Polaris Inc.PIIEarnings & Financial Report
NYSE · Industrials · Miscellaneous Transportation Equipment
Polaris Inc. is an American automotive manufacturer headquartered in Medina, Minnesota, United States. Polaris was founded in Roseau, Minnesota, where it still has engineering and manufacturing facilities. The company manufactured motorcycles through its Victory Motorcycles subsidiary until January 2017, then produced motorcycles through the Indian Motorcycle subsidiary, which it purchased in April 2011 and announced its divestiture in October 2025. Polaris produced personal watercraft from 1...
What changed in Polaris Inc.'s 10-K — 2022 vs 2023
Top changes in Polaris Inc.'s 2023 10-K
376 paragraphs added · 364 removed · 108 edited across 7 sections
- Item 1A. Risk Factors+145 / −103 · 1 edited
- Item 1. Business+85 / −216 · 73 edited
- Item 7. Management's Discussion & Analysis+103 / −7 · 3 edited
- Item 3. Legal Proceedings+15 / −11 · 8 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+16 / −16 · 14 edited
Item 1. Business
Business — how the company describes what it does
73 edited+12 added−143 removed30 unchanged
Item 1. Business
Business — how the company describes what it does
73 edited+12 added−143 removed30 unchanged
2022 filing
2023 filing
We offer our employees a total rewards package that includes competitive base pay, annual incentives, product discounts, comprehensive health and wellness benefits, and equity compensation plans that include the ESOP, Employee Stock Purchase Plan (“ESPP”), and additional incentive equity grants (for certain levels).
We offer our employees a total rewards package that includes competitive base pay, annual incentives, product discounts, comprehensive health and wellness benefits, and equity compensation plans that include the ESOP, the Employee Stock Purchase Plan (“ESPP”), and additional incentive equity grants for certain levels.
While we are not aware of any misstatements regarding the market and industry data presented in this Annual Report, whether any such future-looking data will be accurate involves risks and uncertainties and are subject to change based on various factors, including those factors discussed under the “Forward-Looking Statements” and in our “Risk Factors.” Available Information Our Internet website is http://www.polaris.com.
While we are not aware of any misstatements regarding the market and industry data presented in this Annual Report, whether any such future-looking data will be accurate involves risks and uncertainties and are subject to change based on various factors, including those factors discussed under the headings “Forward-Looking Statements” and “Risk Factors.” Available Information Our Internet website is http://www.polaris.com.
Similarly, statements that describe our future plans, objectives or goals, such as future sales, shipments, future cash flows and capital requirements, operational initiatives, supply chain, 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.
Similarly, statements that describe our future plans, objectives or goals, such as future sales, future cash flows and capital requirements, operational initiatives, supply chain, 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.
Kolpin, Pro Armor and Trail Tech serve various accessory related needs, where Kolpin is a lifestyle brand specializing in purpose-built and universal-fit accessories for a variety of off-road vehicles and off-road outdoor enthusiasts and Pro Armor offers a lineup that specializes in accessories for performance side-by-side vehicles, snowmobiles and ATVs.
Kolpin, Pro Armor and Trail Tech serve various accessory related needs. Kolpin is a lifestyle brand specializing in purpose-built and universal-fit accessories for a variety of off-road vehicles and off-road outdoor enthusiasts. Pro Armor offers a lineup that specializes in accessories for performance side-by-side vehicles, snowmobiles and ATVs.
For example: (i) the United States, the Consumer Product Safety Commission (“CPSC”) has federal oversight over product safety issues related to snowmobiles, snow-bikes and off-road vehicles; (ii) the National Highway Traffic Safety Administration (“NHTSA”) has federal oversight over product safety issues related to motorcycles and Slingshot; and (iii) and the U.S.
For example, in the United States: (i) the Consumer Product Safety Commission (“CPSC”) has federal oversight over product safety issues related to snowmobiles, snow-bikes and off-road vehicles; (ii) the National Highway Traffic Safety Administration (“NHTSA”) has federal oversight over product safety issues related to motorcycles and Slingshot; and (iii) the U.S.
We make available free of charge, on or through our website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission.
We make available free of charge, on or through our website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission (SEC).
We utilize our Wyoming, Minnesota facility for engineering, design and development personnel for our line of engines and powertrains, ORVs, and motorcycles, and our Roseau, Minnesota facility for our snowmobile, ATV and powertrain research and development. We utilize our Elkhart, Indiana facility for engineering, design and development for our boats research and development.
We utilize our Wyoming, Minnesota facility for engineering, design and development for our line of engines and powertrains, ORVs, and motorcycles, and our Roseau, Minnesota facility for our snowmobile, ATV and powertrain research and development. We utilize our Elkhart, Indiana facility for engineering, design and development for our boats research and development.
Instead, we have agreements in place with third-party financing companies to provide financing services to those end consumers. We have no material contingent liabilities for residual value or credit collection risk under these agreements. Manufacturing and Distribution Operations Our products are primarily assembled at our 19 global manufacturing facilities, many of which are shared across business segments.
Instead, we have agreements in place with third-party financing companies to provide financing services to those end consumers. We have no material contingent liabilities for residual value or credit collection risk under these agreements. Manufacturing and Distribution Operations Our products are primarily assembled at our 20 global manufacturing facilities, many of which are shared across business segments.
Item 1. Business Polaris Inc., formerly known as Polaris Industries Inc., a Minnesota corporation, was formed in 1994 and is the successor to Polaris Industries Partners LP. 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.
Item 1. Business Polaris Inc., formerly known as Polaris Industries Inc., a Delaware corporation, was formed in 1994 and is the successor to Polaris Industries Partners LP. 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.
See Market and Industry Data section for additional information. The side-by-side market has been consistently strong over the past several years primarily due to continued innovation by manufacturers. In 2022, we continued to be the North America market share leader in off-road vehicles.
See Market and Industry Data section for additional information. The side-by-side market has been consistently strong over the past several years primarily due to continued innovation by manufacturers. In 2023, we continued to be the North America market share leader in off-road vehicles.
Engineering, Research and Development, and New Product Introduction We have over 1,400 employees who are engaged in the development and testing of existing products and research and development of new products and improved production techniques, located primarily in Roseau, Minnesota, Wyoming, Minnesota, Elkhart, Indiana, Burgdorf, Switzerland, and Bangalore, India.
Engineering, Research and Development, and New Product Introduction We have over 1,400 employees who are engaged in the development and testing of existing products and research and development of new products and improved production techniques, located primarily in Roseau, Minnesota; Wyoming, Minnesota; Elkhart, Indiana; Novi, Michigan; Burgdorf, Switzerland; and Bangalore, India.
Eastman was appointed President of PG&A and Aftermarket in September 2015. Prior to this, Mr. Eastman was Vice President of PG&A since joining Polaris February 2012. Robert P. Mack Chief Financial Officer and Executive Vice President of Finance and Corporate Development 53 Mr. Mack was appointed Chief Financial Officer in April 2021. Mr.
Eastman was appointed President of PG&A and Aftermarket in September 2015. Prior to this, Mr. Eastman was Vice President of PG&A since joining Polaris in February 2012. Robert P. Mack Chief Financial Officer and Executive Vice President of Finance and Corporate Development 54 Mr. Mack was appointed Chief Financial Officer in April 2021. Mr.
Our defense vehicles, which include ATVs and side-by-side vehicles with features specifically designed for military applications, provide versatile mobility for up to nine passengers, and include our DAGOR , Sportsman MV and MRZR models. We offer 39 models across our brands.
Our defense vehicles, which include ATVs and side-by-side vehicles with features specifically designed for military applications, provide versatile mobility for up to nine passengers, and include our DAGOR, Sportsman MV and MRZR models. We offer 26 models across our brands.
As a part of our growth strategy, we are committed to strategically and intentionally developing our current employees to become the next generation of leaders through external partnerships and employee development programs such as Succeeding as a Polaris Leader and Polaris Leadership Development 1 and 2. These programs provide high potential employees opportunities to grow and prepare for next-level roles.
As a part of our growth strategy, we are committed to strategically and intentionally developing our current employees to become the next generation of leaders through external partnerships and employee development programs such as Succeeding as a Polaris Leader and Polaris Leadership Development 1 and 2. These programs provide high-potential employees opportunities to gain experience and prepare for next-level roles.
As members of the Corporate Partnership Council of the Society of Women Engineers (“SWE”) and the Women in Manufacturing Association (“WiM”), we have enabled team development opportunities and a pipeline for future talent.
As members of the Corporate Partnership Council of the Society of Women Engineers and the Women in Manufacturing Association, we have enabled team development opportunities and a pipeline for future talent.
We have a long-term supply contract with a boat engine manufacturer, which requires a certain volume of total engine purchases, and includes favorable pricing, as well as various growth and volume incentives. 6 Table of Contents Contract carriers ship our products from our manufacturing and distribution facilities to our customers.
We have a long-term supply contract with a boat engine manufacturer, which requires a certain volume of total engine purchases, and includes favorable pricing, as well as various growth and volume incentives. Contract carriers ship our products from our manufacturing and distribution facilities to our customers.
We view a comprehensive total rewards package such as this with a broad focus on employee well-being as instrumental in our ability to attract, motivate and retain quality candidates and employees to drive our strategic mission to be the global leader in powersports.
We view our comprehensive total rewards package with a broad focus on employee well-being as instrumental in our ability to attract, motivate and retain quality candidates and employees to drive our strategic mission to continue to be the global leader in powersports.
See Market and Industry Data section for additional information. In 2022, we held the number two position in North America market share for the 900cc+ category. Our motorcycles lineup includes Indian Motorcycle and Slingshot, a three-wheel open air roadster. Our 2023 model year line of motorcycles for Indian Motorcycle and Slingshot consists of 35 models.
See Market and Industry Data section for additional information. In 2023, we held the number two position in North America market share for the 900cc+ category. Our motorcycles lineup includes Indian Motorcycle and Slingshot, a three-wheel open air roadster. Our 2024 model year line of motorcycles for Indian Motorcycle and Slingshot consists of 38 models.
Estimated combined 900cc and above cruiser, touring, and standard market segments (including the moto-roadster Slingshot ® ) motorcycle industry sales in North America and worldwide are summarized as follows: Twelve months ended December 31, Estimated* Industry Sales (in units) 2022 2021 2020 North America 900cc cruiser, touring, and standard retail sales 195,000 220,000 190,000 Worldwide 900cc cruiser, touring, and standard retail sales 315,000 350,000 330,000 *Estimates 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.
Estimated combined 900cc and above cruiser, touring, and standard market segments (including the moto-roadster Slingshot ® ) motorcycle industry sales in North America and worldwide are summarized as follows: Twelve months ended December 31, Estimated* Industry Sales (in units) 2023 2022 2021 North America 900cc cruiser, touring, and standard retail sales 180,000 195,000 220,000 Worldwide 900cc cruiser, touring, and standard retail sales 300,000 315,000 350,000 *Estimates 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.
Duke was appointed President of Marine in May 2022. Prior to this, Mr. Duke was General Manager of Godfrey and Hurricane Boats since joining Polaris in 2019. Prior to joining Polaris, Mr. Duke was President of the Job Site and Standby Power Group at Briggs and Stratton. Stephen L. Eastman President of PG&A and Aftermarket 58 Mr.
Duke was appointed President of Marine in May 2022. Prior to this, Mr. Duke was General Manager of Godfrey and Hurricane Boats since joining Polaris in 2019. Prior to joining Polaris, Mr. Duke was President of the Job Site and Standby Power Group at Briggs and Stratton, a manufacturing company. Stephen L. Eastman President of PG&A and Aftermarket 59 Mr.
We design, engineer, produce or supply a variety of replacement parts and Polaris Engineered Accessories for our ORVs. ORV accessories include winches, bumper/brushguards, plows, racks, wheels and tires, pull-behinds, cab systems, lighting and audio systems, cargo box accessories, tracks and oil.
We design, engineer, produce or supply a variety of replacement parts and Polaris Engineered Accessories for our Off Road Segment. ORV accessories include winches, bumper/brushguards, plows, racks, wheels and tires, pull-behinds, cab systems, lighting and audio systems, cargo box accessories, tracks and oil.
We design, engineer and manufacture powersports vehicles which include: off-road vehicles (“ORV”), including all-terrain vehicles (“ATV”) and side-by-side vehicles; snowmobiles; motorcycles; moto-roadsters; quadricicycles; and boats. We also design and manufacture or source parts, garments and accessories (“PG&A”), which includes aftermarket accessories and apparel.
We design, engineer, manufacture and market powersports vehicles which include: off-road vehicles (“ORV”), including all-terrain vehicles (“ATV”) and side-by-side vehicles; military and commercial ORVs; snowmobiles; motorcycles; moto-roadsters; quadricicycles; and boats. We also design and manufacture or source parts, garments and accessories (“PG&A”), which includes aftermarket accessories and apparel.
Speetzen Chief Executive Officer 53 Mr. Speetzen was appointed Chief Executive Officer in April 2021; proceeding this, Mr. Speetzen was Interim Chief Executive Officer since January 2021. Mr. Speetzen joined Polaris in August 2015 as Executive Vice President and Chief Financial Officer. Lucy Clark Dougherty Senior Vice President, General Counsel and Corporate Secretary 53 Ms.
Speetzen Chief Executive Officer 54 Mr. Speetzen was appointed Chief Executive Officer in April 2021; preceding this, Mr. Speetzen was Interim Chief Executive Officer since January 2021. Mr. Speetzen joined Polaris in August 2015 as Executive Vice President and Chief Financial Officer. Lucy Clark Dougherty Senior Vice President, General Counsel and Corporate Secretary 54 Ms.
Competitive market share position is driven heavily by product news (styling, technology, performance) and attractiveness of promotional incentives. Our commercial and government/defense businesses design and manufacture vehicles that support various commercial and government applications for transporting people and hauling equipment, as well as tactical defense vehicles.
Competitive market share position is driven heavily by product news (styling, technology, performance) and pricing. Our commercial and government/defense businesses design and manufacture vehicles that support various commercial and government applications for transporting people and hauling equipment, as well as tactical defense vehicles.
Our products are sold through a network of over 2,500 independent dealers in North America, over 1,500 independent international dealers through over 25 subsidiaries, and over 90 independent distributors in over 100 countries outside of North America.
Our products are sold through a network of approximately 2,500 independent dealers in North America, approximately 1,500 independent international dealers through over 25 subsidiaries, and approximately 70 independent distributors in nearly 90 countries outside of North America.
Potential risks and uncertainties include such factors as 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 demand; 9 Table of Contents the Company’s ability to identify and meet optimal dealer inventory levels; the Company’s ability to accurately forecast and sustain consumer demand; the Company’s ability to mitigate increasing input costs through pricing or other measures; the Company’s ability to successfully implement its manufacturing operations strategy and supply chain initiatives; product offerings, promotional activities and pricing strategies by competitors that make our products less attractive to consumers; economic conditions that impact consumer spending, including recessionary conditions; the severity and duration of the COVID-19 pandemic and the resulting impact on the Company’s business, supply chain, and the global economy; 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 other litigation expenses incurred due to the nature of the Company’s business; uncertainty in the consumer 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.
Potential risks and uncertainties include such factors as the Company’s ability to successfully implement its manufacturing operations strategy and supply chain initiatives; 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 demand, including as a result of supply chain disruptions; the Company’s ability to identify and meet optimal dealer inventory levels; the Company’s ability to accurately forecast and sustain consumer demand; the Company’s ability to mitigate increasing input costs through pricing or other measures; product offerings, promotional activities and pricing strategies by competitors that may make our products less attractive to consumers; the Company’s ability to strategically invest in innovation and new products, including as compared to our competitors; economic conditions that impact consumer spending or consumer credit, including recessionary conditions and changes in interest rates; 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 on the Company’s supply chain, manufacturing operations and 9 Table of Contents consumer demand; commodity costs; freight and tariff costs (tariff relief or ability to mitigate tariffs); changes to international trade policies and agreements; uninsured product liability and class action claims (including claims seeking punitive damages) and other litigation expenses incurred due to the nature of our business; uncertainty in the consumer retail and wholesale credit markets; performance of affiliate partners; changes in tax policy; relationships with dealers and suppliers; and the general global economic, social and political environment.
Clark Dougherty joined Polaris in January 2018 as Senior Vice President—General Counsel, Compliance Officer and Corporate Secretary. Michael D. Dougherty President of On Road and International 55 Mr. Dougherty was appointed President of On Road and International in December 2019. Prior to this, Mr. Dougherty was President of International since September 2015. Benjamin D. Duke President of Marine 50 Mr.
Clark Dougherty joined Polaris in January 2018 as Senior Vice President—General Counsel and Corporate Secretary. Michael D. Dougherty President of On Road and International 56 Mr. Dougherty was appointed President of On Road and International in December 2019. Prior to this, Mr. Dougherty was President of International since September 2015. Benjamin D. Duke President of Marine 51 Mr.
Our ORV lineup includes the RZR sport side-by-side, the RANGER utility side-by-side, the GENERAL crossover side-by-side, and the Sportsman ATV. The full line spans 91 models, including two-, four- and six-wheel drive general purpose and recreational vehicles.
Our ORV lineup includes the RZR sport side-by-side, the RANGER utility side-by-side, the GENERAL crossover side-by-side, the Polaris XPEDITION adventure side-by-side and the Sportsman ATV. The full line spans 107 models, including two-, four- and six-wheel drive general purpose and recreational vehicles.
We also own Swissauto Powersports Ltd., an engineering company that develops high-performance and high-efficiency engines and innovative vehicles. Intellectual Property Our products are marketed under a variety of valuable trademarks. Some of the more important trademarks used in our global operations include POLARIS, RANGER, RZR, GENERAL, SPORTSMAN, INDIAN MOTORCYCLE, SLINGSHOT, BENNINGTON, and KLIM.
We also own Polaris Technology Center Burgdorf LLC, an engineering company that develops high-performance and high-efficiency engines and innovative vehicles. Intellectual Property Our products are marketed under a variety of valuable trademarks. Some of the more important trademarks used in our global operations include POLARIS, RANGER, RZR, GENERAL, Polaris XPEDITION, SPORTSMAN, INDIAN MOTORCYCLE, SLINGSHOT, BENNINGTON, and KLIM.
The ORV industry is comprised of ATVs and side-by-side vehicles. Internationally, ATVs and side-by-sides are sold primarily in Western European countries by similar manufacturers as in North America.
The ORV industry is comprised of ATVs and side-by-side vehicles. Internationally, ATVs and side-by-sides are sold primarily in Western Europe, Australia, and Mexico by similar manufacturers as in North America.
We have arrangements with Polaris Acceptance (United States), a joint venture between Polaris and a subsidiary of Wells Fargo Bank, N.A., Wells Fargo affiliates (Australia, Canada, France, Germany, the United Kingdom, China and New Zealand), and a subsidiary of Huntington Bancshares Incorporated to provide floor plan financing for many of our dealers.
We have arrangements with Polaris Acceptance (United States), a joint venture between Polaris and a subsidiary of Wells Fargo Bank, N.A., Wells Fargo affiliates (who provide floor plan financing for customers in many countries and regions, including Canada, Australia, France, Germany, the United Kingdom and Scandinavia), and a subsidiary of Huntington Bancshares Incorporated to provide floor plan financing for many of our dealers.
Snowmobiles have been manufactured under the Polaris name since 1954. We estimate that worldwide industry sales of snowmobiles totaled approximately 130,000, 135,000, and 125,000 units for the 12 month seasons ended March 31, 2022, 2021, and 2020, respectively. For the 12 month season ended March 31, 2022, we held the number two market share position for North America.
We estimate that worldwide industry sales of snowmobiles totaled approximately 125,000, 130,000, and 135,000 units for the 12 month seasons ended March 31, 2023, 2022, and 2021, respectively. For the 12 month season ended March 31, 2023, we held the number two market share position for North America.
While we 7 Table of Contents are currently effectively managing compliance with these various regulatory schemes and standards around the world, changes in the regulatory climate in any of the jurisdictions where we operate could have a material adverse effect on our total sales, financial condition, profitability, or cash flows.
While we are currently effectively managing compliance with these various regulatory schemes and standards around the world, changes in the regulatory climate in any of the jurisdictions where we operate could have a material adverse effect on our total sales, financial condition, profitability, or cash flows. For a more detailed discussion of these risks, please see Item 1A.
Mack also serves as Executive Vice President of Finance and Corporate Development. Prior to this, Mr. Mack was Interim Chief Financial Officer since January 2021 and Senior Vice President of Corporate Development and Strategy, and President of Global Adjacent Markets and Marine. Steven D. Menneto President of Off Road 57 Mr.
Mack also serves as Executive Vice President of Finance and Corporate Development. Mr. Mack was Interim Chief Financial Officer since January 2021 and originally joined Polaris in 2016 as Senior Vice President of Corporate Development and Strategy, and President of Global Adjacent Markets and Marine. Steven D. Menneto President of Off Road 58 Mr.
Our engineering department is equipped to make small quantities of new product prototypes for testing and for the planning of manufacturing procedures. In addition, we maintain numerous facilities where each of the products is extensively tested under actual use conditions.
Further, we are continuing to execute our electrification initiative to position the Company as a leader in powersports electrification. Our engineering department is equipped to make small quantities of new product prototypes for testing and for the planning of manufacturing procedures. In addition, we maintain numerous facilities where each of the products is extensively tested under actual use conditions.
As an ORV original equipment manufacturer (“OEM”), our competition primarily comes from North American and Asian manufacturers. Competition in such markets is based upon a number of factors, including price, quality, reliability, styling, product features and warranties and a manufacturer’s ability to timely produce vehicles in response to increased consumer demand.
As an ORV original equipment manufacturer (“OEM”), our competition primarily comes from North American and Asian manufacturers. Competition in such markets is based upon a number of factors, including price, quality, reliability, styling, product features, warranties and a manufacturer’s ability to produce vehicles to meet changing consumer demand. Snowmobiles have been manufactured under the Polaris name since 1954.
Snowmobile accessories include covers, traction products, reverse kits, electric starters, tracks, bags, windshields, oil and lubricants. We also market a full line of gear and apparel for our snowmobiles, including helmets, goggles, jackets, gloves, boots, bibs, pants and hats. Gear and apparel is purchased from independent vendors and sold by us through our dealers, distributors, and online.
We also market a full line of gear and apparel related to our ORVs, including helmets, jackets, gloves, pants and hats. Snowmobile accessories include covers, traction products, reverse kits, electric starters, tracks, bags, windshields, oil and lubricants. We also market a full line of gear and apparel for our snowmobiles, including helmets, goggles, jackets, gloves, boots, bibs, pants and hats.
We utilize internal combustion engine testing facilities to design engine configurations for our products. We utilize specialized facilities for matching engine, exhaust system and clutch performance parameters in our products to achieve desired fuel consumption, power output, noise level and other objectives. Further, we are currently executing an electrification initiative to position the Company as a leader in powersports electrification.
We utilize internal combustion engine testing facilities to design engine configurations for our products. We utilize specialized facilities for matching engine, exhaust system and clutch performance parameters in our products to achieve desired fuel consumption, power output, noise level and other objectives.
Estimated North America and worldwide ORV industry retail sales are summarized as follows: Twelve months ended December 31, Estimated* Approximate Industry Sales (in units) 2022 2021 2020 North America ATV retail sales 255,000 285,000 345,000 North America side-by-side retail sales 515,000 560,000 640,000 North America ORV retail sales 770,000 845,000 985,000 Worldwide ATV retail sales 360,000 415,000 465,000 Worldwide side-by-side retail sales 570,000 620,000 690,000 Worldwide ORV retail sales 930,000 1,035,000 1,155,000 *Estimates 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.
Estimated North America and worldwide ORV industry retail sales are summarized as follows: Twelve months ended December 31, Estimated* Approximate Industry Sales (in units) 2023 2022 2021 North America ATV retail sales 240,000 250,000 285,000 North America side-by-side retail sales 565,000 535,000 560,000 North America ORV retail sales 805,000 785,000 845,000 Worldwide ATV retail sales 335,000 355,000 415,000 Worldwide side-by-side retail sales 620,000 590,000 620,000 Worldwide ORV retail sales 955,000 945,000 1,035,000 *Estimates 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.
In many of our segments, we offer youth, value, mid-size, premium and extreme-performance vehicles, which come in both single passenger and multi-passenger seating arrangements. Key 2022 ORV product introductions included the RANGER CREW XP 1000 NorthStar Big Game Edition, GENERAL XP 1000 Sport, and GENERAL 1000 Sport.
In many of our segments, we offer youth, value, mid-size, premium and extreme-performance vehicles, which come in both single passenger and multi-passenger seating arrangements. Key 2023 ORV product introductions included the Extreme Duty RANGER XD 1500, RANGER XP Kinetic and the Polaris XPEDITION.
The financial results of the Polaris Adventures business is included within the Off Road and On Road segments, based on the related vehicle. Financial Services Arrangements Floor plan financing.
The financial results of the Polaris Adventures business are included within the Off Road and On Road segments, depending on the vehicle platform used in the ride experience. Financial Services Arrangements Floor plan financing.
We also provide print materials, signage and other promotional items for use by dealers. We spent $480.8 million, $458.2 million and $429.8 million for sales and marketing activities in 2022, 2021 and 2020, respectively. Our corporate headquarters facility is in Medina, Minnesota, and we maintain numerous sales and administrative facilities across the world.
We spent $542.3 million, $480.8 million and $458.2 million for sales and marketing activities in 2023, 2022 and 2021, respectively. Our corporate headquarters facility is in Medina, Minnesota, and we maintain numerous sales and administrative facilities across the world.
Menneto was appointed President of Off Road in December 2019. Prior to this, Mr. Menneto was President of Motorcycles since September 2015. Kenneth J. Pucel Executive Vice President—Global Operations and Chief Technology Officer 56 Mr. Pucel joined Polaris in December 2014 as Executive Vice President—Global Operations, Engineering, and Lean. James P.
Menneto was appointed President of Off Road in December 2019. Prior to this, Mr. Menneto was President of Motorcycles since September 2015. James P. Williams Senior Vice President and Chief Human Resources Officer 61 Mr. Williams joined Polaris in April 2011 as Senior Vice President and Chief Human Resources Officer.
We produce and deliver our products throughout the year based on dealer, distributor, and customer orders. ORV retail sales activity at the dealer level drives orders which are incorporated into each product’s production scheduling. International distributor ORV orders are taken throughout the year.
ORV retail sales activity at the dealer level drives orders that are incorporated into each product’s production scheduling. International distributor ORV orders 3 Table of Contents are taken throughout the year.
We design, engineer, produce or source a variety of replacement parts and accessories for our motorcycles. Motorcycle accessories include saddle bags, handlebars, backrests, exhausts, windshields, seats, oil and various chrome accessories. We also market a full line of gear and apparel for our motorcycles, including helmets, jackets, leathers and hats.
Motorcycle accessories include saddle bags, handlebars, backrests, exhausts, windshields, seats, oil and various chrome accessories. We also market a full line of gear and apparel for our motorcycles, including helmets, jackets, leathers and hats. Gear and apparel are purchased from independent vendors and sold by us through our dealers, distributors, and online under our brand names.
Inclusive of the segments in which we compete, we estimate total U.S. 2022 powerboats market sales were approximately $14.0 billion, with pontoon being one of the larger segments therein. Our brands include Bennington, Godfrey, and Hurricane, which together provide a full offering of pontoon and deck boats.
Inclusive of the segments in which we compete, we estimate total 5 Table of Contents U.S. 2023 powerboats market sales were approximately $15.0 billion, with pontoon being one of the larger segments therein. Our brands, Bennington, Godfrey and Hurricane, are strategically positioned with over 500 base models across a range of price points.
Our commercial and government/defense businesses each have their own distribution networks outside of our traditional dealer channels through which their respective vehicles are distributed.
Our commercial and government/defense businesses each have their own distribution networks outside of our traditional dealer channels through which their respective vehicles are distributed. ProXD, one of our vehicle brands, is sold through a growing network of over 200 dealers and also direct to customer where permitted.
We advertise our brands directly to consumers via digital, television, print, out of home, radio, events and sponsorships. We utilize public relations and partnerships to drive earned media. We provide advertising assets and content and partially underwrite dealer and distributor advertising to a degree and on terms which vary by brand and from year to year.
We utilize public relations and partnerships to drive earned media. We provide advertising assets and content and partially underwrite dealer and distributor advertising to a degree and on terms which vary by brand and from year to year. We also provide print materials, signage and other promotional items for use by dealers.
Sales and Marketing Our marketing activities are designed primarily to promote and communicate with consumers to enable the marketing and selling efforts of our dealers and distributors globally. We make available and advertise discount or rebate programs, retail financing or other incentives for our dealers and distributors to remain price competitive to accelerate retail sales to consumers.
Sales and Marketing Our marketing activities are designed primarily to promote and communicate with consumers to enable the marketing and selling efforts of our dealers and distributors globally.
Together, that defines and progresses our commitment to Respect, Inclusion, Diversity, and Equity, with our assertion that we will make meaningful progress leveraging our full workforce (“Together”). The composition of our Board of Directors reflects our actions to make diversity a key priority.
We remain committed to a multi-year strategy, R.I.D.E. Together, that defines and progresses our commitment to Respect, Inclusion, Diversity, and Equity, with our assertion that we will make meaningful progress leveraging our full workforce.
Employee engagement. As a core element of our human capital management strategy, in 2021 we deployed our bi-annual engagement survey of global salaried employees. In 2021, 96% of our employees participated in the survey, and the positive responses rated Polaris in the top quartile compared with a best-in-class global normative database, on par with high performing company norms.
In 2023, 96% of our employees participated in the employee engagement survey, and the positive responses rated Polaris in the top quartile compared with a best-in-class global normative database, on par with high performing company norms. Consistent positive employee responses across diverse groups reflect the results of our focus on building an inclusive work environment.
Our internship programs are a key pipeline to our early career leadership development programs across engineering, operations, sales, marketing, finance, human resources and information technology.
Our internship programs are a key pipeline to our early career leadership development programs across engineering, operations, sales, marketing, finance, human resources and information technology. Our first leadership development program launched over 20 years ago, and the structured rotations and formal development within the programs have proven successful in bolstering our functional and management leadership succession.
Employees are provided with customized comprehensive total rewards statements and a guide to understanding the various pay and benefits elements of our total rewards program. Over the past year, our strong safety culture remained a primary focus as our office teams transitioned back onsite. We have continued to evolve our safety controls to protect employees working onsite.
Employees are provided with customized, comprehensive total rewards statements and resources to understand the various pay and benefits elements of our total rewards program. Our strong safety culture remains a primary focus.
Our employees are based in 19 countries with approximately 45% of our employees located outside of the United States. Commitment to diversity, equity, and inclusion. Our commitment to diversity, equity, and inclusion is foundational to our success. We have committed to a multi-year strategy, R.I.D.E.
As of December 31, 2023, we had approximately 18,500 full-time employees globally, with approximately 5,500 in salaried roles. Our employees are based in 19 countries with approximately 53% of our employees located outside of the United States. Commitment to diversity, equity, and inclusion. Our commitment to diversity, equity, and inclusion is foundational to our success.
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. 10 Table of Contents Information about our Executive Officers Set forth below are the names of our executive officers as of February 17, 2023, their ages, titles, the year first appointed as an executive officer, and employment for the past five years: Name and Position Age Business Experience During the Last Five or More Years Michael T.
Information about our Executive Officers Set forth below are the names of our executive officers as of February 16, 2024, their ages, titles, the year first appointed as an executive officer, and employment for at least the last five years: Name and Position Age Business Experience During the Last Five or More Years Michael T.
We have also created partnerships with People of Color Careers, RippleMatch, Women in Business (“WIB”), Disability Solutions, DoD Skillbridge and others to further our ability to reach a diverse candidate base. Our relationship with Code2College is helping us create a non-traditional talent pipeline for technical talent, and our early career leadership development programs are a catalyst for future diverse leaders.
Our relationship with Code2College is helping us create a non-traditional talent pipeline for technical talent, and our early career leadership development programs are a catalyst for future diverse leaders. Employee engagement.
We believe that the combination of our Bennington and Godfrey brands is projected to be the market share leader in pontoon boats. In 2022, Polaris Marine launched the MY 2023 boats for the Bennington, Godfrey and Hurricane brands.
We also offer custom layouts and features and work with most engine manufacturers enabling customers to build a boat that meets their specifications. We believe that the combination of our Bennington and Godfrey brands is currently the market share leader in pontoon boats. In 2023, Polaris Marine launched the model year 2024 boats for the Bennington, Godfrey and Hurricane brands.
Through the use of offseason incentive programs, we adhere to level production throughout the year, minimizing disruption to the workforce and vendor network. Polaris Adventures Our Polaris Adventures business partners with local outfitters to deliver unique ride experiences leveraging many of our global vehicle platforms. The Polaris Adventures network completed over 350,000 rides in over 190 locations in 2022.
Polaris Adventures Our Polaris Adventures business partners with local outfitters to deliver unique ride experiences leveraging many of our global vehicle platforms. The Polaris Adventures network has completed over 1,500,000 rides since 2017, and had over 250 locations as of December 31, 2023.
We produce a full line of snowmobiles consisting of 68 models, ranging from youth models to utility and economy models to performance and competition models. Polaris snowmobiles are sold principally in the United States, Canada, and Northern Europe.
We produce a full line of snowmobiles consisting of 57 models, ranging from youth models to utility and economy models to performance and competition models. Key model introductions in 2023 included the new Series 9 325 track that further elevates the Polaris RMK line.
Goupil and Aixam sell directly to customers in France, through subsidiaries in certain Western European countries and through several dealers and distributors for markets outside such countries. 5 Table of Contents The On Road segment also designs and sells various PG&A related to its vehicles and aftermarket products.
Goupil and Aixam sell directly to customers in France, through subsidiaries in certain Western European countries and through several dealers and distributors for markets outside such countries. Marine: Our Marine segment designs and manufactures boats that are designed to compete in key segments of the recreational marine industry, specifically pontoon and deck boats.
Due to the seasonality of our business and changes in production cycles, total employment levels vary throughout the year. Despite such variations in employment levels, employee turnover has not been materially disruptive to operations. As of December 31, 2022, we had approximately 16,200 full-time employees globally, with approximately 5,100 in salaried roles.
Our employees are also among our largest shareholder groups, driven by our Employee Stock Ownership Plan (“ESOP”) and our equity compensation program. Headcount. Due to the seasonality of our business and changes in production cycles, total employment levels vary throughout the year. Despite such variations in employment levels, employee turnover has not been materially disruptive to our business.
These businesses each have their own distribution networks through which their respective vehicles are distributed.
Our vehicle brands include Goupil and Aixam which are primarily marketed in Western Europe. We offer 13 models across these brands. These businesses each have their own distribution networks through which their respective vehicles are distributed.
We also design and manufacture vehicles that support various commercial and industrial work applications and include products in the light-duty hauling, industrial and urban/suburban commuting sub-sectors. Our vehicle brands include Goupil and Aixam which are primarily marketed in Western Europe. We offer 14 models across these brands.
We utilize our RFM ordering system for motorcycle dealers, which allows dealers to order daily and create a segment stocking order which helps to reduce order fulfillment times. We also design and manufacture vehicles that support various commercial and industrial work applications and include products in the light-duty hauling, industrial and urban/suburban commuting sub-sectors.
Gear and apparel is designed to our specifications, purchased from independent vendors and sold by us through our dealers, distributors, and online. 3 Table of Contents We sell our ORVs directly to a network of over 1,400 dealers in North America and over 1,100 international dealers. Many of our ORV dealers and distributors are also authorized snowmobile dealers.
We sell our ORVs directly to a network of approximately 1,400 dealers in North America and 1,100 international dealers. Many of our ORV dealers and distributors are also authorized snowmobile dealers. We produce and deliver our products throughout the year based on dealer, distributor, and customer orders.
For a more detailed discussion of these risks, please see Item 1A. Risk Factors of this Annual Report. Human Capital Management Best Team, Best Culture is a Polaris guiding principle. Our greatest asset is our employee base.
Risk Factors of this Annual Report. Human Capital Management Best Team, Best Culture is a Polaris guiding principle. Our greatest asset is our employee base. We are committed to providing an inclusive and engaging work environment, and we aim to leverage our Polaris values to drive a positive 7 Table of Contents culture.
Gear and apparel is purchased from independent vendors and sold by us through our dealers, distributors, and online under our brand names. Indian Motorcycle and Slingshot are distributed directly through independently owned dealers and distributors. Indian Motorcycles are sold through a network of over 200 dealers in North America and over 350 international dealers.
PG&A products for the On Road segment include our OEM brands as well as other portfolio brands including Klim and 509. Indian Motorcycle and Slingshot are distributed directly through independently owned dealers and distributors. Indian Motorcycles are sold through a network of over 200 dealers in North America and over 350 international dealers. Slingshot currently has over 325 dealers globally.
Our extensive, experienced and loyal network of over 550 active dealers is a competitive advantage, helping to generate steady demand. Concentrated primarily in North America, this dealer network is organized into distinct sales territories supported by experienced sales representatives and leadership.
Concentrated primarily in North America, this dealer network is organized into distinct sales territories supported by experienced sales representatives and leadership. Through the use of offseason incentive programs, we adhere to level production throughout the year, minimizing disruption to the workforce and vendor network.
We also manufacture a snow bike conversion kit system under the Timbersled brand and in 2022 we launched the ARO 3 Gen 2 Platform, Quick Drive Timbersled (QDT) belt drive system, and more trim levels and options. We design, engineer, produce or supply a variety of replacement parts and Polaris Engineered Accessories for our snowmobiles and snow bike conversion kits.
We also manufacture a snow bike conversion kit system under the Timbersled brand and in 2023 we launched the new RIOT Gen 2 system, as well as more trim levels and options. Polaris snowmobiles are sold principally in the United States, Canada, and Northern Europe.
Williams Senior Vice President and Chief Human Resources Officer 60 Mr. Williams joined Polaris in April 2011 as Senior Vice President and Chief Human Resources Officer. Executive officers of the Company are elected at the discretion of the Board of Directors with no fixed terms.
Executive officers of the Company are elected at the discretion of the Board of Directors with no fixed terms. There are no family relationships between or among any of the executive officers or directors of the Company.
These products include our OEM brands as well as other portfolio brands including Kolpin, Pro Armor, Klim, 509, and Trail Tech.
Gear and apparel are designed to our specifications, purchased from independent vendors and sold by us through our dealers, distributors, and online. 4 Table of Contents PG&A products for the Off Road segment include our OEM brands as well as other portfolio brands including Kolpin, Pro Armor, Klim, 509, and Trail Tech.
Financial well-being has been a focus in a multifaceted way, including an expanded 401(k) investment lineup. We also offer financial wellness education via an award-winning investment advisory firm, which teaches our employees about the navigation of market volatility and provides inflation and free one-on-one counseling sessions to employees.
Financial well-being is one of our focuses, and we endeavor to support our employees’ financial wellness in a variety of ways, including by offering financial wellness education that supports employees navigating market volatility and inflation. We also offer free one-on-one financial counseling sessions to employees, allowing employees to receive counseling tailored to their priorities.
Attracting and developing early career talent remains a key element of our talent strategy. We returned to in-person internships in 2022 and leveraged our learnings from remote internships to create agile development opportunities culminating with a 3-day summit event in Minnesota providing an opportunity to learn from executives, network with other interns, participate in professional development, and ride Polaris products.
For our interns and post-graduate development program participants, we host a week-long summit event in Minnesota, providing an opportunity to learn from executives, network with others, participate in professional development activities, and experience Polaris products. Employee well-being.
We furthered our employee listening strategy by deploying a new hire feedback survey across our global salaried employees, soliciting feedback from employees throughout the first 18 months of employment. In 2022, our teams have been actively working to evaluate and implement opportunities for improvement identified by these sources of employee feedback. Leadership development.
Our leaders continue to evaluate and implement opportunities for improvement identified by these sources of employee feedback. Leadership development.
Removed
We also market a full line of gear and apparel related to our ORVs, including helmets, jackets, gloves, pants and hats.
Added
In 2023, Indian Motorcycle launched its all-new 2024 lineup, featuring a limited edition FTR x 100% R Carbon, a new Challenger Elite, and completely redesigned PowerBand Audio system. Slingshot launched its all-new 2024 lineup with thoughtful refinement and bold graphics. We design, engineer, produce or source a variety of replacement parts and accessories for our motorcycles.
Removed
Key model introductions in 2022 included the new Patriot Boost Indy VR1, Patriot Boost Switchback Assault, 9R Pro RMK Slash, and 9R RMK Khaos Slash. We also launched the ProStar S4 engine available for Indy, Voyageur and Titan snowmobiles.
Added
Notable launches include Bennington’s SV and S series refresh that offers an enhanced style and streamlined product offering at a competitive price point, and Godfrey’s XP series, a new halo product that elevates design, sound and lighting.
Removed
ProXD, one of our vehicle brands, is sold through a growing network of over 190 dealers and also direct to customer where permitted. 4 Table of Contents The Off Road segment also designs and sells various PG&A related to its vehicles and aftermarket products.
Added
Additionally, Godfrey launched the entry level Xperience series and Hurricane launched the Sundeck 217/Sundeck Sport 218 models as well as the Sundeck 2050/Sundeck Sport 2050 models. Our extensive, experienced and loyal network of over 550 global dealers is a competitive advantage, helping to generate steady demand.
Removed
In 2022, Indian Motorcycle launched its all-new 2023 lineup featuring enhanced style and technology with its groundbreaking FTR lineup and three new limited edition Elite motorcycles. Polaris Slingshot launched its all-new 2023 lineup, including the Slingshot ROUSH® Edition as a new partnership collaboration with ROUSH® Performance.
… 148 more changes not shown on this page.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
1 edited+144 added−102 removed0 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
1 edited+144 added−102 removed0 unchanged
2022 filing
2023 filing
We typically provide a limited warranty for our vehicles and boats for a period of six months to ten years, depending on the product. We provide 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.
We generally provide limited warranties for our vehicles and boats. We may also provide longer warranties in certain geographical markets as determined by local regulations and customary practice or related to certain promotional programs. We also provide a limited emission warranty for certain emission-related parts in our ORVs, snowmobiles, and motorcycles as required by the EPA and CARB.
Removed
Item 1A. Risk Factors of this Annual Report. Full year net income from continuing operations attributable to Polaris Inc. of $602.9 million increased 22 percent from 2021, with diluted earnings per share from continuing operations increasing from $7.92 to $10.04 per share. These increases were primarily driven by higher pricing and favorable product mix.
Added
Item 1A. Risk Factors The following are factors known to us that could materially adversely affect our business, financial condition, cash flows, or operating results, as well as adversely affect the value of an investment in our common stock. 10 Table of Contents Macroeconomic Risks Our business may be sensitive to economic conditions, including those that impact our customers’ spending.
Removed
On February 2, 2023, we announced that our Board of Directors approved a two percent increase in the quarterly cash dividend to $0.65 per share for the first quarter of 2023, representing the 28th consecutive year of increased dividends to shareholders. 24 Table of Contents Consolidated Results of Operations The consolidated results of operations were as follows: For the Years Ended December 31, ($ in millions except per share data) 2022 2021 Change 2022 vs. 2021 2020 Change 2021 vs. 2020 Sales $ 8,589.0 $ 7,439.2 15 % $ 6,281.4 18 % Cost of sales $ 6,629.5 $ 5,688.3 17 % $ 4,745.7 20 % Gross profit $ 1,959.5 $ 1,750.9 12 % $ 1,535.7 14 % Percentage of sales 22.8 % 23.5 % -72 basis points 24.4 % -91 basis points Operating expenses: Selling and marketing $ 480.8 $ 458.2 5 % $ 429.8 7 % Research and development 366.7 328.7 12 % 288.1 14 % General and administrative 355.9 305.8 16 % 296.1 3 % Goodwill impairment — — 81.1 NM Total operating expenses $ 1,203.4 $ 1,092.7 10 % $ 1,095.1 — % Percentage of sales 14.0 % 14.7 % -68 basis points 17.4% -275 basis points Income from financial services $ 48.4 $ 53.8 (10) % $ 80.4 (33) % Operating income $ 804.5 $ 712.0 13 % $ 521.0 37 % Non-operating expense: Interest expense $ 71.7 $ 44.2 62 % $ 66.8 (34) % Other (income) expense, net $ (28.6) $ 2.3 NM $ 3.8 (39) % Loss on sale of businesses $ — $ 36.8 NM $ — NM Income from continuing operations before income taxes $ 761.4 $ 628.7 21 % $ 450.4 40 % Provision for income taxes $ 158.0 $ 132.1 20 % $ 89.9 47 % Effective income tax rate 20.7 % 21.0 % -26 basis points 20.0 % +106 basis points Net income from continuing operations $ 603.4 $ 496.6 22 % $ 360.5 38 % Net income attributable to noncontrolling interest (0.5) (0.4) 25 % (0.1) NM Net income from continuing operations attributable to Polaris Inc. $ 602.9 $ 496.2 22 % $ 360.4 38 % Diluted net income from continuing operations per share attributable to Polaris Inc. shareholders $ 10.04 $ 7.92 27 % $ 5.75 38 % Weighted average diluted shares outstanding 60.1 62.7 (4) % 62.6 — % NM = not meaningful 25 Table of Contents Sales: Sales were $8,589.0 million in 2022, a 15 percent increase from $7,439.2 million in 2021.
Added
Our results of operations may be sensitive to changes in overall economic conditions, primarily in North America and Europe, that impact spending on our products, including discretionary spending.
Removed
The components of the consolidated sales change were as follows: Percent change in total Company sales compared to the prior year 2022 2021 Volume 1 % 9 % Product mix and price 16 8 Currency (2) 1 15 % 18 % Favorable product mix and higher pricing contributed a 16 percent increase to sales in 2022.
Added
Weakening of, and fluctuations in, economic conditions affecting disposable consumer income or our customers’ budgets, such as employment levels, inflation, business conditions, the level of governmental financial assistance, changes in housing market conditions, capital markets, tax rates, savings rates, interest rates, fuel and energy costs, the economic impacts of natural disasters or other severe weather conditions, acts of war, and acts of terrorism, the availability of consumer credit could reduce overall spending or reduce spending on our products.
Removed
Volume contributed a one percent increase in 2022 driven by increased motorcycle and snowmobile shipments, partially offset by lower off-road vehicle shipments. Currency rate movements drove a two percent decrease in sales for 2022. Volume contributed a nine percent increase in 2021 driven by increased shipments in all segments, but most significantly ORV, as well as higher PG&A sales.
Added
Our sales growth and profitability have been affected, from time to time, from a general reduction in consumer spending or a reduction in consumer spending on powersports, boats and aftermarket products. A general reduction in spending by our customers for commercial equipment or a reduction in government budgets could adversely affect our related sales.
Removed
Product mix and price contributed an eight percent increase in 2021, primarily due to lower promotional spending and increased product pricing. Currency rate movements contributed a one percent increase for 2021.
Added
Adverse changes in these factors could lead to a decreased level of demand for our products, which could negatively impact our business, results of operations, financial condition and cash flows.
Removed
Sales by geographic region were as follows: For the Years Ended December 31, ($ in millions) 2022 Percent of Total Sales 2021 Percent of Total Sales Percent Change 2022 vs. 2021 2020 Percent of Total Sales Percent Change 2021 vs. 2020 United States $ 6,809.2 79 % $ 5,742.3 77 % 19 % $ 5,073.5 81 % 13 % Canada 606.7 7 % 573.7 8 % 6 % 367.2 6 % 56 % Other countries 1,173.1 14 % 1,123.2 15 % 4 % 840.7 13 % 34 % Total sales $ 8,589.0 100 % $ 7,439.2 100 % 15 % $ 6,281.4 100 % 18 % Sales in the United States for 2022 increased 19 percent during the year, primarily driven by favorable product mix, higher pricing, and increased motorcycle and snowmobile shipments.
Added
In addition, we have financial services arrangements with subsidiaries of Wells Fargo Bank, N.A. and a subsidiary of Huntington Bancshares Incorporated that require us to repurchase products financed and repossessed pursuant to the terms of such arrangements and subject to certain limitations.
Removed
Sales in the United States represented 79 percent of total Company sales in 2022. Sales in the United States for 2021 increased 13 percent, primarily driven by increased ORV and boat shipments, as well as higher PG&A sales. Sales in Canada for 2022 increased six percent during the year, primarily driven by favorable product mix and higher pricing.
Added
From time to time, we may also elect to provide guarantees or other credit support in favor of, or related to, these arrangements, including to increase capacity thereunder.
Removed
Currency rate movements had an unfavorable impact of four percentage points on sales in 2022. Sales in Canada represented seven percent of total company sales in 2022. Sales in Canada for 2021 increased 56 percent, primarily driven by increased ORV shipments. Currency rate movements had a favorable impact of eight percentage points on sales in 2021.
Added
If adverse changes to economic conditions result in increased defaults on the loans made under these arrangements, our contractual repurchase obligations (or demands under any guarantees or other credit support) could adversely affect our liquidity and harm our business. Shortages or increases in the cost of raw materials, commodities, component parts, and transportation could negatively impact our business.
Removed
Sales in other countries, primarily in Europe, increased four percent during 2022, primarily driven by increased motorcycle shipments and higher pricing. Currency rate movements had an unfavorable impact of nine percentage points on sales in 2022. Sales in other countries represented 14 percent of total company sales in 2022.
Added
The primary commodities used in manufacturing our products are aluminum, steel, copper, petroleum-based resins and certain rare earth metals, as well as diesel fuel to transport products.
Removed
Sales in other foreign countries increased 34 percent during 2021, primarily driven by increased ORV and motorcycle shipments.
Added
Our profitability has been affected by fluctuations in the prices of the raw materials and commodities we use in our products and in the cost of freight and shipping to source materials, commodities, and other component parts necessary to assemble our products.
Removed
Currency rate movements had a favorable impact of five percentage points on sales in 2021. 26 Table of Contents Cost of sales: The following table reflects our cost of sales in dollars and as a percentage of sales: For the Years Ended December 31, ($ in millions) 2022 Percent of Total Cost of Sales 2021 Percent of Total Cost of Sales Change 2022 vs. 2021 2020 Percent of Total Cost of Sales Change 2021 vs. 2020 Purchased materials and services $ 5,606.4 84 % $ 4,826.8 85 % 16 % $ 3,993.5 84 % 21 % Labor and benefits 656.0 10 % 568.5 10 % 15 % 456.5 10 % 25 % Depreciation and amortization 183.6 3 % 162.6 3 % 13 % 172.0 3 % (5) % Warranty costs 183.5 3 % 130.4 2 % 41 % 123.7 3 % 5 % Total cost of sales $ 6,629.5 100 % $ 5,688.3 100 % 17 % $ 4,745.7 100 % 20 % Percentage of sales 77.2 % 76.5 % +72 basis points 75.6 % +91 basis points Cost of sales increased 17 percent in 2022 primarily due to changes in product mix, as well as higher warranty, labor, raw materials, and logistics costs.
Added
In the past, we have experienced significant increases in the cost of these commodities and materials due generally to an inflationary environment driven by high demand and supply chain disruptions.
Removed
Cost of sales increased 20 percent in 2021 primarily due to increased wholegood and PG&A shipments, as well as higher labor, raw materials, and logistics costs.
Added
Additionally, fluctuating policies and the implementation of trade regulations and trade agreements could further disrupt our supply chain or increase the cost of raw materials and commodities necessary to manufacture our products. The impact from tariffs or other trade regulations could require us to shift our manufacturing footprint.
Removed
Gross profit: Gross profit for 2022, as a percentage of sales, decreased primarily due to higher input costs including logistics, components, and commodity prices, plant inefficiencies related to supply chain constraints, and higher warranty costs, partially offset by higher pricing and favorable product mix.
Added
Such restructuring actions could negatively impact our operational costs, work force and/or our growth initiatives. All of these could adversely affect our results of operations and financial condition. Market and Competitive Risks We face intense competition in all product lines. Failure to compete effectively against competitors could negatively impact our business and operating results.
Removed
Gross profit for 2021, as a percentage of sales, decreased primarily due to higher input costs including logistics, components, and commodity prices, as well as plant inefficiencies related to supply chain constraints. The decrease was partially offset by higher sales volume, lower promotional costs and favorable pricing.
Added
The markets in which we operate are highly competitive. Competition in such markets is based upon several factors, including price, quality, reliability, styling, product features and warranties. At the dealer level, competition is based on additional factors, including product availability, sales and marketing support programs (such as financing and cooperative advertising), and dealer and customer perception.
Removed
Operating expenses: Operating expenses for 2022, in absolute dollars, increased compared to 2021, primarily due to higher research and development and general and administrative expenses. Operating expenses for 2022, as a percent of sales, decreased compared to 2021, primarily due to higher pricing and favorable mix which drove increased sales.
Added
Certain of our competitors are more diversified and have advantageous manufacturing footprints, and may invest more heavily in intellectual property, product development, promotions and advertising or online presence.
Removed
Operating expenses for 2021, in absolute dollars and as a percent of sales, decreased primarily due to the prior year impairment of goodwill, partially offset by an increase in total operating expenses to levels commensurate with increases in demand.
Added
If we are not able to compete with new or enhanced products or models of our competitors or compete in the digital marketplace, our ability to retain and attract customers and future business performance may be materially and adversely affected. Internationally, our products typically face more competition where certain foreign competitors manufacture and market products in their respective countries.
Removed
Income from financial services: The following table reflects our income from financial services: For the Years Ended December 31, ($ in millions) 2022 2021 Change 2022 vs. 2021 2020 Change 2021 vs. 2020 Income from Polaris Acceptance joint venture $ 15.1 $ 7.7 96 % $ 18.5 (58) % Income from retail credit agreements 34.3 41.3 (17) % 58.7 (30) % Net income (expense) from other financial services activities (1.0) 4.8 NM 3.2 50 % Total income from financial services $ 48.4 $ 53.8 (10) % $ 80.4 (33) % Percentage of sales 0.6 % 0.7 % -16 basis points 1.3 % -56 basis points Income from financial services decreased 10 percent for 2022, primarily due to lower retail credit income resulting from lower retail sales, partially offset by higher wholesale financing income from Polaris Acceptance due to higher dealer inventory levels. 27 Table of Contents Interest expense: Interest expense increased for 2022 due to higher debt levels and higher interest rates.
Added
This allows those competitors to sell products at lower prices, which could adversely affect our competitiveness. In addition, our products compete with many other recreational, utility, and work products for the discretionary spending of our customers.
Removed
Other (income) expense, net: Other (income) expense is the result of currency exchange rate movements and the corresponding effects on currency transactions related to our international subsidiaries. Also included in Other (income) expense, net in 2021 is a $7.7 million impairment charge related to an investment in a strategic partner that was associated with a divested business.
Added
A failure to compete effectively with these other competitors or adjust pricing to offset inflation or increased supply chain costs could materially and adversely affect our financial results and have a material adverse effect on our performance. 11 Table of Contents If we are unable to continue to enhance existing products and develop and market new or enhanced products that respond to customer needs and preferences, we may experience a decrease in demand for our products and our business could suffer.
Removed
Loss on sale of businesses: In the fourth quarter of 2021, we divested our GEM and Taylor-Dunn businesses which resulted in a $36.8 million loss.
Added
Unless we can continue to enhance existing products, develop and market new products and services, including in the digital and electrification markets, we may not be able to compete effectively in the market, and ultimately satisfy the needs and preferences of our customers in the global markets in which we compete. Product development requires significant financial, technological and other resources.
Removed
Provision for income taxes: The decrease in the effective income tax rate for 2022 was primarily due to an increased deduction for Foreign Derived Intangible Income (“FDII”) and incremental foreign tax credits, partially offset by a decrease in research and development credits, as well as the unfavorable impact of higher pretax income generated in the current period.
Added
There can be no assurance that our level of investment in research and development will be a sufficient competitive advantage in product innovation, which could cause our business to suffer.
Removed
The increase in the effective income tax rate for 2021 was primarily due to the favorable impact of lower pretax income generated in 2020 and the release of certain income tax reserves due to favorable federal tax examination developments in 2020.
Added
Product improvements and new product introductions also require significant engineering, planning, design, development, and testing at the technological, product, and manufacturing process levels and we may not be able to timely develop product improvements or new products.
Removed
The increase was partially offset by favorable income tax benefits in jurisdictions with lower tax rates, as well as favorable income tax benefits from research and development credits in 2021. Weighted average shares outstanding: Weighted average diluted shares outstanding decreased in 2022 primarily due to share repurchases.
Added
Our competitors’ new products may be of a better quality, beat our products to market, and be more attractive in terms of features and price than our products. Our continued success is dependent on positive perceptions of our Polaris brands which, if impaired, could adversely affect our sales.
Removed
Segment Results of Operations On January 1, 2022, the Company began management of its portfolio of businesses under a new basis as a result of the divestiture of the GEM and Taylor-Dunn businesses.
Added
We believe the strength of our Polaris brands is one of the reasons our customers choose our products. To be successful, we must preserve our reputation. Reputational value is based in large part on perceptions and opinions, and broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of our company.
Removed
As a such, the Global Adjacent Markets segment was eliminated and the results of the Company’s remaining businesses historically included within the Global Adjacent Markets segment were reclassified to the Off Road and On Road segments. All historical segment results were reclassified for comparability, including the divested businesses which are included in Corporate.
Added
It may be difficult to control negative publicity, regardless of whether it is accurate. While reputations may take decades to build, any negative incidents can quickly erode trust and confidence, particularly if they result in negative mainstream and social media publicity, governmental investigations, or litigation.
Removed
On June 30, 2022, the Company again began management of its portfolio of businesses under a new basis as a result of the divestiture of TAP. As such, the Aftermarket segment was eliminated and the results of the Company’s remaining aftermarket businesses historically included within the Aftermarket segment were reclassified to the Off Road and On Road segments.
Added
Negative incidents, such as quality and safety concerns or incidents related to our products or actions or statements of our employees, suppliers or dealers, could lead to tangible adverse effects on our business, including lost sales or employee retention and recruiting difficulties.
Removed
All historical segment results were reclassified for comparability. The summary that follows provides a discussion of the results of operations of each of our three reportable segments, Off Road, On Road, and Marine. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit.
Added
In addition, the reputation of our vendors and others with whom we choose to do business may affect our reputation. Increased negative public perception of our products or any increased restrictions on the access or the use of our products in certain locations could materially adversely affect our business or results of operations.
Removed
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.
Added
Demand for the Company’s products depends in part on their social acceptability. Public concerns about the environmental impact of the Company’s products or their perceived safety could result in diminished public perception of the products we sell.
Removed
Businesses that are presented as discontinued operations are excluded from the tables below. 28 Table of Contents Our sales and gross profit by reporting segment, which includes the respective PG&A, were as follows: For the Years Ended December 31, ($ in millions) 2022 Percent of Sales 2021 Percent of Sales Percent Change 2022 vs. 2021 2020 Percent of Sales Percent Change 2021 vs. 2020 Off Road $ 6,436.2 75 % $ 5,574.6 75 % 15 % $ 4,810.0 76 % 16 % On Road 1,163.4 14 % 1,031.8 14 % 13 % 806.7 13 % 28 % Marine 989.4 11 % 760.2 10 % 30 % 603.4 10 % 26 % Corporate — — % 72.6 1 % NM 61.3 1 % 18 % Total sales $ 8,589.0 100 % $ 7,439.2 100 % 15 % $ 6,281.4 100 % 18 % For the Years Ended December 31, ($ in millions) 2022 Percent of Sales 2021 Percent of Sales Percent Change 2022 vs. 2021 2020 Percent of Sales Percent Change 2021 vs. 2020 Off Road $ 1,523.4 23.7 % $ 1,329.8 23.9 % 15 % $ 1,302.0 27.1 % 2 % On Road 206.3 17.7 % 160.7 15.6 % 28 % 95.5 11.8 % 68 % Marine 222.5 22.5 % 170.6 22.4 % 30 % 116.4 19.3 % 47 % Corporate 7.3 89.8 NM 21.8 NM Total gross profit $ 1,959.5 22.8 % $ 1,750.9 23.5 % 12 % $ 1,535.7 24.4 % 14 % NM = not meaningful Off Road: Off Road sales, inclusive of PG&A sales, increased 15 percent in 2022 driven by favorable product mix and higher pricing.
Added
Government, community, media, or activist pressure to limit emissions or perceived land and water impacts could also negatively impact consumers’ perceptions of the Company’s products or limit access to areas where customers can use our products.
Removed
Sales to customers outside of North America increased five percent in 2022 driven by higher pricing and increased snowmobile shipments. The average per unit sales price for the Off Road segment increased approximately 18 percent, driven by higher pricing.
Added
Any decline in the social acceptability of the Company’s products could negatively impact sales or lead to changes in laws, rules and regulations that prevent their access to certain locations or restrict their use or manner of use in certain areas or during certain times, which could also negatively impact sales.
Removed
Additional information on our end markets for 2022: • Polaris North America ATV unit retail sales down low-twenties percent • Polaris North America side-by-side unit retail sales down mid-teens percent • Total Polaris North America ORV unit retail sales down high-teens percent • Estimated North America industry ORV unit retail sales down about 10 percent • Total Polaris North America ORV dealer inventories up approximately 140 percent • Polaris North America snowmobile unit retail sales for the 2022-2023 season-to-date period through December 31, 2022 down mid-single digits percent • Estimated North America industry snowmobile unit retail sales for the 2022-2023 season-to-date period through December 31, 2022 up low-single digits percent • Total Polaris North America snowmobile dealer inventories up approximately 45 percent Gross profit, as a percentage of sales, decreased in 2022 primarily due to higher input costs including logistics, components, and commodity prices, plant inefficiencies related to supply chain constraints, and higher warranty costs, mostly offset by higher pricing.
Added
Any material decline in the social acceptability of the Company’s products could impact the Company’s ability to retain existing customers or attract new ones which, in turn, could have a material adverse effect on its business, results of operations or financial condition.
Removed
Off Road sales increased 16 percent in 2021 driven by broad-based demand and shipments across ATV and side-by-side product lines, including PG&A, as well as increased pricing.
Added
From time to time, we manage our portfolio and grow our business through acquisitions, non-consolidating investments, alliances and new joint ventures and partnerships, which could be risky and could harm our business.
Removed
Gross profit, as a percentage of sales, decreased in 2021 primarily due to higher input costs including logistics, components, and commodity prices, as well as plant inefficiencies related to supply chain constraints, partially offset by favorable mix, lower promotional costs, and higher pricing. 29 Table of Contents On Road: On Road sales, inclusive of PG&A sales, increased 13 percent in 2022 driven by higher pricing and increased shipments.
Added
From time to time, we drive growth in our businesses and accelerate opportunities to expand our global presence and customer base through targeted acquisitions, non-consolidating investments, alliances, and new joint ventures and partnerships (each a “Strategic Transaction”) that we believe add value to our existing brands and product portfolio.
Removed
On Road sales to customers outside of North America increased four percent in 2022 driven by higher pricing, partially offset by unfavorable foreign currency exchange rate movement. The average per unit sales price for the On Road segment increased two percent, driven by favorable product mix and higher pricing.
Added
Alternatively, we may not be able to identify an attractive Strategic Transaction. The benefits of a Strategic Transaction may take more time than expected to develop or integrate into our operations, and we cannot guarantee that any Strategic Transaction will ultimately produce the expected benefits.
Removed
Additional information on our On Road end markets for 2022: • Indian Motorcycle North America unit retail sales down low-twenties percent • Estimated North America industry 900cc cruiser, touring, and standard motorcycle unit retail sales down low-double digits percent • Polaris North America motorcycle dealer inventories up approximately 90 percent Gross profit, as a percentage of sales, increased in 2022 primarily due to favorable product mix and lower promotional costs, partially offset by higher input costs, warranty costs, and unfavorable foreign currency exchange rate movement.
Added
There can be no assurance that Strategic Transactions will be completed or that, if completed, they will be successful. Strategic Transactions pose risks with respect to our ability to project and evaluate market demand, potential synergies and cost savings, make correct accounting estimates and achieve anticipated business goals and objectives.
Removed
On Road sales increased 28 percent in 2021 driven by increased Indian motorcycle and Slingshot shipments as a result of strong retail sales, lower promotional costs, and higher PG&A sales. Gross profit, as a percentage of sales, increased in 2021 primarily due to lower promotional costs, partially offset by increased input costs related to supply chain constraints.
Added
As we continue to grow, in part, through Strategic Transactions, our success depends on our ability to anticipate and effectively manage these risks. If acquired businesses do not achieve forecasted results or otherwise fail to meet projections, it could affect our results. 12 Table of Contents In many cases, Strategic Transactions present a number of integration risks.
Removed
Marine: Marine sales increased 30 percent, primarily due to favorable product mix and increased shipments. The average per unit sales price for the Marine segment increased 15 percent, driven by favorable product mix.
Added
For example, the acquisition may: require more time or resources than anticipated to be fully integrated into our operations and systems, causing operational disruption; create more costs than projected; divert management attention; create the potential of losing customer, supplier or other critical business relationships; and pose difficulties retaining employees.
Removed
Additional information on our boat end markets for 2022: • Polaris U.S pontoon unit retail sales down mid-twenties percent • Estimated U.S. industry pontoon unit retail sales down high-single digits percent Gross profit, as a percentage of sales, increased slightly primarily due to favorable product mix, mostly offset by higher input costs and higher floor plan interest expense.
Added
The inability to successfully integrate new businesses may result in higher production costs, lost sales or otherwise negatively affect earnings and financial results.
Removed
Marine sales increased 26 percent in 2021, primarily due to increased production levels driven by retail and demand, as well as higher pricing and favorable mix. Gross profit, as a percentage of sales, increased in 2021, primarily due to favorable product mix, partially offset by higher input costs related to supply chain constraints.
Added
Potential divestiture activity poses similar risks, including the potential to: disrupt operations in core, adjacent or acquired businesses; require more time or resources than anticipated to be fully completed; deleverage manufacturing operations or reduce sourcing efficiencies; reduce gross profit if the Company is not able to reduce fixed cost (including corporate overhead); not deliver the value anticipated for shareholders; divert management attention; create the potential of losing customer, supplier or other critical business relationships; and pose difficulties retaining employees.
Removed
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.
Added
The inability to successfully manage the risks associated with the Company’s divestiture activity may result in higher production costs, lost sales or otherwise negatively affect earnings and financial results. Operational Risks Disruption in our suppliers’ operations could disrupt our production schedule.
Removed
The seasonality of production and shipments cause working capital requirements to fluctuate during the year and year to year.
… 167 more changes not shown on this page.
Item 2. Properties
Properties — owned and leased real estate
3 edited+2 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
3 edited+2 added−0 removed0 unchanged
2022 filing
2023 filing
Properties The following sets forth the Company’s material properties as of December 31, 2022: Location Facility Type/Use Primary Segment* Owned or Leased Square Footage Medina, Minnesota Headquarters Corp Owned 130,000 Roseau, Minnesota Wholegoods manufacturing and R&D Off Owned 813,000 Huntsville, Alabama Wholegoods manufacturing Off / On Primarily owned 1,355,000 Monterrey, Mexico Wholegoods manufacturing Off Primarily owned 2,000,000 Elkhart, Indiana Wholegoods manufacturing M Primarily owned 1,242,000 Opole, Poland Wholegoods manufacturing Off / On Leased 365,000 Spirit Lake, Iowa Wholegoods manufacturing On Owned 448,000 Chanas, France Wholegoods manufacturing On Owned 196,000 Shanghai, China Wholegoods manufacturing Off Leased 214,000 Bourran, France Wholegoods manufacturing and R&D On Leased 105,000 Aix-les-Bains, France Wholegoods manufacturing and R&D On Owned 98,000 Osceola, Wisconsin Component parts & engine manufacturing Off / On Owned 293,000 Monticello, Minnesota Component parts manufacturing Off / On Owned 109,000 Wyoming, Minnesota Research and development facility Off / On Owned 272,000 Fernley, Nevada Distribution center Off / On Owned 475,000 Wilmington, Ohio Distribution center Off / On Owned 658,000 Vermillion, South Dakota Distribution center Off / On Owned 610,000 Rigby, Idaho Distribution center and office facility Off / On Owned 108,000 Plymouth, Minnesota Office facility Corp Primarily owned 170,000 *Legend: Corp - Corporate (all segments), Off - Off Road, On - On Road, M - Marine Including the material properties listed above and those properties not listed, we have over six million square feet of global manufacturing and research and development space.
Properties The following sets forth the Company’s material properties as of December 31, 2023: Location Facility Type/Use Primary Segment* Owned or Leased Square Footage Medina, Minnesota Headquarters Corp Owned 130,000 Roseau, Minnesota Wholegoods manufacturing and R&D Off Owned 818,000 Huntsville, Alabama Wholegoods manufacturing Off / On Primarily owned 1,400,000 Monterrey, Mexico Wholegoods manufacturing Off Primarily owned 2,700,000 Elkhart, Indiana Wholegoods manufacturing M Primarily owned 1,420,000 Opole, Poland Wholegoods manufacturing Off / On Leased 365,000 Spirit Lake, Iowa Wholegoods manufacturing On Owned 448,000 Chanas, France Wholegoods manufacturing On Owned 196,000 Shanghai, China Wholegoods manufacturing Off Leased 215,000 Bourran, France Wholegoods manufacturing and R&D On Leased 105,000 Aix-les-Bains, France Wholegoods manufacturing and R&D On Owned 98,000 Osceola, Wisconsin Component parts & engine manufacturing Off / On Owned 293,000 Monticello, Minnesota Component parts manufacturing Off / On Owned 109,000 Wyoming, Minnesota Research and development facility Off / On Owned 272,000 Fernley, Nevada Distribution center Off / On Owned 475,000 Wilmington, Ohio Distribution center Off / On Owned 658,000 Vermillion, South Dakota Distribution center Off / On Owned 610,000 Rigby, Idaho Distribution center and office facility Off / On Owned 108,000 Plymouth, Minnesota Office facility Corp Primarily owned 170,000 *Legend: Corp - Corporate (all segments), Off - Off Road, On - On Road, M - Marine Including the material properties listed above and those properties not listed, we have over seven million square feet of global manufacturing and research and development space.
These investments have increased production capacity for our products. We believe our current manufacturing and distribution facilities are adequate in size and suitable for our present manufacturing and distribution needs.
We believe our current manufacturing and distribution facilities are adequate in size and suitable for our present manufacturing and distribution needs.
Additionally, we have over six million square feet of global warehouse and distribution center space. We also have international office facilities in Western Europe, Australia, Brazil, India, China, Japan, and Mexico. We own substantially all tooling and machinery used in the manufacture of our products. We make ongoing capital investments in our facilities.
We also have international office facilities in Western Europe, Australia, New Zealand, Brazil, India, China, Japan, and Mexico. We own substantially all tooling and machinery used in the manufacture of our products. We make ongoing capital investments in our facilities. These investments have increased production capacity for our products.
Added
Additionally, we have over seven million square feet of global warehouse and distribution center space.
Added
For product development and testing of our vehicles, we utilize various parcels of land, including owned or public land near our manufacturing and engineering facilities, land owned in Texas dedicated to testing of our ORVs, and other pieces of public land around the world that provide the appropriate conditions for testing.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
8 edited+7 added−3 removed2 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
8 edited+7 added−3 removed2 unchanged
2022 filing
2023 filing
We removed the matter to federal court in June 2022 (C.D. Cal.) 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 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.
The first case brought related to this matter— Guzman —was first reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The district court granted summary judgment against both plaintiffs’ claims, which the plaintiffs appealed.
The first case brought related to this matter— Guzman/Albright —was first reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The district court granted summary judgment against both plaintiffs’ claims, which the plaintiffs appealed.
As of the date hereof, we are party to putative class actions brought by the same plaintiff’s counsel and largely repeating the same allegations regarding various state consumer protection laws focused on rollover protection systems’ certifications for various Polaris off-road vehicles sold in California and Oregon.
As of the date hereof, we are party to certain putative class actions brought by the same plaintiff’s counsel and largely repeating the same allegations regarding various state consumer protection laws focused on rollover protection structures’ certifications for various Polaris off-road vehicles sold in California.
With respect to each of these putative class action lawsuits, 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.
With respect to each of these putative class action lawsuits, we are unable to provide any reasonable evaluation of the likelihood that a loss will be incurred or any reasonable estimate of the range of possible loss.
The Ninth Circuit recently issued two rulings 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 Ninth Circuit issued two rulings in September 2022 that reversed the district court’s summary judgment 21 Table of Contents 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 .
Item 3. 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 the financial results of our business.
Item 3. 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.
Additional similar putative class actions on behalf of certain plaintiffs dismissed from the Hellman 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, has been dismissed.
Plaintiffs’ counsel, in both the Albright and Hellman/Berlanga cases, filed similar putative class actions on behalf of certain plaintiffs dismissed from the Hellman/Berlanga case in Texas ( Lollar ), Nevada ( Mitchell ), and Oregon ( Artoff ), though the Lollar and Mitchell matters have since been dismissed, the parties reached a final settlement agreement of the plaintiff’s individual claims in Artoff , and another plaintiff from the Hellman/Berlanga matter, Michael Hellman, has been dismissed.
The second case— Hellman/Berlanga —was first reported in the Company’s quarterly report for the period ended June 30, 20 Table of Contents 2021.
On January 30, 2024, the Guzman court entered an amended scheduling order in that case setting dates for further expert discovery, the filing of dispositive motions and other pre-trial motions, and a trial date of December 3, 2024. The second case— Hellman/Berlanga —was first reported in the Company’s quarterly report for the period ended June 30, 2021.
Removed
We recently moved to dismiss plaintiff’s amended complaint and the Court is scheduled to hold a hearing on the motion 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.
Added
In June 2023, the Albright court granted the parties’ stipulation to stay that case pending a decision on class certification in the Guzman case. On September 27, 2023, the district court in Guzman entered an order granting in part and denying in part plaintiff’s motion for class certification.
Removed
The Eighth Circuit subsequently affirmed that denial. On June 13, 2022, 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. (4 th Dist. Minn.).
Added
The district court certified a California class for plaintiff’s claim seeking money damages under the California Consumers Legal Remedies Act but denied class certification on plaintiff’s claim seeking injunctive relief under Fed. R. Civ. P. 23(b)(2). On October 11, 2023, Polaris filed a petition to appeal the portion of the district court’s order granting class certification.
Removed
After we moved to dismiss, the Miller court dismissed plaintiff’s class claims with prejudice, leaving only his individual claims for alleged economic loss.
Added
On December 14, 2023, the Ninth Circuit denied Polaris’s petition. On December 20, 2023, the court in Albright entered an order setting a hearing for June 27, 2024 to review the stay of proceedings in that case.
Added
In May 2023, the remaining plaintiff in the Berlanga case filed a motion for class certification. We have filed an opposition to the plaintiff’s motion for class certification and have filed a motion to exclude the opinions of certain of plaintiff’s expert witnesses.
Added
On August 28, 2023, the United States District Court for the Eastern District of California transferred the Berlanga case to the United States District Court for the Central District of California. On September 13, 2023, the district court in the Guzman case consented to the transfer of the Berlanga case.
Added
That district court has not yet ruled on the Berlanga plaintiff’s motion for class certification or Polaris’s motion to exclude the opinions of plaintiff’s expert witnesses in that case.
Added
We moved to dismiss plaintiff’s amended complaint, which the Court denied in March 2023. On February 5, 2024, the DeBiasio court entered an amended scheduling order setting dates for fact and expert discovery, and the filing of class certification, dispositive, and other motions. The court did not set a trial date. The parties are currently engaged in fact discovery.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+1 added−2 removed2 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+1 added−2 removed2 unchanged
2022 filing
2023 filing
The table below sets forth the information with respect to purchases made by or on behalf of Polaris of its own stock during the fourth quarter of the fiscal year ended December 31, 2022.
The table below sets forth the information with respect to purchases made by or on behalf of Polaris of its own stock during the fourth quarter of the fiscal year ended December 31, 2023.
The graph assumes the investment of $100 at the close on December 31, 2017 in common stock of the Company and in each of the indexes, and the reinvestment of all dividends since that date to December 31, 2022. Points on the graph represent the performance as of the last business day of each of the years indicated.
The graph assumes the investment of $100 at the close on December 31, 2018 in common stock of the Company and in each of the indexes, and the reinvestment of all dividends since that date to December 31, 2023. Points on the graph represent the performance as of the last business day of each of the years indicated.
STOCK PERFORMANCE GRAPH The following graph compares the five-year cumulative total return to shareholders (stock price appreciation plus reinvested dividends) for the Company’s common stock with the comparable cumulative return of three indexes: S&P Midcap 400 Index, S&P Composite 1500 Leisure Products Index, and Morningstar’s Global Recreational Vehicles Index.
STOCK PERFORMANCE GRAPH The following graph compares the five-year cumulative total return to shareholders (stock price appreciation plus reinvested dividends) for the Company’s common stock with the comparable cumulative return of two indexes: S&P Midcap 400 Index and S&P Composite 1500 Leisure Products Index.
On February 10, 2023, there were 1,655 shareholders of record of the Company’s common stock and the last reported sale price for shares of our common stock on the New York Stock Exchange was $115.20 per share.
On February 9, 2024, there were 1,601 shareholders of record of the Company’s common stock and the last reported sale price for shares of our common stock on the New York Stock Exchange was $91.06 per share.
Assumes $100 Invested at the close on December 31, 2017 Assumes Dividend Reinvestment Fiscal Year Ended December 31, 2022 2017 2018 2019 2020 2021 2022 Polaris Inc. $ 100.00 $ 63.24 $ 86.29 $ 83.01 $ 97.79 $ 91.90 S&P Midcap 400 Index 100.00 88.92 112.21 127.54 159.12 138.34 S&P Composite 1500 Leisure Products Index 100.00 80.06 103.47 119.05 144.36 100.85 Morningstar Global Recreational Vehicles Index 100.00 57.10 75.86 95.59 118.73 92.91 22 Table of Contents Comparison of 5-Year Cumulative Total Return Among Polaris Inc., S&P Midcap 400 Index, S&P Composite 1500 Leisure Products Index, and Morningstar’s Global Recreational Vehicles Index This performance graph shall not be deemed “soliciting material” or “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act.
Assumes $100 Invested at the close on December 31, 2018 Assumes Dividend Reinvestment Fiscal Year Ended December 31, 2023 2018 2019 2020 2021 2022 2023 Polaris Inc. $ 100.00 $ 136.45 $ 131.26 $ 154.63 $ 145.33 $ 139.86 S&P Midcap 400 Index 100.00 126.20 143.44 178.95 155.58 181.15 S&P Composite 1500 Leisure Products Index 100.00 129.24 148.71 180.32 125.97 131.61 23 Table of Contents Comparison of 5-Year Cumulative Total Return Among Polaris Inc., S&P Midcap 400 Index, and S&P Composite 1500 Leisure Products Index This performance graph shall not be deemed “soliciting material” or “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act.
Issuer Purchases of Equity Securities 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) October 1–31, 2022 150,000 $ 101.40 150,000 $ 460,393,160 November 1–30, 2022 750,000 $ 108.34 750,000 $ 379,143,259 December 1–31, 2022 275,000 $ 109.23 275,000 $ 349,109,019 Total 1,175,000 $ 107.66 1,175,000 (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.
Issuer Purchases of Equity Securities 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) October 1–31, 2023 5,000 $ 86.60 5,000 $ 1,203,577,355 November 1–30, 2023 105,000 $ 89.41 105,000 $ 1,194,190,453 December 1–31, 2023 100,000 $ 90.89 100,000 $ 1,185,102,460 Total 210,000 $ 90.05 210,000 (1) In October 2023, the Company’s Board of Directors authorized the purchase of up to an additional $1.0 billion of the Company’s outstanding common stock, in addition to the amount still outstanding on its April 2021 share repurchase program.
Removed
The S&P Composite 1500 Leisure Products Index will replace the Morningstar Global Recreational Vehicles Index in this analysis going forward as it includes companies that are more closely aligned with our industry and strategic direction.
Added
As of December 31, 2023, the Company was authorized to repurchase up to an additional $1,185.1 million of the Company’s common stock. The share repurchase program does not have an expiration date. 24 Table of Contents Item 6. [Reserved]
Removed
As of December 31, 2022, the approximate value of shares that may yet to be purchased pursuant to the Program is $349.1 million. The Program does not have an expiration date.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
3 edited+100 added−4 removed1 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
3 edited+100 added−4 removed1 unchanged
2022 filing
2023 filing
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Overview 2022 was a record year for sales which totaled $8.6 billion, a 15 percent increase from 2021. The Company achieved growth across all segments and regions driven primarily by favorable product mix and higher pricing compared to 2021.
Overview 2023 was a record year for sales, which totaled $8.9 billion, a four percent increase from 2022. The year-over-year increase in sales was driven primarily by product mix and increased shipments. Gross profit totaled $2.0 billion in both 2023 and 2022.
Removed
The impact of the novel coronavirus (“COVID-19”) 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.
Added
Expressed as a percentage of sales, gross profit decreased in 2023 as compared to 2022, primarily due to unfavorable foreign currency exchange rate movement and higher finance interest, both partially offset by higher net pricing.
Removed
In 2021 and the first half of 2022 we saw strong retail demand for our products. Consistent with macroeconomic trends, as we progressed through 2022, we have seen indicators of demand moderating.
Added
Full year net income from continuing operations attributable to Polaris Inc. of $502.8 million decreased 17 percent from 2022, with diluted earnings per share from continuing operations decreasing from $10.04 to $8.71 per share. In addition to the reasons discussed above, these decreases were primarily the result of increased operating expenses and higher interest expense.
Removed
Due to the dynamics of the COVID-19 pandemic, heightened demand, natural disasters, and geopolitical events, including the conflict between Russia and Ukraine and related sanctions, our supply chain and manufacturing operations have experienced inefficiencies caused by production-limiting disruptions, including supplier labor shortages. Although these disruptions are moderating, we have made pricing changes to address the resulting increase in production costs.
Added
We reported Adjusted EBITDA of $1,020.9 million in 2023 compared to $1,075.9 million in 2022. For information on how we define and calculate Adjusted EBITDA, and a reconciliation from net income from continuing operations to Adjusted EBITDA, see “Non-GAAP Financial Measures”.
Removed
The duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (some of which are outside management’s control), including those presented in
Added
On February 1, 2024, we announced that our Board of Directors declared a quarterly cash dividend of $0.66 per share for the first quarter of 2024, a two percent increase from the prior quarterly cash dividend, representing the 29th consecutive year of increased dividends to shareholders. 25 Table of Contents Consolidated Results of Operations The consolidated results of operations were as follows: For the Years Ended December 31, ($ in millions except per share data) 2023 2022 Change 2023 vs. 2022 2021 Change 2022 vs. 2021 Sales $ 8,934.4 $ 8,589.0 4 % $ 7,439.2 15 % Cost of sales $ 6,974.5 $ 6,629.5 5 % $ 5,688.3 17 % Gross profit $ 1,959.9 $ 1,959.5 0 % $ 1,750.9 12 % Percentage of sales 21.9 % 22.8 % -88 basis points 23.5 % -72 basis points Operating expenses: Selling and marketing $ 542.3 $ 480.8 13 % $ 458.2 5 % Research and development 374.3 366.7 2 % 328.7 12 % General and administrative 422.8 355.9 19 % 305.8 16 % Total operating expenses $ 1,339.4 $ 1,203.4 11 % $ 1,092.7 10 % Percentage of sales 15.0 % 14.0 % +98 basis points 14.7% -68 basis points Income from financial services $ 80.4 $ 48.4 66 % $ 53.8 (10) % Operating income $ 700.9 $ 804.5 (13) % $ 712.0 13 % Non-operating expense: Interest expense $ 125.0 $ 71.7 74 % $ 44.2 62 % Other (income) expense, net $ (44.5) $ (28.6) 56 % $ 2.3 NM Loss on sale of businesses $ — $ — — $ 36.8 NM Income from continuing operations before income taxes $ 620.4 $ 761.4 (19) % $ 628.7 21 % Provision for income taxes $ 117.7 $ 158.0 (26) % $ 132.1 20 % Effective income tax rate 19.0 % 20.7 % -178 basis points 21.0 % -26 basis points Net income from continuing operations $ 502.7 $ 603.4 (17) % $ 496.6 22 % Net loss (income) attributable to noncontrolling interest 0.1 (0.5) NM (0.4) 25 % Net income from continuing operations attributable to Polaris Inc. $ 502.8 $ 602.9 (17) % $ 496.2 22 % Percentage of sales 5.6 % 7.0 % -140 basis points 6.7 % +35 basis points Adjusted EBITDA $ 1,020.9 $ 1,075.9 (5) % $ 956.2 13 % Adjusted EBITDA Margin 11.4 % 12.5 % -110 basis points 12.9 % -33 basis points Diluted net income from continuing operations per share attributable to Polaris Inc. shareholders $ 8.71 $ 10.04 (13) % $ 7.92 27 % Weighted average diluted shares outstanding 57.7 60.1 (4) % 62.7 (4) % NM = not meaningful 26 Table of Contents Sales: The year-over-year increase in sales was driven primarily by product mix and increased shipments.
Added
The components of the consolidated sales change were as follows: Percent change in total Company sales compared to the prior year 2023 2022 Volume 2 % 1 % Product mix and price 2 16 Currency — (2) 4 % 15 % The year-over-year volume increase was driven by increased ORV and snowmobile shipments.
Added
Product mix and price drove an increase in sales as a result of a higher sales mix of premium ORV models, which was partially offset by higher finance interest.
Added
Sales by geographic region were as follows: For the Years Ended December 31, ($ in millions) 2023 Percent of Total Sales 2022 Percent of Total Sales Percent Change 2023 vs. 2022 2021 Percent of Total Sales Percent Change 2022 vs. 2021 United States $ 7,122.2 80 % $ 6,809.2 79 % 5 % $ 5,742.3 77 % 19 % Canada 584.0 6 % 606.7 7 % (4) % 573.7 8 % 6 % Other countries 1,228.2 14 % 1,173.1 14 % 5 % 1,123.2 15 % 4 % Total sales $ 8,934.4 100 % $ 8,589.0 100 % 4 % $ 7,439.2 100 % 15 % Sales in the United States for 2023 increased five percent during the year, primarily driven by product mix and increased shipments, partially offset by higher finance interest.
Added
Sales in Canada decreased four percent during 2023, primarily due to unfavorable foreign currency exchange rate movement. Currency rate movements had an unfavorable impact of three percentage points on sales in 2023. Sales in other countries, primarily in Europe, increased five percent during 2023, primarily driven by product mix.
Added
Currency rate movements had a favorable impact of two percentage points on sales in 2023.
Added
Cost of sales: The following table reflects our cost of sales in dollars and as a percentage of sales: For the Years Ended December 31, ($ in millions) 2023 Percent of Total Cost of Sales 2022 Percent of Total Cost of Sales Change 2023 vs. 2022 2021 Percent of Total Cost of Sales Change 2022 vs. 2021 Purchased materials and services $ 5,802.9 83 % $ 5,606.4 84 % 4 % $ 4,826.8 85 % 16 % Labor and benefits 756.7 11 % 656.0 10 % 15 % 568.5 10 % 15 % Depreciation and amortization 205.8 3 % 183.6 3 % 12 % 162.6 3 % 13 % Warranty costs 209.1 3 % 183.5 3 % 14 % 130.4 2 % 41 % Total cost of sales $ 6,974.5 100 % $ 6,629.5 100 % 5 % $ 5,688.3 100 % 17 % Percentage of sales 78.1 % 77.2 % +88 basis points 76.5 % +72 basis points The year-over-year increase in cost of sales was primarily due to higher labor, warranty, and depreciation and amortization expenses.
Added
Higher sales volumes and product mix also contributed to the increase. 27 Table of Contents Gross profit: Gross profit for 2023, as a percentage of sales, decreased primarily due to unfavorable foreign currency exchange rate movement and higher finance interest, both partially offset by higher net pricing.
Added
Operating expenses: Operating expenses for 2023, in absolute dollars and as a percentage of sales, increased compared to 2022, primarily due to higher general and administrative and selling and marketing expenses.
Added
Income from financial services: The following table reflects our income from financial services: For the Years Ended December 31, ($ in millions) 2023 2022 Change 2023 vs. 2022 2021 Change 2022 vs. 2021 Income from Polaris Acceptance joint venture $ 41.5 $ 15.1 175 % $ 7.7 96 % Income from retail credit agreements 39.0 34.3 14 % 41.3 (17) % Net income (expense) from other financial services activities (0.1) (1.0) NM 4.8 NM Total income from financial services $ 80.4 $ 48.4 66 % $ 53.8 (10) % Percentage of sales 0.9 % 0.6 % +34 basis points 0.7 % -16 basis points Income from financial services increased 66 percent in 2023, primarily due to higher wholesale financing income from Polaris Acceptance driven by higher dealer inventory levels.
Added
Interest expense: Interest expense increased for 2023 due to higher interest rates. Other (income) expense, net: Other (income) expense is primarily the result of currency exchange rate movements and the corresponding effects on currency transactions related to our international subsidiaries.
Added
Provision for income taxes: The decrease in the effective income tax rate for 2023 was primarily due to an increase in research and development credits, a non-cash increase of deferred tax assets, and the favorable impact of lower pretax income generated in 2023, partially offset by a decreased deduction for Foreign Derived Intangible Income (“FDII”).
Added
Adjusted EBITDA: Adjusted EBITDA, in absolute dollars and as a percentage of sales, decreased in 2023 due to increased operating expenses, higher finance interest and unfavorable foreign currency exchange rate movement, partially offset by higher net pricing. Weighted average diluted shares outstanding: Weighted average diluted shares outstanding decreased throughout 2023 primarily due to share repurchases.
Added
Segment Results of Operations The summary that follows provides a discussion of the results of operations of each of our three reportable segments, Off Road, On Road, and Marine. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit.
Added
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.
Added
Businesses that are presented as discontinued operations are excluded from the tables below. 28 Table of Contents Our sales and gross profit by reporting segment, which includes the respective PG&A, were as follows: For the Years Ended December 31, ($ in millions) 2023 Percent of Sales 2022 Percent of Sales Percent Change 2023 vs. 2022 2021 Percent of Sales Percent Change 2022 vs. 2021 Off Road $ 6,984.4 78 % $ 6,436.2 75 % 9 % $ 5,574.6 75 % 15 % On Road 1,184.6 13 % 1,163.4 14 % 2 % 1,031.8 14 % 13 % Marine 765.4 9 % 989.4 11 % (23) % 760.2 10 % 30 % Corporate — — % — — % NM 72.6 1 % NM Total sales $ 8,934.4 100 % $ 8,589.0 100 % 4 % $ 7,439.2 100 % 15 % For the Years Ended December 31, ($ in millions) 2023 Percent of Sales 2022 Percent of Sales Percent Change 2023 vs. 2022 2021 Percent of Sales Percent Change 2022 vs. 2021 Off Road $ 1,531.6 21.9 % $ 1,523.4 23.7 % 1 % $ 1,329.8 23.9 % 15 % On Road 240.4 20.3 % 206.3 17.7 % 17 % 160.7 15.6 % 28 % Marine 169.0 22.1 % 222.5 22.5 % (24) % 170.6 22.4 % 30 % Corporate 18.9 7.3 NM 89.8 NM Total gross profit $ 1,959.9 21.9 % $ 1,959.5 22.8 % 0 % $ 1,750.9 23.5 % 12 % NM = not meaningful Off Road: Off Road sales, inclusive of PG&A sales, increased nine percent in 2023 driven by increased shipments and product mix, partially offset by higher finance interest.
Added
Sales to customers outside of North America increased one percent in 2023 driven by increased snowmobile shipments. The average per unit sales price for the Off Road segment increased approximately two percent, driven by higher pricing.
Added
Additional information on our end markets for 2023: • Polaris North America ATV unit retail sales up low-single digits percent • Polaris North America side-by-side unit retail sales up mid-single digits percent • Total Polaris North America ORV unit retail sales up mid-single digits percent • Estimated North America industry ORV unit retail sales up low-single digits percent • Total Polaris North America ORV dealer inventories up approximately 55 percent • Polaris North America snowmobile unit retail sales for the 2023-2024 season-to-date period through December 31, 2023 up low-teens percent • Estimated North America industry snowmobile unit retail sales for the 2023-2024 season-to-date period through December 31, 2023 up low-double digits percent • Total Polaris North America snowmobile dealer inventories up approximately 120 percent Gross profit, as a percentage of sales, decreased in 2023 primarily due to unfavorable product mix, higher finance interest, and foreign currency exchange rate movement, partially offset by lower input costs.
Added
On Road: On Road sales, inclusive of PG&A sales, increased two percent in 2023 driven by product mix. On Road sales to customers outside of North America increased nine percent in 2023, driven by product mix.
Added
The average per unit sales price for the On Road segment increased five percent, driven by product mix. 29 Table of Contents Additional information on our end markets for 2023: • Indian Motorcycle North America unit retail sales up mid-single digits percent • Estimated North America industry 900cc cruiser, touring, and standard motorcycle unit retail sales down high-single digits percent • Polaris North America motorcycle dealer inventories up approximately 20 percent Gross profit, as a percentage of sales, increased in 2023 due to favorable product mix and lower input costs, partially offset by increased warranty costs and higher finance interest.
Added
Marine: Marine sales decreased 23 percent, primarily due to decreased shipments, partially offset by higher net pricing.
Added
Additional information on our end markets for 2023: • Polaris U.S pontoon unit retail sales down mid-single digits percent • Estimated U.S. industry pontoon unit retail sales down high-single digits percent • Polaris U.S. deck boat unit retail sales down mid-teens percent • Estimate U.S. industry deck boat unit retail sales down mid-twenties percent Gross profit, as a percentage of sales, decreased due to a decrease in sales volumes resulting in decreased leverage of manufacturing costs, partially offset by higher net pricing.
Added
Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance.
Added
These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
Added
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.
Added
For example, costs associated with our multi-phase supply chain transformation initiative and certain corporate restructuring activities, such as acquisitions and divestitures, are included as non-GAAP adjustments. We use the non-GAAP financial measure of Adjusted EBITDA Margin, which is defined as Adjusted EBITDA divided by net sales.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
The following table presents a reconciliation of net income from continuing operations, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the periods presented: 30 Table of Contents For the Years Ended December 31, ($ in millions) 2023 2022 2021 Sales $ 8,934.4 $ 8,589.0 $ 7,439.2 Net income from continuing operations 502.7 603.4 496.6 Provision for income taxes 117.7 158.0 132.1 Interest expense 125.0 71.7 44.2 Depreciation 241.2 214.0 193.4 Intangible amortization (1) 17.7 18.8 22.9 Distributions from other affiliates and impairment charges (2) (1.4) (0.7) 7.7 Acquisition-related costs (3) 1.3 — — Restructuring and realignment expenses (4) 8.2 6.2 13.1 Class action litigation expenses (5) 8.5 4.5 9.4 Loss on sale of businesses (6) — — 36.8 Adjusted EBITDA $ 1,020.9 $ 1,075.9 $ 956.2 Adjusted EBITDA Margin 11.4 % 12.5 % 12.9 % (1) Represents amortization expense for acquisition-related intangible assets (2) Represents impairment charges and subsequent distributions related to a strategic investment held by the Company (3) Represents adjustments for integration and acquisition-related expenses (4) Represents adjustments for corporate restructuring, network realignment costs, and supply chain transformation costs (5) Represents adjustments for certain class action litigation-related expenses (6) Represents the loss associated with the Company’s divestiture of the Global Electric Motorcar (GEM) and Taylor-Dunn businesses Liquidity and Capital Resources Our primary sources of liquidity have been cash provided by operating and financing activities, including funds as needed from our credit facility and issuances of long-term debt.
Added
Our primary uses of funds have been for new product development, capital investments, cash dividends to shareholders, repurchases and retirement of common stock and acquisitions. The seasonality of production and shipments cause working capital requirements to fluctuate during the year and from year to year.
Added
We believe that existing cash balances and cash flows to be generated from operating activities, borrowing capacity under our credit facility and from future issuances or borrowings of long-term debt, will be sufficient to fund operations, new product development, cash dividends to shareholders, repurchases and retirement of common stock, and capital requirements for at least the next 12 months and for the foreseeable future thereafter. 31 Table of Contents Cash Flows The following table summarizes the cash flows from operating, investing and financing activities of continuing operations: ($ in millions) For the Years Ended December 31, 2023 2022 Change 2023 vs. 2022 2021 Change 2022 vs. 2021 Total cash provided by (used for): Operating activities $ 925.8 $ 534.5 $ 391.3 $ 286.8 $ 247.7 Investing activities (462.0) (319.3) (142.7) (288.4) (30.9) Financing activities (431.3) (363.2) (68.1) (107.6) (255.6) Operating Activities: The increase in net cash provided by operating activities of continuing operations in 2023 was primarily the result of reduced working capital in the current year compared to working capital additions in the prior year, partially offset by lower net income from continuing operations.
Added
Investing Activities: The primary sources and uses of cash were for the purchase of property, equipment and tooling for continued capacity and capability at our manufacturing, distribution and product development facilities, capital deployed for acquisitions and proceeds received from the disposal of businesses, and distributions from and contributions to Polaris Acceptance.
Added
Net cash used for investing activities of continuing operations increased in 2023 due to an increase in property, equipment and tooling purchases, as well as cash utilized for an acquisition in the current period compared to proceeds received for the disposal of certain businesses in the prior year.
Added
Financing Activities: The increase in net cash used for financing activities was attributable to decreased net borrowings under debt arrangements. Net repayments totaled $158.2 million in 2023 compared to $257.7 million of net borrowings in 2022. This increase was partially offset by lower share repurchases and increased proceeds from stock issuances under employee plans.
Added
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 December 31, 2023, outstanding borrowings under the Master Note Purchase Agreement totaled $350.0 million.
Added
We are also party to an unsecured credit facility, which includes a $1.0 billion variable interest rate Revolving Loan Facility that matures in June 2026, under which we have unsecured borrowings. As of December 31, 2023, there were borrowings of $228.2 million outstanding under the Revolving Loan Facility.
Added
Our credit facility also includes a Term Loan Facility, on which $780.0 million was outstanding as of December 31, 2023. We are required to make principal payments under the Term Loan Facility totaling $45 million over the next 12 months. Interest is charged at rates based on adjusted Term SOFR for the credit facility.
Added
As of December 31, 2023, we had $764.3 million of availability on the Revolving Loan Facility. In December 2021, we amended the credit facility to provide an unsecured incremental 364-day term loan (the “Incremental Term Loan”) in the amount of $500 million, which was fully drawn on closing.
Added
In December 2022, we further amended the unsecured credit facility to extend the maturity date of the Incremental Term Loan to December 15, 2023. The Incremental Term Loan was fully repaid in December 2023 using net proceeds from the Company’s sale of senior notes in a public offering completed in November 2023.
Added
In November 2023, we amended the credit facility to terminate all guarantees provided by our subsidiaries under the credit facility, remove the requirement for our subsidiaries to provide guarantees of the obligations under the credit facility, and remove certain of our subsidiaries as co-borrowers. 32 Table of Contents The agreements governing the credit facility and the Master Note Purchase Agreement contain covenants that require us to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios.
Added
The agreements require us to maintain an interest coverage ratio of not less than 3.00 to 1.00 and a leverage ratio of not more than 3.50 to 1.00 on a rolling four quarter basis. In November 2023, we issued $500 million aggregate principal amount of 6.950% Senior Notes pursuant to a public offering.
Added
We received approximately $492 million pursuant to the notes after deducting the underwriting discount and other fees and expenses. Net proceeds from the notes, along with cash on hand, were used to repay borrowings due in December 2023 under the Incremental Term Loan.
Added
The notes bear interest at a rate of 6.950% per year, with interest payable semi-annually in arrears in March and September of each year. The notes mature in March of 2029. The indenture governing the senior notes is subject to customary covenants and make-whole provisions upon early termination.
Added
On July 2, 2018, pursuant to the Agreement and Plan of Merger dated May 29, 2018, we completed the acquisition of Boat Holdings, LLC, a privately held Delaware limited liability company, headquartered in Elkhart, Indiana which manufactures boats (“Boat Holdings”).
Added
As a component of the Boat Holdings merger agreement, we have committed to make a series of deferred payments to the former owners through July 2030. The original discounted payable was for $76.7 million, of which $49.4 million was outstanding as of December 31, 2023.
Added
As of December 31, 2023, and December 31, 2022, we were in compliance with all debt covenants. Our debt to total capital ratio was 57 percent and 65 percent as of December 31, 2023 and December 31, 2022, respectively.
Added
Additionally, as of December 31, 2023, we had letters of credit outstanding of $42.6 million, primarily related to purchase obligations for raw materials. Share Repurchases: As of December 31, 2023, our Board of Directors has authorized us to repurchase up to an additional $1,185.1 million of our common stock.
Added
We repurchased a total of 1.6 million shares of our common stock for $178.6 million during 2023, which had a favorable impact on diluted net income from continuing operations per share of 13 cents. Wholesale Customer Financing Arrangements: We have arrangements with certain finance companies to provide secured floor plan financing for our dealers.
Added
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.
Added
As of December 31, 2023 and 2022, the outstanding amount financed worldwide by dealers under these arrangements was approximately $2,629.9 million and $1,893.9 million, respectively. We participate in the cost of dealer financing up to certain limits. Under these arrangements, we have agreed to repurchase products repossessed by these finance companies.
Added
As of December 31, 2023, the potential aggregate repurchase obligations were approximately $496.3 million. Our financial exposure under these repurchase agreements is limited to the difference between the amounts unpaid by the dealer with respect to the repossessed product plus costs of repossession and the amount received on the resale of the repossessed product.
Added
No material losses have been incurred under these agreements during the periods presented. Retail Customer Financing Arrangements: We have agreements with third-party financing companies to provide financing options to end consumers of our products. We have no material contingent liabilities for residual value or credit collection risk under these agreements.
Added
During 2023, consumers financed 27 percent of our vehicles sold in the United States through these arrangements. The volume of installment credit contracts written in calendar year 2023 with these institutions was $1,403.1 million, a 28 percent increase from 2022.
Added
Critical Accounting Policies and Critical Accounting Estimates We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates.
Added
An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different 33 Table of Contents estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur may have a material impact on our financial condition or results of operations.
Added
The significant accounting policies that management believes are the most critical to aid in fully understanding and evaluating our reported financial results include the following: revenue recognition, sales promotions and incentives, product warranties, product liability, and goodwill and other intangible assets. Revenue recognition.
Added
With respect to wholegood vehicles, boats, and PG&A, revenue is recognized when we transfer control of the product to our customer (primarily dealers and distributors).
Added
With respect to services provided by us, revenue is recognized upon completion of the service or over the term of the service agreement in proportion to the costs expected to be incurred in satisfying the obligations over the term of the service period.
Added
Revenue is measured based on the amount of consideration that we expect to be entitled to in exchange for the goods or services transferred. Sales, value add, and other taxes collected from a customer concurrent with revenue-producing activities are excluded from revenue. When the right of return exists, we adjust the consideration for the estimated effect of returns.
Added
We estimate expected returns based on historical sales levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of customer, and a projection of this experience into the future. We have agreed to repurchase products repossessed by the finance companies up to certain limits.
Added
Our financial exposure is limited to the difference between the amount paid to the finance companies and the amount received on the resale of the repossessed product. Sales promotions and incentives.
Added
We accrue for estimated sales promotion and incentive expenses, which are recognized as a component of sales in measuring the amount of consideration we expect to receive in exchange for transferring goods or providing services. Examples of sales promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and sales associate incentives.
Added
Sales promotion and incentive expenses are estimated based on current programs, planned programs, and historical rates for each product line. We record these amounts as a liability in the consolidated balance sheet until they are ultimately paid. As of December 31, 2023 and 2022, accrued sales promotions and incentives were $230.9 million and $127.0 million, respectively.
Added
Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if the customer usage rate varies from historical trends.
Added
Adjustments to sales promotion and incentive accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date. Product warranties.
Added
We typically provide a limited warranty for our vehicles and boats for a period of six months to ten years, depending on the product. We provide 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.
Added
Our standard warranties require us, generally through our 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.
… 27 more changes not shown on this page.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
14 edited+2 added−2 removed2 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
14 edited+2 added−2 removed2 unchanged
2022 filing
2023 filing
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.
Certain assets and liabilities related to intercompany positions reported on our consolidated balance sheets that are denominated in a currency other than the entity’s functional currency are translated at the foreign exchange rates at the balance sheet date and the associated gains and losses are included in net income.
We expect currencies to have a negative impact on net income in 2023 compared to 2022. The assets and liabilities in all our international entities are translated at the foreign exchange rate in effect at the balance sheet date.
We expect currencies to have a negative impact on net income in 2024 compared to 2023. The assets and liabilities in all of our international entities are translated at the foreign exchange rate in effect at the balance sheet date.
All other things being equal, at current annual volumes, a hypothetical 10 percent fluctuation of the U.S. dollar compared to the Euro impacts annual operating income by approximately $20 million and a hypothetical 10 percent fluctuation of the U.S. dollar compared to the Canadian Dollar impacts annual operating income by approximately $53 million.
All other things being equal, at current annual volumes, a hypothetical 10 percent fluctuation of the U.S. dollar compared to the Euro impacts annual operating income by approximately $21 million and a hypothetical 10 percent fluctuation of the U.S. dollar compared to the Canadian Dollar impacts annual operating income by approximately $47 million.
Foreign exchange risk can be quantified by performing a sensitivity analysis assuming a hypothetical change in the value of the U.S. dollar compared to other currencies in which we transact. We are most exposed to the Euro and Canadian dollar.
The relationship of the U.S. dollar in relation to these other currencies impacts sales, cost of sales and net income. Foreign exchange risk can be quantified by performing a sensitivity analysis assuming a hypothetical change in the value of the U.S. dollar compared to other currencies in which we transact. We are most exposed to the Euro and Canadian dollar.
A portion of our foreign currency exposure is mitigated with the following open foreign currency hedging contracts as of December 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 $ 13.7 $0.69 to 1 AUD Canadian Dollar Long $ 93.3 $0.76 to 1 CAD Mexican Peso Short $ 47.0 22 Peso to $1 35 Table of Contents In 2022, after consideration of the existing foreign currency hedging contracts, foreign currencies had a negative impact on net income compared to 2021.
A portion of our foreign currency exposure is mitigated with the following open foreign currency hedging contracts as of December 31, 2023: 36 Table of Contents 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 $ 25.6 $0.66 to 1 AUD Canadian Dollar Long $ 196.7 $0.74 to 1 CAD Mexican Peso Short $ 28.0 20 Peso to $1 In 2023, after consideration of the existing foreign currency hedging contracts, foreign currencies had a negative impact on net income compared to 2022.
Based on our current outlook for commodity prices, the total impact of commodities is expected to have a favorable impact on our gross profit margins for 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.
The total impact of commodities had a favorable impact on our gross profit margins for 2023 when compared to 2022. Based on our current outlook for commodity prices, the total impact of commodities is expected to have a favorable impact on our gross profit margins for 2024 when compared to 2023.
Based on the unhedged variable-rate debt included in our debt portfolio as of December 31, 2022, a 100 basis point increase or decrease in interest rates would increase or decrease interest expense by approximately $8 million. 36 Table of Contents
Based on the unhedged variable-rate debt included in our debt portfolio as of December 31, 2023, a 100 basis point increase or decrease in interest rates would increase or decrease interest expense by approximately $6 million. Borrowings pursuant to our private senior notes and public senior notes bear interest at fixed rates.
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.
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.
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 Rates: We are a party to an unsecured credit facility with various lenders consisting of a $1.0 billion revolving loan facility and a $1.2 billion term loan facility. Interest accrues on the revolving loan and term loans at variable rates based on adjusted Term SOFR plus the applicable add-on percentage as defined.
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.
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 enter into interest rate swaps in order to maintain a balanced risk of fixed and floating interest rates associated with our debt.
As of December 31, 2023, there was $228.2 million outstanding on the revolving loan and $780.0 million outstanding on the term loan. We enter into interest rate swaps in order to maintain a balanced risk of fixed and variable interest rates associated with our debt.
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.
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.
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.
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 and purchase components from certain suppliers directly for our U.S. operations in transactions denominated in these foreign currencies.
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. The total impact of commodities, had an unfavorable impact on our gross profit margins for 2022 when compared to 2021.
We generally buy these commodities and components based upon market prices that are established with the vendor as part of the purchase process. We enter into commodity hedging contracts in order to manage fluctuating market prices of certain commodities such as steel and diesel fuel.
Removed
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 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.
Added
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Inflation, Foreign Exchange Rates, and Interest Rates Inflation: We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials, including steel, aluminum, copper, petroleum-based resins, certain rare earth metals and diesel fuel.
Removed
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 December 31, 2022, there was $312.9 million outstanding on the revolving loan, $828.0 million outstanding on the term loan, and $500 million outstanding on the incremental term loan.
Added
We are subject to changes in the fair value of fixed-rate borrowings as a result of potential changes in prevailing interest rates. Changes in the fair value of fixed-rate borrowings have no impact on the amount of interest incurred, cash flows or our financial position. 37 Table of Contents