~~revenues and costs of businesses that were divested in 2021, as well as~~ costs that are not allocated to segments, including certain unallocated manufacturing costs. Businesses that are presented as discontinued operations are excluded from the tables below.

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

Three months ended March 31,
($ in millions) 2022 Percent of Sales 2021 Percent of Sales Percent Change 2022 vs. 2021
Off-Road $ 1,308.7 67 % $ 1,278.3 65 % 2 %
On-Road 219.1 11 % 229.3 12 % (4) %
Marine 211.5 11 % 198.7 10 % 6 %
Aftermarket 217.5 11 % 229.8 12 % (5) %
Corporate — — % 15.0 1 % NM
Total sales $ 1,956.8 100 % $ 1,951.1 100 % — %


	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 March 31,							Three months ended March 31,
($ in millions)	($ in millions)				2022		Percent of Sales			2021		Percent of Sales			Percent Change 2022 vs. 2021		($ in millions)			2023			Percent of Sales		2022		Percent of Sales		Percent Change 2023 vs. 2022
Off-Road					$	251.1	19.2	%		$	337.5	26.4	%		(26)	%
On-Road					37.6		17.2	%		30.0		13.1	%		25	%
Off Road																	Off Road			$	331.6		20.8	%	$	258.7	19.3	%	28	%
On Road																	On Road			69.2			21.4	%	41.2		18.1	%	68	%
Marine	Marine				46.5		22.0	%		46.4		23.4	%		—	%	Marine			61.5			23.3	%	46.5		22.0	%	32	%
Aftermarket					54.6		25.1	%		61.3		26.7	%		(11)	%
Corporate	Corporate				6.5					5.3							Corporate			6.9					6.5
Total gross profit dollars					$	396.3				$	480.5				(18)	%
Total gross profit																	Total gross profit			$	469.2				$	352.9			33	%
Percentage of sales	Percentage of sales		20.3	%			24.6	%		-438 bps				Percentage of sales				21.5	%	19.8		%	+172 bps

~~Off-Road:~~Off Road:

~~Off-Road~~Off Road sales, inclusive of PG&A sales, ~~were $1,308.7 million for the quarter ended March 31, 2022, compared to $1,278.3 million in the prior year period. The increase of two~~increased 19 percent for the quarter, was driven by increased snowmobile sales, as a result of the delayed timing of shipments for the Company's pre-season snowmobile orders, as well as higher PG&A sales, partially offset by lower side-by-side and ATV shipments as a result of supply chain constraints and related component shortages. Off-RoadOff Road sales to customers outside of North America increased six percent for the quarter, ~~driven by increased snowmobile shipments. The~~and the average per unit sales price for the ~~Off-Road~~Off Road segment increased approximately 1311 percent for the ~~quarter, driven by~~quarter. These increases were primarily due to increased ~~product pricing~~shipments and ~~lower promotional spending.~~higher net pricing.

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

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

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

•Total Polaris North America ORV unit retail sales down ~~high-twenties~~about 10 percent

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

•Total Polaris North America ORV dealer inventories ~~down~~up approximately 10240 percent

•Polaris North America snowmobile unit retail sales for the ~~2021-2022~~2022-2023 season ~~ended~~ending March 31, ~~2022 were down mid-teens~~2023 up low-single digits percent

•Estimated North America industry snowmobile unit retail sales for the ~~2021-2022~~2022-2023 season ~~ended~~ending March 31, ~~2022 were~~2023 down ~~mid-single~~low-single digits percent

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

Gross profit, as a percentage of sales, ~~decreased~~increased during the quarter, primarily due to ~~higher~~increased net pricing and lower input costs, ~~including logistics, components, and commodity prices, plant inefficiencies related to supply chain constraints, and unfavorable mix,~~ partially offset by ~~increased pricing~~higher finance interest costs and ~~lower promotional costs.~~unfavorable product mix.

~~On-Road:~~On Road:

~~On-Road~~On Road sales, inclusive of PG&A sales, ~~decreased four~~increased 42 percent for the ~~quarter. The decrease was~~quarter primarily ~~driven~~due to increased shipments and favorable product mix, partially offset by ~~decreased Indian Motorcycle shipments. On-Road~~lower net pricing. On Road sales to customers outside of North America ~~decreased five~~increased 30 percent for the quarter primarily due to favorable product mix. The average per unit sales price for the On Road segment increased approximately one percent for the quarter primarily due to favorable product mix, partially offset by unfavorable foreign currency exchange rate movement.

Additional information on our end markets for the quarter:

•Indian Motorcycle North America unit retail sales flat

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quarter, primarily driven by decreased Indian Motorcycle shipments. The average per unit sales price for the On-Road segment increased approximately seven percent for the quarter, driven by lower promotional costs.

~~Additional information on our end markets:~~

•~~Indian Motorcycle North America unit retail sales down low-thirties percent~~

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

•~~Estimated~~ 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 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 product mix and previous pricing actions.

Additional information on our end markets for the quarter:

•Polaris U.S pontoon unit retail sales down ~~approximately 60~~low-thirties percent

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

Gross profit, as a percentage of sales, increased during the quarter ~~driven by favorable product mix and lower promotional costs, partially offset by increased input costs related to supply chain constraints.~~

~~Marine:~~

~~Marine sales increased six percent for the quarter~~ primarily due to favorable ~~mix~~product mix.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and ~~increased pricing, partially offset~~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 ~~lower shipments.~~ 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 non-GAAP financial measure of Adjusted EBITDA Margin, which is defined as Adjusted EBITDA divided by net sales. We believe that Adjusted EBITDA and Adjusted EBITDA Margin help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude from Adjusted EBITDA and Adjusted EBITDA Margin.

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 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 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 ~~average per unit sales price~~following table presents a reconciliation of net income from continuing operations, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the ~~Marine segment increased approximately 18 percent for the quarter, driven by higher pricing.~~periods presented:

~~Additional information on our end markets:~~


	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)~~Polaris U.S pontoon unit retail sales down high-twenties percent~~ Represents adjustments for corporate restructuring, network realignment costs, and supply chain transformation costs

•(2)~~Estimated U.S. industry pontoon unit retail sales down low-single digits percent~~

~~Gross profit, as a percentage of sales, decreased during the quarter primarily due to higher input costs related to supply chain constraints, partially offset by increased pricing.~~

~~Aftermarket:~~

~~Aftermarket sales, which includes Transamerican Auto Parts (TAP), along with our other aftermarket brands of Klim, Kolpin, ProArmor, Trail Tech and 509, decreased five percent~~ Represents adjustments for the quarter, driven by TAP. TAP sales decreased nine percent for the quarter, reflecting the impact of fewer new and used SUV and truck transactions which are catalysts for consumer upgrade activity. New and used vehicle sales have faced headwinds through the first quarter 2022 due to supply chain challenges driving low inventory and limited vehicle availability.

~~Gross profit, as a percentage of sales, decreased during the quarter, primarily due to lower sales volumes and higher input costs.~~certain class action litigation-related expenses

Liquidity and Capital Resources

Our primary sources of funds have been cash provided by operating and financing activities. Our primary uses of funds have been for acquisitions, repurchases and retirement of common stock, capital 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, 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 thereafter.

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Cash Flows

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


($ in millions)	($ in millions)	Three months ended March 31,						($ in millions)	Three months ended March 31,
		2022		2021		Change			2023		2022		Change
Total cash provided by (used for):	Total cash provided by (used for):							Total cash provided by (used for):
Operating activities	Operating activities	$	(49.1)	$	56.0	$	(105.1)	Operating activities	$	124.2	$	(38.4)	$	162.6
Investing activities	Investing activities	(39.2)		(30.2)		(9.0)		Investing activities	(89.1)		(37.6)		(51.5)
Financing activities	Financing activities	(48.5)		(224.3)		175.8		Financing activities	(41.6)		(48.5)		6.9
Impact of currency exchange rates on cash balances		(0.3)		(4.3)		4.0
Decrease in cash, cash equivalents and restricted cash		$	(137.1)	$	(202.8)

Operating Activities:

The ~~decrease~~increase in net cash provided by operating activities of continuing operations was primarily the result of lower ~~net income and higher~~ working capital additions ~~due to increases in inventory driven by strong end-market demand~~ and ~~supply chain inefficiencies.~~

Beginning in 2022, the Tax Cuts and Jobs Act ("Act") eliminates the option to deduct research and development expenditures and requires taxpayers to amortize domestic expenditures over five years and foreign expenditures over fifteen years. This legislation is expected to decrease the Company's cashhigher net income from ~~operations beginning in 2022 and continue over the five year amortization period.~~continuing operations.

Investing Activities:

The primary ~~sources and~~ uses of cash were for the purchase of property, equipment and tooling for continued capacity and capability at our manufacturing and distribution facilities and for product development, ~~as well as~~and distributions from and contributions to Polaris Acceptance. AnNet cash used for investing activities of continuing operations increased due to an increase in property, equipment and tooling purchases ~~resulted~~and a net decrease in ~~more cash used for investing activities compared to the prior year quarter.~~distributions from Polaris Acceptance.

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Financing Activities:

The decrease in net cash used for financing activities was primarily due to ~~increased~~lower share repurchases, mostly offset by decreased net borrowings under debt arrangements. We recorded ~~$147.8~~$45.0 million of net borrowings for the three months ended March 31, ~~2022,~~2023, compared to ~~$15.9~~$147.8 million of net ~~repayments~~borrowings for the comparable period in ~~2021. The change was also driven by lower share repurchases in the current year, partially offset by stock issuances under employee plans.~~2022.

Financing Arrangements:

We are party to an unsecured Master Note Purchase Agreement, as amended and supplemented, under which we have issued senior notes. As of March 31, ~~2022,~~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 $1.0 billion variable interest rate Revolving Loan Facility that matures in June 2026, under which we have unsecured borrowings. As of March 31, ~~2022~~2023, there were borrowings of ~~$160.0~~$371.0 million outstanding under the Revolving Loan Facility. Our credit agreement also includes a Term Loan Facility, on which ~~$864.0~~$816.0 million was outstanding as of March 31, ~~2022.~~2023. Interest is charged at rates based on ~~LIBOR or “prime”~~adjusted Term SOFR for the credit facility. As of March 31, ~~2022,~~2023, we had ~~$832.5~~$621.5 million of availability on the Revolving Loan Facility.

OnIn December ~~17,~~ 2021, wethe Company amended the credit ~~agreement~~facility to provide an unsecured incremental 364-day term loan (the ~~“incremental term loan”~~“Incremental Term Loan”) in the amount of $500 ~~million. The incremental term loan,~~million, which was fully drawn on ~~closing, is~~closing. In December 2022, the Company further amended its unsecured ~~and matures on~~credit facility to extend the maturity date of the Incremental Term Loan to December ~~16, 2022.~~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, we are~~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 financial ratios, including minimum interest coverage and maximum leverage ratios. The agreements also require the Company to maintain an interest coverage ratio of not less than 3.00 to 1.00 and a leverage ratio of not more than 3.50 to 1.00 on a rolling four quarter basis.

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On July 2, 2018, pursuant to the Agreement and Plan of Merger dated May 29, 2018, the Company completed the acquisition of Boat Holdings, LLC, a privately held Delaware limited liability company, headquartered in Elkhart, Indiana which manufactures boats (“Boat Holdings”). As a component of the Boat Holdings merger agreement, we have committed to make a series of deferred payments to the former owners through July 2030. The original discounted payable was for $76.7 million, of which ~~$61.0~~$55.3 million was outstanding as of March 31, ~~2022.~~2023.

As of March 31, ~~2022,~~2023, we were in compliance with all debt covenants. Our debt to total capital ratio was 6465 percent as of March 31, ~~2022.~~2023. Additionally, as of March 31, ~~2022,~~2023, we had letters of credit outstanding of ~~$36.5~~$33.3 million, primarily related to purchase obligations for raw materials.

Share Repurchases:

As of March 31, ~~2022,~~2023, our Board of Directors has authorized us to repurchase up to an additional ~~$681.7~~$300.5 million of our common stock. We repurchased a total of ~~1.5~~0.5 million shares of our common stock for ~~$172.3~~$62.8 million during the first three months of ~~2022,~~2023, which had a favorable impact on diluted ~~earnings~~net income from continuing operations per share of one cent.

Wholesale Customer Financing Arrangements:

We have arrangements with certain finance companies to provide secured floor plan financing for our dealers. These arrangements provide liquidity by financing dealer purchases of our products without the use of our working capital. A majority of the worldwide sales of snowmobiles, ORVs, motorcycles, boats and related PG&A are financed under similar arrangements whereby we receive payment within a few days of shipment of the product. We participate in the cost of dealer financing up to certain limits.

Under these arrangements, we have agreed to repurchase products repossessed by these finance companies. As of March 31, ~~2022,~~2023, the potential aggregate repurchase obligations were approximately ~~$268.6~~$558.1 million. Our financial exposure under these repurchase agreements is limited to the difference between the amounts unpaid by the dealer with respect to the repossessed product plus costs of repossession and the amount received on the resale of the repossessed product. No material losses have been incurred under ~~this agreement~~these agreements during the periods presented.

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Retail Customer Financing Arrangements:

We have agreements with third-party financing companies to provide financing options to end consumers of our products. We have no material contingent liabilities for residual value or credit collection risk under these agreements. ~~The income generated from these agreements has been included as a component of income from financial services in the consolidated statements of income.~~

~~Inflation, Foreign Exchange Rates, and Interest Rates~~

~~Inflation:~~

Rising costs, including wages, logistics, components, and commodity prices, are negatively impacting our gross profit margins. We strive to minimize the effects of inflation through cost containment, productivity improvements and price increases.

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. We do not currently hedge commodity prices. Based on our current outlook for commodity prices, which we expect to remain high, the total impact of commodities, including tariff costs, is expected to have a negative impact on our gross profit margins for full-year 2022 when compared to 2021.

~~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.

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~~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, 2022:

~~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~~

~~26.7~~

~~$0.73 to 1 AUD~~

~~Canadian Dollar~~

~~Long~~

~~149.8~~

~~$0.78 to 1 CAD~~

~~Mexican Peso~~

~~Short~~

~~81.9~~

~~21 Peso to $1~~

During the quarter ended March 31, 2022, after consideration of the existing foreign currency hedging contracts, foreign currencies had a slightly positive impact on net income compared to 2021. We expect currencies to have a negative impact on full-year net income in 2022 compared to 2021.

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 LIBOR or “prime” plus the applicable add-on percentage as defined. As of March 31, 2022, there was $160.0 million outstanding on the revolving loan, $864.0 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 in 2022 compared to 2021.

Critical Accounting Policies

See our most recent Annual Report on Form 10-K for the year ended December 31, ~~2021~~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

This report 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” can generally be identified as such because the context of the statement will include words such as we or our management “believes,” “should,” “anticipates,” “expects,” “estimates” or words of similar import. Similarly, statements that describe 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.

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Potential risks and uncertainties include such factors as the severity and duration of the supply-chain related constraints currently impacting the Company; the Company’s ability to successfully source necessary parts and materials on a timely basis; the ability of the Company to manufacture and deliver products to dealers to meet ~~increasing demand~~demand; the Company’s ability to identify and ~~to bring~~meet optimal dealer inventory ~~levels back~~levels; the Company’s ability to ~~optimal levels; COVID-19~~accurately forecast and sustain consumer demand; the Company’s ability to mitigate increasing input costs through pricing or other measures; the pandemic and the resulting impact on the Company’s business, supply chain, and the global economy; the Company’s ability to successfully implement its manufacturing operations ~~expansion~~strategy and supply chain initiatives; the Company’s ability to successfully increase the pricing of its products to offset increasing input costs; consumer demand for the Company’s products (including its Model Year 2023 product offerings); 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;~~credit including recessionary conditions; disruptions in manufacturing facilities; 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; effects of weather; commodity costs; freight and tariff costs (tariff relief or ability to mitigate tariffs); changes to international trade policies and agreements; uninsured product liability ~~claims;~~and class action claims and other litigation expenses incurred due to the nature of our business; uncertainty in the retail and wholesale credit markets; performance of affiliate partners; changes in tax policy; relationships with dealers and suppliers; and 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 do not anticipate may emerge as significant risks and uncertainties.

Any forward-looking statements made in this report or otherwise speak only as of the date of such statement, and we undertake no obligation to update such statements to 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, ~~2021~~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

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10-K for the year ended December 31, ~~2021.~~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.

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.

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 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) 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 Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

Changes in Internal Controls

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.

As of the date hereof, we are ~~also~~ party to ~~series of~~putative class ~~actions—all~~actions brought by the same plaintiff’s counsel and largely repeating the same allegations regarding various state consumer protection laws focused on rollover protection ~~systems’~~structures’ certifications for various Polaris off-road vehicles sold in California ~~Oregon, Nevada~~ and ~~Texas.~~Oregon. The first case brought related to this matter—~~Guzman—~~Guzman—was first reported in the Company’s ~~10-K~~ Annual Report on Form 10-K for the ~~period~~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 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 in California State Court under the name Albright. The second case—~~Hellman—~~Hellman/Berlanga—was first reported in the Company’s ~~10-Q~~ quarterly report for the period ended June 30, 2021. Additional similar putative class actions on behalf of certain plaintiffs dismissed from the Hellman/Berlanga case have been filed in Texas (Lollar), Nevada (Mitchell), and Oregon (Artoff), though the Lollar and Mitchell matters have since been dismissed, and another plaintiff from the Hellman/Berlanga matter, Michael Hellman, ~~case~~has been dismissed.

As previously reported in the Company’s quarterly report on Form 10-Q for the period ended September 30, 2021, the district court in In re Polaris dismissed half of the plaintiffs and their claims related to alleged fire hazards in certain Polaris products. Plaintiffs’ counsel voluntarily dismissed the remaining plaintiffs to appeal. The Eighth Circuit affirmed dismissal of the claims brought by plaintiffs who had appealed. On April 28, 2022, the In re Polaris plaintiffs’ counsel filed a new, substantially similar putative class action in California State Court, seeking damages for alleged economic loss: James DeBiasio v. Polaris Industries Inc. (County of Los Angeles, Ca.). We removed the matter to federal court (C.D. Cal.) in June 2022 and have moved to dismiss the plaintiff’s claims; plaintiff filed a motion to remand the case. The district court denied plaintiff’s motion to remand and granted our motion to dismiss, allowing plaintiff to file an amended complaint. We moved to dismiss plaintiff’s amended complaint, 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 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 ~~been filed~~agreed in ~~Texas (Lollar), Nevada (Mitchell), and Oregon (Artoff)—based~~principle to settle those matters on ~~substantially similar allegations as in the Hellman matter. Each~~a non-class basis. That settlement is not yet final.

With respect to each of these ~~cases~~putative class action lawsuits, we are ~~in varying stages of discovery or motion practice. The Company is~~ 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 ~~fiscal 2021~~ Annual Report ~~filed~~ on Form ~~10-K.~~10-K for the year ended December 31, 2022. There have been no material changes or additions to our risk factors discussed 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 ~~2022:~~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, 2022 165,000 $ 111.10 165,000 $ 820,495,597
February 1 — 28, 2022 1,082,736 $ 119.58 1,082,736 $ 691,024,326
March 1 — 31, 2022 78,721 $ 118.32 78,721 $ 681,709,711
Total / Average 1,326,457 $ 118.45 1,326,457


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

(1) In April 2021, the Company’s Board of Directors authorized the purchase of up to $1.0 billion of the Company’s common stock (the “Program”), which replaced the previous share repurchase program. As of March 31, ~~2022,~~2023, the approximate value of shares that may yet to be purchased pursuant to the Program is ~~$681.7~~$300.5 million. The Program does not have an expiration date.

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Item 6 – EXHIBITS


Exhibit Number						Description

3.a						Restated Articles of Incorporation of Polaris Inc., effective as of July 29, 2019, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed July 29, 2019.

3.b						Bylaws of Polaris Inc., as amended and restated on July 29, 2019, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed July 29, 2019.

10.a						~~Employment Offer Letter dated December 27, 2017 by~~Form of Nonqualified Stock Option Award Agreement (2023) made under the Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and ~~between the Company and Lucy Clark Dougherty, incorporated by reference to Exhibit 10.u to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.~~Restated April 30, 2020).*

10.b						~~Severance~~Form of Nonqualified Stock Option Award Agreement ~~dated January 29, 2018~~(2023) entered into with ~~Lucy Clark Dougherty, incorporated by reference to Exhibit 10.z to~~Kenneth J. Pucel, made under the ~~Company’s Annual Report on~~ Polaris Inc. 2007 Omnibus Incentive Plan (As Amended and Restated April 30, 2020).*

10.c						Form ~~10-K for~~of Restricted Stock Award Agreement (2023) made under the ~~year ended December 31, 2018.~~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 Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, ~~2022,~~2023, filed with the SEC on April ~~26, 2022,~~25, 2023, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) the Consolidated Statements of Income for the three month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, (iii) the Consolidated Statements of Comprehensive Income for the three month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, (iv) the Consolidated Statements of Equity for the three month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, (v) the Consolidated Statements of Cash Flows for the three month periods ended March 31, ~~2022~~2023 and ~~2021,~~2022, and (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, ~~2022~~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 ~~26, 2022~~25, 2023	/s/ MICHAEL T. SPEETZEN
		Michael T. Speetzen Chief Executive Officer (Principal Executive Officer)

Date:	April ~~26, 2022~~25, 2023	/s/ ROBERT P. MACK
		Robert P. Mack Chief Financial Officer (Principal Financial and Accounting Officer)

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		March 31, 2022				December 31, 2021
Effective Date	Termination Date	Notional Amounts		Net Unrealized Gain (Loss)		Notional Amounts		Net Unrealized Gain (Loss)
September 30, 2019	September 30, 2023	150.0		(1.8)		150.0		(5.8)
March 3, 2020	February 28, 2023	400.0		2.7		400.0		(2.0)
Total		$	550.0	$	0.9	$	550.0	$	(7.8)


	Carrying Values of Derivative Instruments as of March 31, 2022
	Fair Value— Assets		Fair Value— (Liabilities)		Derivative Net Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts	$	5.6	$	(1.3)	$	4.3
Interest rate contracts	2.7		(1.8)		0.9
Total derivatives designated as hedging instruments	$	8.3	$	(3.1)	$	5.2