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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-11411
POLARIS INC.
(Exact name of registrant as specified in its charter)
Minnesota41-1790959
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2100 Highway 55,
Medina,
Minnesota
55340
(Address of Principal Executive Offices)
(Zip Code)
(763) 542-0500
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act
Title of ClassTrading Symbols
Name of Each Exchange on Which Registered 
Common Stock, $.01 par valuePIINew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes      No  ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No       
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $5,675,268,000 as of June 30, 2020, based upon the last sales price per share of the registrant’s Common Stock, as reported on the New York Stock Exchange on such date. As of February 9, 2021, 61,970,286 shares of Common Stock, $.01 par value, of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement for the registrant’s Annual Meeting of Shareholders to be held on April 29, 2021 to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report (the “2021 Proxy Statement”), are incorporated by reference into Part III of this Form 10-K.


Table of Contents
 
  POLARIS INC.
2020 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
 
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PART I
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. We design, engineer and manufacture powersports vehicles which include, Off-Road Vehicles (ORV), including All-Terrain Vehicles (ATV) and side-by-side vehicles for recreational and utility use, Snowmobiles, Motorcycles, Global Adjacent Markets vehicles, including Commercial, Government and Defense vehicles, and Boats. Polaris also designs and manufactures or sources parts, garments and accessories (PG&A) related to its vehicles and aftermarket products and services for off-road and on-road vehicles. Polaris products are sold online and through dealers, distributors, and retail stores principally located in the United States, Canada, Western Europe, Australia, and Mexico.
Business Segments
We operate in six business segments; ORV, Snowmobiles, Motorcycles, Global Adjacent Markets, Aftermarket, and Boats. Our products are sold through a network of approximately 2,300 independent dealers in North America, approximately 1,400 independent international dealers through over 30 subsidiaries, and approximately 90 independent distributors in over 120 countries outside of North America. A majority of our dealers and distributors are multi-line and also carry competitor products, however few carry our full line of products and, while relatively consistent, the actual number of dealers can vary from time to time. We also sell through a network of brick-and-mortar retail centers.
Off-Road Vehicles:
ORVs are four-wheel vehicles designed for off-road use and traversing a wide variety of terrain, including dunes, trails, and mud. The vehicles can be multi-passenger or single passenger, are used for recreation in such sports as fishing and hunting and for trail and dune riding, and for utility purposes on farms, ranches, and construction sites. 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.
Estimated North America and worldwide ORV industry retail sales are summarized as follows:
Twelve months ended December 31,
Estimated* Approximate Industry Sales (in units)202020192018
North America ATV retail sales345,000260,000260,000
North America side-by-side retail sales640,000510,000475,000
North America ORV retail sales985,000770,000735,000
Worldwide ATV retail sales465,000380,000370,000
Worldwide side-by-side retail sales690,000550,000530,000
Worldwide ORV retail sales1,155,000930,000900,000
*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. See Market and Industry Data section for additional information.
The side-by-side market has increased consistently over the past several years primarily due to continued innovation by manufacturers. More recently, the COVID-19 pandemic has boosted both ATV and side-by-side sales as these products provide an attractive social-distancing solution for new and existing Powersports customers.
In 2020, we continued to be the North America market share leader in Off-Road Vehicles. 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 (excluding military vehicles) spans 85 models, including two-, four- and six-wheel drive general purpose, recreational, and commercial vehicles. 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 2020 ORV product introductions included the fully redesigned SPORTSMAN 450 & SPORTSMAN 570, SPORTSMAN 570 ULTIMATE TRAIL LE, RANGER XP1000 NORTHSTAR ULTIMATE, RANGER XP1000 TRAIL BOSS, GENERAL XP1000 PURSUIT EDITION, GENERAL XP1000 FACTORY CUSTOM EDITION, GENERAL 1000 SPORT, RZR TURBO S LIFTED LIME LE, RZR PROXP ORANGE MADNESS LE & OUTLAW 70 EFI.
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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 also market a full line of gear and apparel related to our ORVs, including helmets, jackets, gloves, pants and hats. Gear and apparel is designed to our specifications, purchased from independent vendors and sold by us through our dealers, distributors, and online.
We sell our ORVs directly to a network of over 1,400 dealers in North America and over 1,000 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. 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. We utilize our Retail Flow Management (RFM) ordering system for ORV dealers, which allows dealers to order daily and create a segment stocking order which reduces order fulfillment times.
The ORV industry in the United States, Canada and other global markets is highly competitive. 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.
Snowmobiles:
Snowmobiles have been manufactured under the Polaris name since 1954. We estimate that worldwide industry sales of snowmobiles totaled approximately 125,000, 135,000, and 125,000 units for the seasons ended March 31, 2020, 2019, and 2018, respectively.
For the season ended March 31, 2020, we held the number two market share position for North America. We produce a full line of snowmobiles consisting of 80 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, Russia and Northern Europe. 2020 snowmobile product introductions included the all new Matryx Platform available with 7S display as well as the 650 Patriot Engine. Key models include the Polaris INDY VR1 129/137, Polaris INDY XC Launch Edition, Polaris SWITCHBACK ASSAULT 146, Polaris PRO RMK QD2, Polaris RMK KHAOS QD2.We also manufacture a snow bike conversion kit system under the Timbersled brand.
We design, engineer, produce or supply a variety of replacement parts and Polaris Engineered Accessories for our snowmobiles and snow bike conversion kits. 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 sell our snowmobiles directly to a network of approximately 600 dealers in North America, primarily located in the snowbelt regions of the United States and Canada, as well as and over 300 international dealers. We offer a pre-order SnowCheck program in the spring for our customers that assists us in production planning. This program allows our customers to order a true factory-customized snowmobile by selecting various options, including chassis, track, suspension, colors and accessories. Manufacturing of snowmobiles commences in late winter of the previous season and continues through late autumn or early winter of the current season.
The global Snowmobile industry is primarily comprised of North American, Japanese, and Russian competitors. Competitive market share position is driven heavily by product news (styling, technology, performance) and attractiveness of promotional incentives.
Motorcycles:
Motorcycles are utilized as a mode of transportation as well as for recreational purposes. The industry is comprised of several segments. We currently compete in three segments: cruisers, touring (including 3-wheel), and standard motorcycles. Competition in these segments of the motorcycle industry is based on a number of factors, including styling, price, quality, reliability and the dealer network supporting the brand.
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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)202020192018
North America 900cc cruiser, touring, and standard retail sales190,000210,000210,000
Worldwide 900cc cruiser, touring, and standard retail sales330,000365,000370,000
*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. See Market and Industry Data section for additional information.
In 2020, we held the number two position in North America market share for the 900cc+ category. Our motorcycles lineup includes Indian Motorcycle and Slingshot, a 3-wheel open air roadster. Our 2021 model year line of motorcycles for Indian Motorcycle and Slingshot consists of 25 models. In 2020, Indian Motorcycle launched its all-new 2021 lineup delivering next-level technology and a robust suite of new accessories. Polaris Slingshot launched its much-anticipated AutoDrive transmission technology in the 2020 lineup, then expanded the 2021 lineup, which now includes a base model Slingshot S.
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. Gear and apparel is purchased from independent vendors and sold by us through our dealers and 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 North America and over 300 international dealers. Slingshot currently has over 350 dealers globally. We utilize our RFM ordering system for motorcycle dealers, which allows dealers to order daily and create a segment stocking order which reduces order fulfillment times.
Global Adjacent Markets:
Our Global Adjacent Markets business designs and manufacturers vehicles that support people mobility as well as various commercial work applications, and include products in the light-duty hauling, people mover, industrial and urban/suburban commuting sub-sectors, as well as tactical defense vehicles. As part of Global Adjacent Markets, our Polaris Adventures business partners with local outfitters to deliver unique ride experiences leveraging many of our global vehicle platforms. We estimate the worldwide target market for Polaris’ Global Adjacent Markets businesses was over $8.0 billion in 2020, which includes light duty hauling, people movers, industrial, rental, urban/suburban commuting and related quadricycles.
Our vehicle brands include GEM, Goupil, Aixam, ProXD, and Taylor-Dunn, offering low emission vehicles, light duty hauling, passenger vehicles and industrial vehicles. Across these brands we offer 85 models. Global Adjacent Markets also includes all government, defense, and business-to-business (B2B) applications of ORV, Snowmobiles, and Motorcycles outside of our traditional dealer channels. For defense customers, we offer ATVs and side-by-side vehicles with features specifically designed for ultra-light tactical military applications. These vehicles provide versatile mobility for up to nine passengers, and include DAGOR, Sportsman MV and MRZR.
Within Global Adjacent Markets, our businesses each have their own distribution networks through which their respective vehicles are distributed. GEM has approximately 200 dealers. ProXD is sold through a growing network of over 100 dealers and also direct to customer where permitted. 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. Taylor-Dunn has approximately 200 United States dealers and approximately 50 international dealers. The Polaris Adventures network completed over 270,000 rides in over 150 locations in 2020.
Aftermarket:
Aftermarket parts, garments and accessories are sold through a highly fragmented industry, which includes dealers, aftermarket e-commerce, big box retailers, distributors and specialty 4x4 retailers. We estimate the market for Jeep and truck aftermarket accessories was approximately $9.0 billion in 2020, and the market for Powersports aftermarket parts, garments and accessories to be approximately $5.0 billion in 2020.
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Our aftermarket portfolio of brands include Transamerican Auto Parts (“TAP”), which is a vertically integrated manufacturer, distributor, retailer and installer of off-road Jeep and truck accessories. TAP owned brands include 4WP, 4 Wheel Parts, Pro Comp, Smittybilt, Rubicon Express, G2 Axle & Gear, Poison Spyder, Trail Master, 4WP Factory, and LRG. We compete primarily in North America and our competition is highly fragmented across the retail and online channels. TAP sells through its retail stores, call center, and e-commerce sites, while also supporting numerous independent accessory retailers/installers through their wholesale distribution network. TAP conducts business through a three-pronged sales, service, and manufacturing paradigm. TAP has 95 brick-and-mortar retail centers, staffed with experienced product and installation specialists. TAP’s omni-channel retail strategy includes a significant e-commerce business with 4WheelParts.com and 4WD.com. The TAP e-commerce network facilitates consumer sales, service and support, including “pick-up-in-store.”
Other brands within our aftermarket portfolio include Kolpin, Pro Armor, Klim, 509, and Trail Tech. Aftermarket brands in our off-road category include Kolpin, 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, a lineup that specializes in accessories for performance side-by-side vehicles and ATVs. Aftermarket brands in our Apparel category include Klim, which specializes in premium technical riding gear for snowmobile, motorcycle and off-road activities, and 509, which is an aftermarket leader in snowmobile and Offroad apparel, helmets and goggles. Kolpin Outdoors, Pro Armor and Trail Tech are marketed through Apex Product Group, a unified sales, customer service, distribution and vertically integrated manufacturing organization. Apex brands allow us to access customers through strategic retail and e-commerce marketplaces, as well as dealerships (Polaris and non-Polaris) to reach owners of Polaris and other OEM’s products. Klim and 509 each have their own dealer/distributor networks.
Boats:
On July 2, 2018, we completed the acquisition of Boat Holdings, LLC, a privately held Delaware limited liability company, headquartered in Elkhart, Indiana which manufactures boats. As a result, we established the Boats operating segment.
Our boats are designed to compete in key segments of the recreational marine industry, primarily pontoon and deck boats. Inclusive of the segments in which we compete, we estimate total U.S. 2020 powerboats market sales were approximately $13.0 billion, with pontoon being one of the largest segments therein.
Our brands include Bennington, Godfrey, and Hurricane, with a full offering of pontoon and deck boats. These brands are strategically positioned with over 500 base models across a range of price points. We also offer custom layouts and features and work with numerous engine manufacturers enabling customers to build exactly what they want. In 2020, Polaris Boats, including the Bennington and Godfrey brands, is projected to be the market share leader in pontoon boats and our Hurricane brand the market share leader in deck boats.
In a highly fragmented industry, our extensive, experienced and loyal network of over 600 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. Through the use of offseason incentive programs, we adhere to level production throughout the year, minimizing disruption to the workforce and vendor network. 
Financial Services Arrangements
Floor plan financing. 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 TCF Financial Corporation (“TCF”) to provide floor plan financing for many of our dealers. A majority of our North America sales of snowmobiles, ORVs, motorcycles, boats, and related PG&A are financed under these arrangements whereby we are paid within a few days of shipment of our product. We participate in the cost of dealer financing and have agreed to repurchase products from the finance companies under certain circumstances and subject to certain limitations. We have not historically been required to repurchase a significant number of units. See Note 10 of Notes to Consolidated Financial Statements for a discussion of these financial services arrangements.
Customer financing. We do not offer consumer financing directly to the end users of our products. Instead, we have agreements in place with third party financing companies to provide financing services to those end consumers.
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We have a multi-year agreement with Sheffield Financial (“Sheffield”) pursuant to which Sheffield agreed to make available closed-end installment consumer and commercial credit to customers of our dealers for Polaris products. The current installment credit agreement under which Sheffield provides installment credit lending for ORVs, snowmobiles, and certain other Polaris products expires in December 2024.
We have a multi-year agreement with Evergreen Bank Group, under which Performance Finance, as a division of Evergreen Bank Group, makes available closed-end installment credit to customers of our dealers for both Polaris and non-Polaris products. The current installment credit agreement under which Performance Finance provides installment credit lending for Polaris and non-Polaris products expires in December 2021.
We have a multi-year contract with Synchrony Bank, under which Synchrony Bank makes available closed-end installment consumer and commercial credit to customers of our dealers for both Polaris and non-Polaris products. The current installment credit agreement under which Synchrony Bank provides installment credit lending for Polaris products expires in December 2025.
Manufacturing and Distribution Operations
Our products are primarily assembled at our 20 global manufacturing facilities, many of which are shared across business segments. We are vertically integrated in several key components of our manufacturing process, including plastic injection molding, precision machining, welding, clutch assembly and painting. Certain other component parts are purchased from third-party vendors. Raw materials or standard parts are available from multiple sources for the components manufactured by us. Polaris Boats has a long-term supply contract with an 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 maintain several leased wholegoods distribution centers where final set-up and up-fitting is completed for certain models before shipment to dealers, distributors, and customers.
Our products are distributed to our dealers, distributors, and customers through a network of over 30 distribution centers, including third-party providers.
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. 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 also provide print materials, signage and other promotional items for use by dealers. We spent $544.3 million, $559.2 million and $491.8 million for sales and marketing activities in 2020, 2019 and 2018, respectively. Our corporate headquarters facility is in Medina, Minnesota, and we maintain over 30 other sales and administrative facilities across the world.
Engineering, Research and Development, and New Product Introduction
We have approximately 1,300 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, Chula Vista, California, Elkhart, Indiana, and Burgdorf, Switzerland.
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. 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. We utilize our Wyoming, Minnesota facility for engineering, design and development personnel for our line of engines and powertrains, ORVs, motorcycles, and certain Global Adjacent Market vehicles, 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 also own Swissauto
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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, KLIM, and 4 WHEEL PARTS. We protect these marks as appropriate through registrations in the United States and other jurisdictions. Depending on the jurisdiction, trademarks are generally valid as long as they are in use or their registrations are properly maintained and they have not been found to have become generic. Registrations of trademarks can also generally be renewed indefinitely for as long as the trademarks are in use.
We continue our focus on developing and marketing innovative, proprietary products, many of which use proprietary expertise, trade secrets, and know-how. We consider the collective rights under our various patents, which expire from time to time, a valuable asset, but we do not believe that our businesses are materially dependent upon any single patent or group of related patents.
Product Safety & Regulatory Affairs
Product safety regulations. Federal, state/provincial and local governments around the world have promulgated and/or are considering promulgating laws and regulations relating to the safety of our products. For example, in 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. The National Highway Transportation Safety Administration (NHTSA) has federal oversight over product safety issues related to motorcycles (including Slingshot) and on-road people mobility vehicles (including GEM). The U.S. Coast Guard (part of the U.S. Department of Homeland Security) is the federal agency responsible for maritime safety, security and environmental stewardship in U.S. ports and waterways.
The Consumer Product Safety Improvement Act (the Act) requires ATV manufacturers and distributors to comply with previously voluntary American National Standards Institute (ANSI) safety standards developed by the Specialty Vehicle Institute of America (SVIA). The Act also requires CPSC to update the mandatory standard (if it deems doing so to be appropriate) based on updates to the voluntary ANSI/SVIA standards, which has occurred.  The Act also includes a provision that requires the CPSC to complete an ongoing ATV rulemaking process regarding the need for safety standards or increased safety standards for ATVs.  This process has not yet resulted in the issuance of a final rule.  We believe that our products comply with all applicable CPSC, ANSI and/or SVIA safety standards as well as all other applicable safety standards in the U.S. or internationally.  In addition, we have had an action plan on file with the CPSC since 1998 regarding safety related issues.
In October 2009, the CPSC published an advance notice of proposed rulemaking regarding side-by-side vehicle, also known as Recreational Off-Highway Vehicle (ROV), safety under the Consumer Product Safety Act. In December 2014, the CPSC published a Notice of Proposed Rulemaking that includes proposed mandatory safety standards for ROVs in the areas of lateral stability, steering and handling, and occupant retention. Polaris and powersports industry associations have expressed concerns about the proposed mandatory standards, whether they would actually reduce ROV incident rates, whether the proposed tests are repeatable and appropriate for ROVs, and the unintended safety consequences that could result from them. As a result of those concerns, revisions to voluntary industry standards were proposed. In 2015, CPSC staff expressed support for the proposed 2016 revisions to the ANSI standard, and subsequently recommended that the CPSC terminate its rule-making process. We are unable to predict the outcome of the CPSC rule-making process or the ultimate impact of any resulting rules on our business and operating results.
We are a member of the Recreational Off-Highway Vehicle Association (ROHVA), which was established to promote the safe and responsible use of ROVs, a category that includes our RANGER, Polaris GENERAL, and RZR vehicles. ROHVA develops, through ANSI, voluntary standards for equipment, configuration and performance requirements of ROVs. Comments on the draft standards have been actively solicited from the CPSC and other stakeholders as part of the ANSI process. The standard, which addresses stability, occupant retention and other safety performance criteria, was approved and published by ANSI.  We believe that our products comply with all applicable ROHVA/ANSI safety standards, as well as all other applicable safety standards in the U.S. or internationally.
Motorcycles and certain people mobility vehicles are subject to certain U.S. and foreign vehicle safety and equipment standards, including those standards administered by the NHTSA. Our products and their operators are also subject to various international state and local vehicle equipment and safety standards. Our products are occasionally classified differently in various international jurisdictions. For example, our Slingshot vehicle is classified as a motorcycle under
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U.S. federal law, but may be classified differently in other jurisdictions. At the state level in the U.S., in approximately 48 states the Slingshot is classified as an autocycle, which permits it to be driven with a standard drivers license. We believe our motorcycles (including Slingshot), people mobility vehicles, and all other of our on-road products comply with all applicable U.S and international safety and equipment standards pursuant to each product’s classification.
Our Boats products are subject to marine safety regulations for vessels developed and enforced by the U.S. Coast Guard and its foreign equivalents. We believe that our marine products comply with all applicable U.S. and international safety, design, construction and equipment standards. We are committed to improving recreational boating safety, we maintain strong leadership roles in many international maritime organizations, and we have supported and continue to support a variety of government and nongovernment boating safety efforts in partnership with government agencies and marine industry associations.
Industry Associations. We participate in a number of industry associations relating to our products, including the National Association of Manufacturers, the Recreational Off-Highway Vehicle Association, the Specialty Vehicle Institute of America, the Outdoor Power Equipment Institute, the International Snowmobile Manufacturers Association, the Motorcycle Industry Council, the Motorcycle Safety Foundation, the U.S. Motorcycle Manufacturers Association, the International Motorcycle Manufacturers Association, ACEM, the National Marine Manufacturers Association, and the American Boat & Yacht Council. These associations focus on key issues affecting the manufacture, marketing, and use of our products, including safety standards. We believe our products comply with the applicable industry standards established within these associations.
Product use regulations. Federal, state/provincial and local laws and regulations around the world have been promulgated, and at various times, ordinances or legislation is introduced, relating to the use or manner of use of our products. Some government entities have adopted, or are considering adopting, laws that restrict the use of ORVs and snowmobiles to specified hours and locations. For example, the U.S. federal government also has legislative and executive authority to restrict the use of ORVs, snowmobiles and other products in national parks and on federal lands. In several instances, this restriction has been a ban on the recreational use of these products in these areas.
Environmental regulations. Federal, state/provincial and local governments around the world have adopted and/or are considering adopting laws relating to the reduction or elimination of certain substances and materials in consumer products and the reduction of vehicle greenhouse gas emissions. These regulations are an important component of global environmental and climate protection, and therefore form a key regulatory framework in the design of our products.
For example, in the United States, the federal Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) have both adopted regulations in these areas which are applicable to certain of our products. Canada’s emission regulations for motorcycles, ORVs and snowmobiles are similar to those in the United States. The Europe Union currently regulates emissions from our motorcycles and certain of our ATV-based products for which we obtain whole vehicle type approvals. Emissions from certain other Polaris ORV and snowmobile engines in vehicles sold in the EU may be subject to additional regulations currently under consideration there. We are developing compliance solutions for these future EU emissions regulations. We are also currently developing and obtaining engine and emission technologies to meet the requirements of future anticipated international emission standards.
Human Capital Management
Best People, Best Team is a Polaris guiding principle. Our employees are also among our largest shareholder groups, driven by our Employee Stock Ownership Plan and our equity compensation program. Our greatest asset is our employees and we are committed to providing a diverse and engaging work environment. With almost 15,000 employees globally at the end of 2020, we aim to leverage our Polaris values to drive a positive culture.
Employee Well Being. We believe the physical health, safety, and financial security of our employees is critical to our success and it is a key focus of our guiding principles. Over the last year, the strength of our team was displayed through the agile response to the COVID-19 pandemic, which also offered an opportunity to reinforce our commitment to employee well-being. Polaris’ culture of safety first prepared us to identify and adopt safety controls to protect employees working onsite. We developed a broad set of resources and communications to educate our employees on safety both within and outside of the work environment. Our COVID-19 Pay Policy for US employees provided additional financial security for those impacted by illness or quarantine. With employee well-being as a key focus, we shared resources for employees to manage remote work, support mental health, and balance parental and other family responsibilities.
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Leadership Development. 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. In 2020, our investment in leadership development continued. We scaled virtual leadership training to a larger number of leaders than prior years and disseminated tools for managing remote teams.
We also remained committed to focused development for early career talent. We revamped our 2020 intern programs to support both onsite and remote interns, launching development programs across the hybrid workforce. We believe our intern programs provide a strong talent pipeline to our early career functional development programs across engineering, operations, sales, marketing, finance, human resources, and information services. Each development program consists of structured rotations and additional formal development, accelerating our talent pipeline.
Commitment to Diversity and Inclusion. Our commitment to diversity and inclusion is another focus of our guiding principle of Best People, Best Team. Fostering an environment that ensures equal opportunity and truly values individual differences is critical to the success of our business. Polaris thrives when it empowers and values the unique skills, perspectives and contributions of each employee. In 2020, we made a corporate commitment to the CEO Action Pledge for Diversity & Inclusion, which outlines specific sets of actions designed to advance diversity and inclusion in the workplace. To further this work, we created a Diversity and Inclusion Steering Team to accelerate our progress. We partnered with external training organizations to drive a culture of inclusion, including a partnership with Franklin Covey for interactive training for all employees at the Director+ level in the company. In addition to other actions, we joined the Corporate Partnership Council of the Society of Women Engineers to promote opportunities for development for our team, as well as to build a pipeline for future talent.
Headcount. Due to the seasonality of our business and certain 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, 2020, on a worldwide basis, we employed almost 15,000 full-time persons. Approximately 5,000 of our full-time employees are salaried.
Market and Industry Data
We have obtained the market and industry data presented in this year’s Annual Report from a combination of internal surveys, third party information and estimates by management. There are limited sources that report on our markets and industries. As such, much of the market and industry data presented in this year’s Annual Report is based on internally-generated management estimates, including estimates based on extrapolations from third party surveys of the industries in which we compete. While we believe internal surveys, third party information and our estimates are reliable, we have not verified them, nor have they been verified by any independent sources and we have no assurance that the information contained in third party websites is current, up-to date, or accurate. 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. 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 also make available through our website our corporate governance materials, including our Corporate Governance Guidelines, the charters of the Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Technology Committee of our Board of Directors, our Code of Business Conduct and Ethics, and our Corporate Responsibility Report. Any shareholder or other interested party wishing to receive a copy of these corporate governance materials should write to Polaris Inc., 2100 Highway 55, Medina, Minnesota 55340, Attention: Investor Relations. Information contained on our website is not part of this report. In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC and state the address of that side (http://www.sec.gov).
Forward-Looking Statements
This 2020 Annual Report contains not only historical information, but also “forward-looking statements” intended to qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These “forward-looking
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statements” can generally be identified as such because the context of the statement will include words such as we or our management “believes,” “anticipates,” “expects,” “estimates” or words of similar import. Similarly, statements that describe our future plans, objectives or goals, such as future sales, shipments, net income, net income per share, future cash flows and capital requirements, operational initiatives, tariffs, currency fluctuations, interest rates, and commodity costs, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements, are also forward-looking. Forward-looking statements may also be made from time to time in oral presentations, including telephone conferences and/or webcasts open to the public.
Potential risks and uncertainties include such factors as severity and duration of the COVID-19 pandemic and the resulting impact on the Company’s business, supply chain, and the global economy; the Company’s ability to successfully implement its manufacturing operations expansion and supply chain initiatives, product offerings, promotional activities and pricing strategies by competitors; the Company’s ability to successfully source necessary parts and materials and the ability of the Company to manufacture and deliver products to dealers to meet increasing demand and to bring dealer inventory levels back to optimal levels; the continuation of the increasing consumer demand for the Company’s products; economic conditions that impact consumer spending; disruptions in manufacturing facilities; acquisition integration costs; product recalls, warranty expenses; 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; uncertainty in the retail and wholesale credit markets; performance of affiliate partners; changes in tax policy; relationships with dealers and suppliers; and the general overall economic, social, and political environment.
The risks and uncertainties discussed in this report are not exclusive and other factors that we may consider immaterial or do not anticipate may emerge as significant risks and uncertainties.
Any forward-looking statements made in this report or otherwise speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. We advise you, however, to consult any further disclosures made on related subjects in future quarterly reports on Form 10-Q and current reports on Form 8-K that are filed with or furnished to the Securities and Exchange Commission.
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Information about our Executive Officers
Set forth below are the names of our executive officers as of February 16, 2021, their ages, titles, the year first appointed as an executive officer, and employment for the past five years:
Name and PositionAgeBusiness Experience During the Last Five or More Years
Michael T. Speetzen
Interim Chief Executive Officer
51
Mr. Speetzen was appointed Interim Chief Executive Officer in December 2020. Prior to this, Mr. Speetzen was Executive Vice President—Chief Financial Officer since August 2015.
Robert P. Mack
Interim Chief Financial Officer, Senior Vice President—Corporate Development and Strategy, and President—Global Adjacent Markets and Boats
51
Mr. Mack was appointed Interim Chief Financial Officer in December 2020. Mr. Mack also serves as Senior Vice President—Corporate Development and Strategy, and President—Global Adjacent Markets and Boats. Prior to joining Polaris in April 2016, Mr. Mack was Vice President, Corporate Development for Ingersoll Rand plc.
Kenneth J. Pucel
Executive Vice President—Global Operations, Engineering and Lean
54Mr. Pucel joined Polaris in December 2014 as Executive Vice President—Global Operations, Engineering and Lean.
Lucy Clark Dougherty
Senior Vice President—General Counsel, Chief Compliance Officer and Secretary
51Ms. Clark Dougherty joined Polaris in January 2018 as Senior Vice President—General Counsel, Chief Compliance Officer and Secretary. Prior to joining Polaris, Ms. Clark Dougherty was deputy general counsel at General Motors for Global Markets, Autonomous Vehicles and Transportation as a Service since June 2017. Prior to that role, Ms. Clark Dougherty held several positions at General Motors.
James P. Williams
Senior Vice President—Chief Human Resources Officer
58
Mr. Williams was appointed Senior Vice President—Chief Human Resources Officer in September 2015. Prior to this, Mr. Williams was Vice President—Human Resources since April 2011.
Michael D. Dougherty
President—Motorcycles and International
53
Mr. Dougherty was appointed President—Motorcycles and International in December 2019. Prior to this, Mr. Dougherty was President—International since September 2015 and Vice President—Asia Pacific and Latin America since August 2011.
Stephen L. Eastman
President—Parts, Garments and Accessories
56
Mr. Eastman was appointed President—Parts, Garments and Accessories in September 2015. Prior to this, Mr. Eastman was Vice President—Parts, Garments and Accessories since February 2012.
Steven D. Menneto
President—Off-Road Vehicles
55
Mr. Menneto was appointed President—Off-Road Vehicles in December 2019. Prior to this, Mr. Menneto was President—Motorcycles since September 2015 and previously held several leadership positions since joining the Company in 1997.
 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.

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.
Macroeconomic Risks
Our business may be sensitive to economic conditions, including those that impact our customers’ spending.
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. Weakening of, and fluctuations in, economic conditions affecting disposable consumer income or our customers’ budgets, such as employment levels, 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 and acts of terrorism, the availability of consumer credit could reduce overall spending or reduce spending on our products. A general reduction in consumer spending or a reduction in consumer spending on powersports, boats and aftermarket products could adversely affect our sales growth and profitability. Overall demand for products sold in the Jeep and truck aftermarket is dependent upon many factors including the total number of vehicle
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miles driven in North America, the total number of registered vehicles in North America, the age and quality of these registered vehicles and the level of unemployment in North America. A general reduction in spending by our customers for commercial equipment or a reduction in government budgets could adversely affect our Global Adjacent Markets business.
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.
In addition, we have financial services partnership arrangements with subsidiaries of Wells Fargo Bank, N.A. and TCF Financial Corporation that require us to repurchase products financed and repossessed by the partnership, subject to certain limitations. If adverse changes to economic conditions result in increased defaults on the loans made by this financial services partnership, our repurchase obligation under the partnership arrangement could adversely affect our liquidity and harm our business.
Increases in the cost of raw material, commodity, component parts, and transportation costs and shortages of certain raw materials could negatively impact our business.
The primary commodities used in manufacturing our products are aluminum, steel, petroleum-based resins and certain rare earth metals used in our charging systems, as well as diesel fuel to transport the products. Our profitability is affected by significant 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. Additionally, there continues to be uncertainty with respect to the implementation of current trade regulations (including the USMCA), future trade regulations and existing international trade agreements which 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 or result in decreased demand for our products or restructuring actions that could impact our work force and/or our investments in research and development or other growth initiatives. All of these could materially and 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.
The markets we operate in are highly competitive. Competition in such markets is based upon a number of factors, including price, quality, reliability, styling, product features and warranties. At the dealer level, competition is based on a number of factors, including product availability, sales and marketing support programs (such as financing and cooperative advertising), and dealer and customer perception. Certain of our competitors are more diversified and have advantaged manufacturing footprints, and may invest more heavily in intellectual property, product development, promotions and advertising. If we are not able to compete with new or enhanced products or models of our competitors, our 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. 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 products for the discretionary spending of consumers and, to a lesser extent, with other vehicles designed for utility applications. A failure to effectively compete with these other competitors could materially and adversely affect our financial results and have a material adverse effect on our performance.
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.
One of our growth strategies is to develop safe, quality, innovative, customer-valued products to generate revenue growth, including from an increasing portfolio of electric vehicles. Our sales from new products in the past have represented a significant component of our sales and are expected to continue to represent a significant component of our future sales. We may not be able to compete as effectively in the market, and ultimately satisfy the needs and preferences of our customers, unless we can continue to enhance existing product, execute on our electrification strategy, and develop new innovative products in the global markets in which we compete. Product development requires significant financial, technological and other resources. There can be no assurance that our past level of investment in research and development will be sufficient to maintain our competitive advantage in product innovation, which could cause our
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business to suffer. 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. Our competitors’ new products may be of a better quality, beat our products to market, and be more attractive with more features and/or less expensive than our products.
Our continued success is dependent on positive perceptions of our Polaris brands which, if impaired, could adversely affect our sales.
We believe that our Polaris brands are 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. 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. Negative incidents, such as quality and safety concerns or incidents related to our products or actions or statements of our employees or dealers, could lead to tangible adverse effects on our business, including lost sales or employee retention and recruiting difficulties. In addition, 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.
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. Government, media, or activist pressure to limit emissions could also negatively impact consumers’ perceptions of the Company’s products. Any decline in the social acceptability of the Company’s products could negatively impact their 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 negatively impact sales. 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.
From time to time, we grow our business through acquisitions, non-consolidating investments, alliances and new joint ventures and partnerships, which could be risky and could harm our business.
From time to time, we drive growth in our businesses and accelerate opportunities to expand our global presence through targeted acquisitions, non-consolidating investments, alliances, and new joint ventures and partnerships (each a “Strategic Transaction”) that we believe add value while considering our existing brands and product portfolio. 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 any benefits.
There can be no assurance that Strategic Transactions will be completed or that, if completed, they will be successful. Strategic Transaction 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. As we continue to grow, in part, through Strategic Transaction, 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 of operations.
In many cases, Strategic Transactions present a number of integration risks. For example, the acquisition may: disrupt operations in core, adjacent or acquired businesses; require more time or resources than anticipated to be fully integrated into our operations and systems; 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. The inability to successfully integrate new businesses may result in higher production costs, lost sales or otherwise negatively affect earnings and financial results.
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. The
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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
Any disruption in our suppliers’ operations could disrupt our production schedule.
Our ability to maintain production is dependent upon our suppliers delivering sufficient quantities of systems, components, raw materials and part to manufacture our products and on time to meet our production schedules. In some instances, we purchase systems, components, raw materials and parts that are ultimately derived from a single source and may be at an increased risk for supply disruptions. Any number of factors, including labor disruptions, catastrophic weather events, the occurrence of a contagious disease or illness, contractual or other disputes, unfavorable economic or industry conditions, delivery delays or other performance problems or financial difficulties or solvency problems, could disrupt our suppliers’ operations and lead to uncertainty in our supply chain or cause supply disruptions for us, which could, in turn, disrupt our operations. If we experience material supply disruptions—like those that we experienced in 2020 related to COVID-19 delays—we may not be able to develop alternate sourcing quickly or at all. Any material disruption of our production schedule caused by an unexpected shortage of systems, components, raw materials or parts could cause us not to be able to meet customer demand, to alter production schedules or suspend production entirely, which could cause a loss of revenues, which could materially and adversely affect our results of operations.
We manufacture our products at, and distribute our products from, several locations in North America and internationally. An unforeseen increase in demand for our products or any disruption at any of these facilities or manufacturing delays could adversely affect our business and operating results.
We assemble vehicles at various facilities around the world. Our facilities are typically designed to produce particular models for particular geographic markets. No single facility is designed to manufacture our full range of vehicles. We also have several locations that serve as wholegoods and PG&A distribution centers, warehouses and office facilities. In addition, we have agreements with other third-party manufacturers to manufacture products on our behalf. Should these or other facilities become unavailable either temporarily or permanently for any number of reasons, including labor disruptions, the occurrence of a contagious disease or illness or catastrophic weather events, the inability to manufacture at the affected facility may result in harm to our reputation, increased costs, lower revenues and the loss of customers. We may not be able to easily shift production to other facilities or to make up for lost production. In addition, in 2020 our ability to meet customer demand was constrained by our manufacturing capacity. There can be no assurance that our current or future manufacturing footprint will be sufficient to meet customer demand or that we will be able to successfully expand our manufacturing capacity to meet demand, which could result in loss of revenue and market share.
Although we maintain insurance for damage to our property and disruption of our business from casualties, such insurance may not be sufficient to cover all of our potential losses. Any disruption in our manufacturing capacity could have an adverse impact on our ability to produce sufficient inventory of our products or may require us to incur additional expenses in order to produce sufficient inventory, and therefore, may adversely affect our net sales and operating results. Any disruption or delay at our manufacturing facilities could impair our ability to meet the demands of our customers, and our customers may cancel orders or purchase products from our competitors, which could adversely affect our business and operating results.
We depend on suppliers, financing sources and other strategic partners who may be sensitive to economic conditions that could affect their businesses in a manner that adversely affects their relationship with us.
We source component parts and raw materials through numerous suppliers and have relationships with a limited number of product financing sources for our dealers and consumers. Our sales growth and profitability could be adversely affected if deterioration of economic or business conditions results in a weakening of the financial condition of a material number of our suppliers or financing sources, or if uncertainty about the economy or the demand for our products causes these business partners to voluntarily or involuntarily reduce or terminate their relationship with us.
Failure to establish and maintain the appropriate level of dealers and distributor relationships or weak economic conditions impacting those relationships may negatively impact our business and operating results.
We distribute our products through numerous dealers and distributors and rely on them to retail our products to the end customers. Our sales growth and profitability could be adversely affected if deterioration of business conditions or reputational harm results in a weakening of the financial condition of a material number of our dealers and distributors. Additionally, weak demand for, or quality issues with, our products may cause dealers and distributors to voluntarily or
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involuntarily reduce or terminate their relationship with us. Further, if we fail to establish and maintain an appropriate level of dealers and distributors for each of our products, we may not obtain adequate market coverage for the desired level of retail sales of our products.
Our operations require significant management attention and financial resources, expose us to difficulties presented by global economic, political, legal, accounting, and business factors, and may not be successful or produce desired levels of sales and profitability.
Investments to increase our global presence, including adding employees and continuing to invest in business infrastructure and operations, might not produce the returns we expect, which could adversely affect our profitability. Our operations and sales are also subject to risks related to political and economic instability, increased costs of customizing products for foreign countries, labor market conditions, the imposition of tariffs and other trade barriers or costs, the impact of government laws and regulations, the effects of income and withholding taxes, governmental expropriation and differences in business practices in different markets, and multiple, changing, and often inconsistent enforcement of laws, rules, and regulations, including rules relating to environmental, health, and safety matters. The realization of any of these risks or unfavorable changes in the political, regulatory and business 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.
Weather conditions may reduce demand and negatively impact net sales and production of certain of our products.
Unfavorable weather conditions may reduce demand and negatively impact sales of certain of the Company’s products. Unfavorable weather in any particular geographic region may have an adverse effect on sales of the Company’s products in that region. In particular, lack of snowfall during winter may materially adversely affect snowmobile sales, while excessive rain before and during spring and summer may materially adversely affect sales of off-road vehicles, ATVs, and boats. There is no assurance that weather conditions or natural disasters could not have a material effect on our sales, production capability or component supply continuity for any of our products.
Our operations are dependent upon attracting and retaining senior executives and skilled employees. Our future success depends on our continuing ability to identify, hire, develop, motivate, retain and promote skilled personnel for all areas of our organization and to retain or provide for adequate succession planning for our senior executives.
Our success depends on attracting and retaining qualified personnel. Our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and diverse management team and workforce. Many members of the Company’s management team have extensive experience in the Company’s industry and with its business, products and customers. The unplanned loss of members of Company’s management team, particularly if combined with difficulties in finding qualified substitutes, could negatively affect the Company’s ability to develop and pursue its business strategy, which could materially adversely affect the Company’s business, results of operations or financial condition. In addition, the Company’s success depends to a large extent upon its ability to retain skilled employees. There is intense competition for qualified and skilled employees, and a failure to recruit, train and retain such employees could have a material adverse effect on its business, results of operations or financial condition.
Our operations and sales have been adversely impacted by the COVID-19 pandemic, and we must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of COVID-19 and the related widespread public health crisis.
Our business has been, and may continue to be, negatively impacted by the fear of exposure to or actual effects of the COVID-19 pandemic in the United States and other countries where we operate or our dealers or suppliers are located. Impacts on our operations include, but are not limited to:
Reductions in demand or significant future volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, dealer closures, or financial hardship, supply chain and shipping constraints, reduced options for marketing and promotion of products at in-person events or other impacts resulting from COVID-19. If prolonged, such impacts could increase the difficulty of operating our business, including accurately planning and forecasting, planning for operations and may adversely impact our results;
Inability to meet our dealers’ or consumers’ demands due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw
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materials or other finished product components, transportation, workforce, or other manufacturing and distribution capability;
Failure of third parties on which we rely, including our suppliers, contract manufacturers, distributors, and contractors to meet their obligations to the Company or to timely meet those obligations, which may be caused by their own financial or operational difficulties and may adversely impact our operations;
These impacts may have a negative effect on our business, financial condition, results of operations and cash flows, as well as the trading price of our securities. And while in 2020 the Company saw increased demand for its products resulting in part from effects of the COVID-19 pandemic, there can be no assurance that we can maintain or continue to expand demand for products in a post-pandemic era. Furthermore, COVID-19 has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, interest rates, and liquidity. Despite our efforts to manage and remedy COVID-19 related impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of the COVID-19 pandemic, third-party actions taken to contain its spread and mitigate its public health effects, including efficacy and distribution of available vaccines to our employees and the general population, and the related impact on consumer confidence and spending.
Product-Specific Risks
A significant adverse determination in any material litigation claim against us could adversely affect our operating results or financial condition.
The manufacture, sale and usage of products expose us to significant risks associated with product liability, economic loss, and other claims. If our products are found to be defective or used incorrectly by our customers, bodily injury, property damage or other injury, including death, may result and this could give rise to additional product liability or economic loss claims against us or adversely affect our brand image or reputation. Any losses that we may suffer from any such claims, and the effect that any such liability may have upon the reputation and marketability of our products, may have a negative impact on our business and operating results.
The Company purchases excess insurance coverage for product liability claims for incidents occurring subsequent to the policy date that exceed our self-insured retention levels. However, certain claims, such as economic loss claims and false marketing claims, are uninsured.
No assurance can be given that our historical claims record, which has not resulted in any material adverse effects on our financial statements, will not change or that material product liability or other claims against us will not be made in the future. An unanticipated adverse determination of a material product liability claim or other material claim (particularly an uninsured matter) made against us could materially and adversely affect our financial condition.
Significant product repair and/or replacement costs due to product warranty claims or product recalls could have a material adverse impact on our results of operations.
We 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 and may also provide longer warranties 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. Although we employ quality control procedures, sometimes a product is distributed that needs repair or replacement. Our standard warranties require us, through our dealer network, to repair or replace defective products during such warranty periods.
Historically, product recalls have been administered through our dealers and distributors. The repair and replacement costs we could incur in connection with a recall could materially and adversely affect our business. Past product recalls have harmed our reputation and caused us to lose customers. Future product recalls could increasingly cause consumers to question the safety or reliability of our products.
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Regulatory, Intellectual Property, Privacy and Cybersecurity Risks
Our business, properties and products are subject to extensive United States federal and state and international safety, environmental and other government regulation and any failure to comply with these regulations could harm our reputation, expose us to damages and otherwise adversely affect our business.
Our business, properties, and products are subject to numerous international, federal, state, and other governmental laws, rules, and regulations relating to, among other things: climate change; emissions to air; discharges to water; restrictions placed on water and land usage and water availability; product and associated packaging; use of certain chemicals; import and export compliance, including country of origin certification requirements; worker and product user health and safety; consumer privacy; energy efficiency; product life-cycles; outdoor noise laws; and the generation, use, handling, labeling, collection, management, storage, transportation, treatment, and disposal of hazardous substances, wastes, and other regulated materials. We are unable to predict the ultimate impact of adopted or future laws, rules, and regulations on our business, properties, or products.
Any of these laws, rules, or regulations may cause us to incur significant expenses to achieve or maintain compliance, require us to modify our products, or modify our approach to our workforce, adversely affecting the price of or demand for some of our products, and ultimately affect the way we conduct our operations. Failure to comply with any of these laws, rules, or regulations could result in harm to our reputation and/or could lead to fines and other penalties, including restrictions on the importation of our products into, and the sale of our products in, one or more jurisdictions until compliance is achieved. In addition, changes to regulations may require us to incur expenses or modify product offerings in order to maintain compliance with the actions of regulators and could decrease the demand for our products.
Our reliance upon patents, trademark laws, and contractual provisions to protect our proprietary rights may not be sufficient to protect our intellectual property from others who may sell similar products and may lead to costly litigation.
We hold patents and trademarks relating to various aspects of our products, such as our patented “on demand” all-wheel drive, and believe that proprietary technical know-how is important to our business. Proprietary rights relating to our products are protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or trademarks or are maintained in confidence as trade secrets. We cannot be certain that we will be issued any patents from any pending or future patent applications owned by or licensed to us or that the claims allowed under any issued patents will be sufficiently broad to protect our technology. In the absence of enforceable patent or trademark protection, we may be vulnerable to competitors who attempt to copy our products, gain access to our trade secrets and know-how or diminish our brand through unauthorized use of our trademarks, all of which could adversely affect our business. Others may initiate litigation to challenge the validity of our patents, or allege that we infringe their patents, or they may use their resources to design comparable products that do not infringe our patents. We may incur substantial costs if our competitors initiate litigation to challenge the validity of our patents, or allege that we infringe their patents, or if we initiate proceedings to protect our proprietary rights. If the outcome of any such litigation is unfavorable to us, our business, operating results, and financial condition could be adversely affected. Regardless of whether litigation relating to our intellectual property rights is successful, the litigation could significantly increase our costs and divert management’s attention from operation of our business, which could adversely affect our results of operations and financial condition. We also cannot be certain that our products or technologies have not infringed or will not infringe the proprietary rights of others. Any such infringement could cause third parties, including our competitors, to bring claims against us, resulting in significant costs, possible damages and substantial uncertainty.
We may be subject to cybersecurity breaches and other disruptions to our information technology systems and connected products that could adversely affect our business.
We use many information technology systems, some of which are managed by third parties, and manufacture connected products (including connected vehicles), some of which are managed by third parties, in operating our business. Those systems and products process potentially sensitive information, including intellectual property; proprietary business information of Polaris and our dealers, suppliers, and other business partners; and personal information of consumers and employees. Our systems and products have been, and could be in the future vulnerable to breach, damage, disruption, or breakdown from various sources, power loss, viruses, malware, ransomware, phishing, denial of service, and other cyber-attacks that may be random, targeted, or the result of misconduct of error by individuals with access to our systems. While we invest in layers of data and information technology protection, and monitor continually evolving cybersecurity threats, there can be no assurance that our efforts will prevent disruptions or breaches of our systems and connected products.
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We have experienced cyber-attacks, but to our knowledge, we have not experienced any material disruptions or breaches of our information technology systems or connected products. We could, however, experience material disruptions or breaches in the future. Such disruptions or breaches of our information technology systems and connected products could adversely affect our business by resulting in, among other things: (i) disruption to our business operations; (ii) compromise or loss of the information processed by those systems and products, such as intellectual property, proprietary information, or personal information; (iii) impact to the performance and/or safety of our connected products; (iv) damage to our reputation; and (v) litigation or regulatory proceedings. We are subject to laws and regulations in the United States and other countries concerning the handling of personal information, including laws that require us to notify governmental authorities and/or affected individuals of data breaches involving certain personal information. These laws and regulations include, for example, the European General Data Protection Regulation (GDPR), effective May 25, 2018, and the California Consumer Privacy Act (CCPA), effective January 1, 2020. Regulatory actions or litigation seeking to impose significant penalties could be brought against us in the event of a data breach or alleged non-compliance with such laws and regulations.
Finance and Capital Structure Risks
Fluctuations in foreign currency exchange rates could result in declines in our reported sales and net earnings.
The changing relationships of the United States dollar to the Canadian dollar, Australian dollar, the Euro, the Swiss franc, the Mexican peso, and certain other foreign currencies have from time to time had a negative impact on our results of operations. Fluctuations in the value of the United States dollar relative to these foreign currencies can adversely affect the price of our products in foreign markets, the costs we incur to import certain components for our products, and the translation of our foreign balance sheets. While we actively manage our exposure to fluctuating foreign currency exchange rates by entering into foreign exchange hedging contracts from time to time, these contracts hedge foreign currency denominated transactions, and any change in the fair value of the contracts would be offset by changes in the underlying value of the transactions being hedged.
Retail credit market deterioration and volatility may restrict the ability of our retail customers to finance the purchase of our products and adversely affect our income from financial services.
We have arrangements with each of Performance Finance, Sheffield Financial and Synchrony Bank to make retail financing available to consumers who purchase our products in the United States. During 2020, consumers financed approximately 30 percent of the vehicles we sold in the United States through these installment retail credit programs. Furthermore, some customers use financing from lenders who do not partner with us, such as local banks and credit unions. There can be no assurance that retail financing will continue to be available in the same amounts and under the same terms that had been previously available to our customers. If retail financing is not available to customers on satisfactory terms, it is possible that our sales and profitability could be adversely affected.
We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements.
Our credit agreement and other debt agreements contain financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of business opportunities. While we are currently in compliance with the financial covenants, increases in our debt or decreases in our earnings could cause us to fail to comply with these financial covenants. Failing to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our financial position, results of operation and debt service capability.
Our level of debt and the financial and restrictive covenants contained in our credit agreement could have important consequences on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt under our credit agreement bears interest at variable rates.
General Risks
Additional tax expense or tax exposure could impact our financial performance.
We are subject to income taxes and other business taxes in various jurisdictions in which we operate. Our tax liabilities are dependent upon the earnings generated in these different jurisdictions. Our provision for income taxes and cash tax liability could be adversely affected by numerous factors, including income before taxes being lower than anticipated in jurisdictions with lower statutory tax rates and higher than anticipated in jurisdictions with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws and regulations in various
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jurisdictions. We also have negotiated and are party to certain tax incentives that require the Company comply with certain covenants. We are also subject to the continuous examination of our income tax returns by various tax authorities. The results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures or the loss of any tax incentive may have an adverse effect on the Company’s provision for income taxes and cash tax liability.
An impairment in the carrying value of goodwill and trade names could negatively impact our consolidated results of operations and net worth.
Goodwill and indefinite-lived intangible assets, such as our trade names, are recorded at fair value at the time of acquisition and are not amortized but are reviewed for impairment at least annually or more frequently if impairment indicators arise. Our determination of whether goodwill impairment has occurred is based on a comparison of each of our reporting units’ fair market value with its carrying value. Significant and unanticipated changes in circumstances, such as significant and long-term adverse changes in business climate, negative perception of the Company’s brands and tradenames, unanticipated competition, and/or changes in technology or markets, could require a provision for impairment in a future period that could negatively impact our reported earnings and reduce our consolidated net worth and shareholders’ equity.

Item 1B. Unresolved Staff Comments
Not Applicable.

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Item 2. Properties
The following sets forth the Company’s material properties as of December 31, 2020:
LocationFacility Type/UsePrimary Segment*Owned or LeasedSquare Footage
Medina, Minnesota
HeadquartersCOwned130,000
Roseau, Minnesota
Wholegoods manufacturing and R&DO/S, GOwned733,000
Huntsville, Alabama
Wholegoods manufacturingO/S, M, GOwned725,000
Monterrey, Mexico
Wholegoods manufacturingO/SOwned440,000
Elkhart, Indiana
Wholegoods manufacturingBOwned822,000
Opole, Poland
Wholegoods manufacturingO/S, MLeased300,000
Osceola, Wisconsin
Component parts & engine manufacturingO/S, M, GOwned286,000
Spirit Lake, Iowa
Wholegoods manufacturingMOwned273,000
Chanas, France
Wholegoods manufacturingGOwned196,000
Shanghai, China
Wholegoods manufacturingO/SLeased158,000
Anaheim, California
Wholegoods manufacturingGLeased151,000
Bourran, France
Wholegoods manufacturing and R&DGLeased120,000
Aix-les-Bains, France
Wholegoods manufacturing and R&DGOwned98,000
Monticello, Minnesota
Component parts manufacturingO/S, M, GOwned109,000
Wyoming, Minnesota
Research and development facilityO/S, M, GOwned272,000
Burgdorf, Switzerland
Research and development facilityO/S, M, GLeased17,000
Fernley, Nevada
Distribution centerO/S, M, GOwned475,000
Wilmington, Ohio
Distribution centerO/S, M, GOwned429,000
Vermillion, South Dakota
Distribution centerO/S, M, GOwned610,000
Carlisle, Pennslyvania
Distribution centerALeased205,000
Coppell, Texas
Distribution centerALeased165,000
Jacksonville, Florida
Distribution centerALeased144,000
Denver, ColoradoDistribution centerALeased48,000
Compton, California
Distribution center and office facilityALeased254,000
Rigby, Idaho
Distribution center and office facilityAOwned84,000
Shakopee, Minnesota
Wholegoods distributionO/S, GLeased870,000
Plymouth, Minnesota
Office facilityCPrimarily owned175,000
Winnipeg, Canada
Office facilityCLeased15,000
Rolle, Switzerland
Office facilityCLeased8,000
*Legend: C - Corporate (all segments), O/S - ORV/Snow, M - Motorcycles, G - Global Adjacent Markets, A - Aftermarket, B - Boats
Including the material properties listed above and those properties not listed, we have over five million square feet of global manufacturing and research and development space. Additionally, we have over six million square feet of global warehouse and distribution center space. In the United States and Canada, we lease 95 retail stores with approximately two million square feet of space. We also have international office facilities in Western Europe, Australia, Brazil, India, China, Japan, and Mexico.
We own substantially all tooling and machinery (including heavy presses, conventional and computer-controlled welding facilities for steel and aluminum, assembly lines and paint lines) used in the manufacture of our products. We make ongoing capital investments in our facilities. 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.

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Item 3. Legal Proceedings
We are involved in a number of legal proceedings incidental to our business, none of which is expected to have a material effect on the financial results of our business.
As of the date hereof, we are party to three putative class actions pending against Polaris in the U.S., all of which were previously reported in the Company’s 10-Q quarterly report for the period ended September 30, 2020.
The first putative class action is pending in the United States District Court for the District of Minnesota and arises out of allegations that certain Polaris products suffer from purportedly unresolved fire hazards allegedly resulting in economic loss, and is the result of the consolidation of the three putative class actions that were filed between April 5-10, 2018 and that we disclosed in our Quarterly Report on Form 10-Q for the period ended March 31, 2018: In re Polaris Marketing, Sales Practices, and Product Liability Litigation (D. Minn.), June 15, 2018. On February 26, 2020, the district court dismissed the majority of plaintiffs and claims. Plaintiffs subsequently voluntarily dismissed the remaining plaintiffs and have appealed, as of right, to the Eight Circuit on behalf of the Court dismissed plaintiffs.
The second putative class action is also pending in the United States District Court for the District of Minnesota and alleges excessive heat hazards on Sportsman ATV, seeking damages for alleged economic loss: Riley Johannessohn, Daniel Badilla, James Kelley, Kevin Wonders, William Bates and James Pinion, individually and on behalf of all others similarly situated v. Polaris Industries (D. Minn.), October 4, 2016. On March 31, 2020, the district court judge denied class certification. The Eighth Circuit agreed to hear plaintiffs’ appeal.
The third putative class action is pending in the United States District Court for the Central District of California and alleges violations of various California consumer protection laws focused on rollover protection systems’ certifications, for various Polaris off-road vehicles sold in California: Paul Guzman and Jeremy Albright v. Polaris Inc., Polaris Industries Inc., and Polaris Sales Inc., August 8, 2019. Depositions and document discovery are proceeding in this matter.
With respect to each of these three 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.

Item 4. Mine Safety Disclosures
Not applicable.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Shares of common stock of Polaris Inc. trade on the New York Stock Exchange under the symbol PII. On February 9, 2021, shareholders of record of the Company’s common stock were 1,809 and the last reported sale price for shares of our common stock on the New York Stock Exchange was $121.70 per share. The Company has historically paid cash dividends and expects to continue to pay comparable cash dividends in the future.
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 Morningstar’s Recreational Vehicles Industry Group Index. The graph assumes the investment of $100 at the close on December 31, 2015 in common stock of the Company and in each of the indexes, and the reinvestment of all dividends since that date to December 31, 2020. Points on the graph represent the performance as of the last business day of each of the years indicated.
Assumes $100 Invested at the close on December 31, 2015
Assumes Dividend Reinvestment
Fiscal Year Ended December 31, 2020
201520162017201820192020
Polaris Inc.
$100.00$98.27$151.52$95.82$130.74$125.78
S&P Midcap 400 Index
100.00120.74140.35124.80157.49179.00
Recreational Vehicles Industry Group Index—Morningstar Group
100.00140.02182.47108.49148.59184.69

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Comparison of 5-Year Cumulative Total Return Among Polaris Inc., S&P Midcap 400 Index and Morningstar’s Recreational Vehicles Group Index
pii-20201231_g1.jpg

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, 2020.
Issuer Purchases of Equity Securities
PeriodTotal Number of
Shares Purchased
Average Price Paid
per Share
Total Number of Shares Purchased as Part of Publicly Announced Program
Maximum Number of Shares That May Yet Be Purchased Under the Program(1)
October 1–31, 2020
1,000$96.721,0002,589,000
November 1–30, 2020
6,000$95.496,0002,583,000
December 1–31, 2020
1,000$99.111,0002,582,000
Total 8,000$95.948,0002,582,000
 
(1)    The Board of Directors has authorized additional shares for repurchase in January of 2016, at which time it authorized the Company to repurchase 10.4 million shares of the Company’s common stock (the “Program”). Of that total, 2.6 million remain available for repurchase under the Program. The Program does not have an expiration date.
Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion pertains to the results of operations and financial position of the Company and should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere in this report. This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 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 Polaris’ Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
 Overview
2020 was a record year for sales which totaled approximately $7.0 billion, a four percent increase from 2019, primarily due to strong ORV sales. Our annual sales to North American customers increased approximately four percent and our annual sales to customers outside of North America increased approximately one percent in 2020.
Full year net income attributable to Polaris Inc. of $124.8 million was a 61 percent decrease from 2019, with diluted earnings per share decreasing 62 percent to $1.99 per share. The decrease was primarily due to the $379.2 million (pre-tax) impairment of goodwill and other intangible assets in the second quarter associated with the Company’s Aftermarket segment as a result of market and economic conditions resulting from the novel coronavirus (COVID-19) pandemic and financial performance and restructuring actions.
On January 28, 2021, we announced that our Board of Directors approved a two percent increase in the regular quarterly cash dividend to $0.63 per share for the first quarter of 2021, representing the 26th consecutive year of increased dividends to shareholders effective with the 2021 first quarter dividend.
The global spread of COVID-19 has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The impact of this pandemic has affected our business segments, employees, dealers, suppliers, and customers in a variety of ways.
As a result of COVID-19, our sales and profitability during the first half of 2020 were negatively impacted by the temporary suspension of select plant operations, which reduced our manufacture and shipment of products, as well as the temporary closures of certain dealers. During this period, sales and profitability were also negatively impacted by a decline in economic activity related to certain of our end markets, such as those served by Global Adjacent Markets and Aftermarket.
Beginning in the second quarter we began to see stronger than anticipated retail demand for our Powersports products as they provided an attractive social-distancing solution for new and existing Powersports customers. Our unit retail sales of ORVs, snowmobiles, and motorcycles to consumers in North America increased 25 percent in 2020. Further, unit retail sales of our boats also increased significantly during the year. Polaris North American dealer inventory as of December 31, 2020 was down 58 percent as retail sales significantly outpaced shipments. At this time, we expect retail demand to be down in 2021 compared to the strong retail of 2020.
During the second half of the year we made significant progress managing operations as we seek to satisfy retail demand. However, due to the dynamics of the COVID-19 pandemic and other natural disasters, our supply chain and manufacturing operations experienced constraints caused by logistics and production-limiting disruptions. Because of the significant economic uncertainty, we are continuing to execute a cautionary approach to spending given the pandemic-generated economic uncertainty. As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.
Looking ahead, adverse impacts to the economy and certain of the Company’s business segments, certain suppliers, dealers or customers as a result of COVID-19 may affect the Company’s future valuation of certain assets and therefore may increase the likelihood of additional impairment charges, write-offs, or reserves associated with such assets, including goodwill, indefinite and finite-lived intangible assets, property and equipment, inventories, accounts receivable, tax assets, and other assets.
We believe we are well positioned to mitigate the impacts of COVID-19. We will continue to adjust mitigation measures as needed related to employee health and safety. Those measures might include further suspensions of select plant operations, modifying workspaces, continuing social distancing policies, implementing new personal protective equipment or health screening policies at our facilities, or such other industry best practices needed to continue to maintain a healthy and safe environment for our employees amidst the pandemic. In addition, while we have and will
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continue to enhance functionality and security of technology for off-site functions, we are also planning for the eventual reintroduction of our currently remote workforce to our facilities.
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 Item 1A. Risk Factors of this Annual Report.

Consolidated Results of Operations
The consolidated results of operations were as follows:
For the Years Ended December 31,
($ in millions except per share data)20202019Change
2020 vs. 2019
2018Change
2019 vs. 2018
Sales$7,027.9 $6,782.5 %$6,078.5 12 %
Cost of sales$5,317.7 $5,133.7 %$4,577.3 12 %
Gross profit$1,710.2 $1,648.8 %$1,501.2 10 %
Percentage of sales24.3%24.3% +2 basis points24.7% -39 basis points
Operating expenses:
Selling and marketing $544.3 $559.2 (3)%$491.8 14 %
Research and development 295.6 292.9 %259.7 13 %
General and administrative 359.2 393.9 (9)%349.7 13 %
Goodwill and other intangible asset impairment379.2 — NM— NM
Total operating expenses $1,578.3 $1,246.0 27 %$1,101.2 13 %
Percentage of sales22.5 %18.4 % +409 basis points18.1% +25 basis points
Income from financial services$80.4 $80.9 (1)%$87.4 (7)%
Operating income$212.3 $483.7 (56)%$487.4 (1)%
Non-operating expense:
Interest expense$66.7 $77.6 (14)%$57.0 36 %
Equity in loss of other affiliates$— $5.1 NM$29.3 (83)%
Other (income) expense, net$4.2 $(6.8)NM$(28.1)(76)%
Income before income taxes$141.4 $407.8 (65)%$429.2 (5)%
Provision for income taxes$16.5 $83.9 (80)%$93.9 (11)%
Effective income tax rate11.6%20.6%NM21.9% -132 basis points
Net income$124.9 $323.9 (61)%$335.3 (3)%
Net (income) loss attributable to noncontrolling interest(0.1)0.1 NM— NM
Net income attributable to Polaris Inc.$124.8 $324.0 (61)%$335.3 (3)%
Diluted net income per share attributable to Polaris Inc. shareholders$1.99 $5.20 (62)%$5.24 (1)%
Weighted average diluted shares outstanding62.6 62.3 — %63.9 (3)%
NM = not meaningful
Sales:
Sales were $7,027.9 million in 2020, a four percent increase from $6,782.5 million in 2019. The components of the consolidated sales change were as follows:
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Percent change in total Company sales compared to the prior year
20202019
Volume %%
Product mix and price
Acquisitions— 
Currency — (1)
%12 %
The three percent volume increase in 2020 was primarily the result of increased ORV shipments and related PG&A. Product mix and price contributed a one percent increase in 2020, primarily due to lower promotional costs for ORVs.
Sales by geographic region were as follows:
For the Years Ended December 31,
($ in millions)2020Percent of Total Sales2019Percent of Total Sales Percent Change 2020 vs. 20192018Percent of Total Sales Percent Change 2019 vs. 2018
United States $5,791.1 82  %$5,551.7 82 % %$4,883.8 80 %14  %
Canada 396.1 %394.8 %— %390.2 %%
Other foreign countries 840.7 12 %836.0 12 %%804.5 13 %%
Total sales $7,027.9 100  %$6,782.5 100 % %$6,078.5 100 %12  %
Sales in the United States for 2020 increased four percent compared to 2019, primarily due to increased ORV wholegood shipments and higher ORV PG&A sales. The United States represented 82 percent of total company sales in 2020.
Sales in Canada for 2020 were flat compared to 2019. Currency rate movements had less than a one percentage point impact on year-over-year sales. Sales in Canada represented six percent of total company sales in 2020.
Sales in other foreign countries, primarily in Europe, increased one percent in 2020 compared to 2019. This increase was primarily driven by higher ORV shipments. Currency rate movements had less than a one percentage point impact on year-over-year sales. Sales in other foreign countries represented 12 percent of total company sales in 2020.
Cost of sales:  
The following table reflects our cost of sales in dollars and as a percentage of sales:
For the Years Ended December 31,
($ in millions)2020Percent of Total Cost of Sales 2019Percent of Total Cost of Sales Change 2020 vs. 20192018Percent of Total Cost of Sales Change 2019 vs. 2018
Purchased materials and services
$4,562.6 86 %$4,418.5 86 %%$3,978.1 87 %11 %
Labor and benefits 456.5 %433.3 %%358.5 %21 %
Depreciation and amortization
174.9 %159.0 %10 %135.7 %17 %
Warranty costs 123.7 %122.9 %%105.0 %17 %
Total cost of sales $5,317.7 100 %$5,133.7 100 %%$4,577.3 100 %12 %
Percentage of sales75.7 %75.7 % -2 basis points75.3 % +39 basis points
For 2020, cost of sales increased four percent to $5,317.7 million compared to $5,133.7 million in 2019. The increase in cost of sales in 2020 is primarily attributed to increased purchased materials and services related to increased ORV shipments and higher PG&A sales.
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Gross profit:
Consolidated gross profit for 2020, as a percentage of sales, was approximately flat compared to the 2019. Lower promotional costs and dealer floor plan financing costs were offset by increased costs resulting from supply chain disruption and higher depreciation related to capital expenditures associated with recent new product launches.
Operating expenses:
Operating expenses for 2020, in absolute dollars and as a percent of sales, increased primarily due to the $379.2 million impairment of goodwill and other intangible assets associated with the Company’s Aftermarket segment, partially offset by decreased stock compensation expense related to the CEO departure and lower non-essential expenses driven by our ongoing cautionary approach to spending given the pandemic-generated economic uncertainty.
Income from financial services:
The following table reflects our income from financial services:
For the Years Ended December 31,
($ in millions)20202019Change
2020 vs. 2019
2018Change
2019 vs. 2018
Income from Polaris Acceptance joint venture
$18.5 $32.5 (43)%$30.4 %
Income from retail credit agreements
58.7 45.6 29 %46.3 (2)%
Income from other financial services activities
3.2 2.8 14 %10.7 (74)%
Total income from financial services
$80.4 $80.9 (1)%$87.4 (7)%
Percentage of sales1.1 %1.2 % -5 basis points1.4 %-25 basis points
Income from financial services decreased one percent to $80.4 million in 2020 compared to $80.9 million in 2019. The decrease in 2020 was primarily due to lower wholesale financing income due to lower dealer inventory levels, partially offset by higher retail credit income driven by higher retail sales.
Interest expense:
The decrease in 2020 compared to 2019, was primarily due to lower interest rates.
Equity in loss of other affiliates:
In the 2019 comparable period, the Company incurred $5.1 million of losses associated with certain investments in nonmarketable securities of strategic companies. Such losses did not occur in 2020.
Other (income) expense, net:
The change in Other (income) expense, net primarily relates to foreign currency exchange rate movements and the corresponding effects on foreign currency transactions, currency hedging positions and balance sheet positions related to our foreign subsidiaries from period to period.
Provision for income taxes:
Income tax expense was $16.5 million, or 11.6% of income before income taxes, for 2020 compared with income tax expense of $83.9 million, or 20.6% of income before income taxes, for 2019. The lower income tax rate for 2020 was primarily due to the lower pretax income generated combined with the incremental benefit from the passing of the statute of limitations on certain tax positions during the year.
Weighted average shares outstanding:
The change in the weighted average diluted shares outstanding from 2019 to 2020 was primarily due to share issuances under employee plans.
Segment Results of Operations
The summary that follows provides a discussion of the results of operations of each of our five reportable segments. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit.
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Beginning in the first quarter of 2020, certain costs, primarily incentive-based compensation costs, previously classified as "Corporate" in the Company's segment gross profit results were allocated to the respective operating segments results. The comparative 2019 gross profit results for ORV/Snowmobiles, Motorcycles, Global Adjacent Markets, Aftermarket, Boats, and Corporate were reclassified for comparability. However, the 2018 gross profit results presented below have not been reclassified to reallocate the costs discussed above and are therefore not comparable to 2020 and 2019 results.
Our sales and gross profit by reporting segment, which includes the respective PG&A, were as follows:
For the Years Ended December 31,
($ in millions) 2020Percent of Sales 2019Percent of Sales Percent Change 2020 vs. 20192018Percent of Sales Percent Change 2019 vs. 2018
Sales
ORV/Snowmobiles$4,533.3 64 %$4,209.1 62 %%$3,919.4 64 %%
Motorcycles581.7 %584.1 %— %545.6 %%
Global Adjacent Markets424.6 %461.3 %(8)%444.6 %%
Aftermarket884.9 13 %906.7 13 %(2)%889.2 15 %%
Boats603.4 %621.3 %(3)%279.7 %NM
Total sales $7,027.9 100 %$6,782.5 100 %%$6,078.5 100 %12 %
For the Years Ended December 31,
($ in millions)2020Percent of Sales2019Percent of SalesPercent Change 2020 vs. 20192018Percent of SalesPercent Change 2019 vs. 2018
Gross profit
ORV/Snowmobiles$1,218.4 26.9 %$1,145.5 27.2 %%$1,113.9 28.4 %NM
Motorcycles20.0 3.4 %30.0 5.1 %(33)%63.0 11.6 %NM
Global Adjacent Markets116.4 27.4 %128.8 27.9 %(10)%116.6 26.2 %NM
Aftermarket222.8 25.2 %222.7 24.6 %— %234.4 26.4 %NM
Boats116.4 19.3 %124.6 20.1 %(7)%46.3 16.5 %NM
Corporate 16.2 (2.8)NM(73.0)NM
Total gross profit$1,710.2 24.3 %$1,648.8 24.3 %%$1,501.2 24.7 %10 %
NM = not meaningful
ORV/Snowmobiles:
ORV sales, inclusive of PG&A, of $4,187.9 million in 2020, which includes ATV, Polaris GENERAL, RANGER, and RZR vehicles, increased nine percent compared to 2019. This increase was primarily driven by increased RANGER and ATV shipments as a result of strong retail, as well as higher PG&A sales. Polaris’ North American ORV unit retail sales to consumers increased mid-twenties percent for 2020 compared to 2019, with ATV unit retail sales up high-twenties percent and side-by-side vehicles unit retail sales up mid-twenties percent over the prior year, as our products provided an attractive social-distancing solution for new and existing Powersports customers. The Company estimates that North American industry ORV retail sales were up approximately 30 percent over the prior year. Polaris North American dealer inventories of ORVs decreased mid-sixties percent from 2019 as a result of strong retail sales. ORV sales outside of North America increased 11 percent in 2020 compared to 2019. For 2020, the average ORV per unit sales price increased approximately one percent compared to 2019’s average per unit sales price, primarily driven by lower promotional costs.
Snowmobiles sales, inclusive of PG&A sales, decreased 10 percent to $345.4 million for 2020 compared to 2019. Retail sales to consumers for the 2020-2021 season-to-date period through December 31, 2020, increased mid-twenties percent. Sales of snowmobiles to customers outside of North America, principally within the Scandinavian region and Russia, decreased approximately 19 percent in 2020 as compared to 2019. The Company estimates that North American industry snowmobile retail sales for the 2020-2021 season-to-date period through December 31, 2020, increased high-teens
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percent. Polaris North American dealer inventories of snowmobiles decreased 50 percent from 2019. The average per unit sales price in 2020 increased approximately eight percent over 2019’s average per unit sales price, primarily driven by favorable mix.
For the ORV/Snowmobiles segment, gross profit, as a percentage of sales, decreased from 2019 to 2020, primarily due to higher logistical costs as well as plant inefficiencies resulting from the temporary suspension of select plant operations in the first half of the year and ongoing supply chain constraints, partially offset by higher average selling prices driven by lower promotional costs and lower dealer floor plan financing costs, as well as higher PG&A sales.
Motorcycles:
Sales of Motorcycles, inclusive of PG&A sales, decreased slightly from $584.1 million in 2019 to $581.7 million in 2020, primarily due to decreased sales of Indian motorcycles of nine percent, partially offset by an increase in sales of Slingshot of 57 percent. The Company estimates North American industry retail sales of combined 900cc and above cruiser, touring (including 3-wheel), and standard market segments decreased high-single digits percent in 2020 compared to 2019. Over the same period, Polaris North American motorcycle (including Slingshot) unit retail sales to consumers increased high-twenties percent. Polaris North American motorcycle (including Slingshot) dealer inventory decreased low-twenties percent in 2020 versus 2019 levels. Sales of motorcycles (including Slingshot) to customers outside of North America decreased approximately eight percent in 2020 compared to 2019, due primarily to a decrease in Indian motorcycle shipments. The average per unit sales price for the Motorcycles segment in 2020 was approximately flat compared to 2019’s average per unit sales price.
Gross profit, as a percentage of sales, decreased from 2019 to 2020, primarily due to unfavorable mix, higher logistical costs, and plant inefficiencies resulting from the temporary suspension of select plant operations in the first half of the year and ongoing supply chain constraints, partially offset by lower European Union retaliatory tariffs and lower warranty expense.
Global Adjacent Markets:
Global Adjacent Markets sales, inclusive of PG&A sales, decreased eight percent to $424.6 million for 2020 compared to 2019. The decrease in sales was driven by industrial, educational, government and rental organizations reducing or suspending purchases during the COVID-19 pandemic. The decrease in sales was primarily in the Commercial, Government and Defense businesses, partially offset by growth in Polaris Adventures. Sales to customers outside of North America decreased approximately five percent in 2020 compared to 2019.
Gross profit, as a percentage of sales, decreased from 2019 to 2020, primarily due to the reduction of sales volumes resulting in decreased leverage of manufacturing fixed costs, partially offset by favorable product mix.
Aftermarket:
Aftermarket sales, which includes Transamerican Auto Parts (TAP), along with our other aftermarket brands of Klim, Kolpin, ProArmor, Trail Tech and 509, of $884.9 million for 2020 were down two percent compared to 2019, primarily due to a five percent decrease in TAP’s full year sales. TAP sales declined 10% over the first half of the year before stabilizing and growing by one percent over the second half of the year. Underlying the full year performance, we saw a decline within our wholesale business channel, partially offset by growth in our direct to consumer e-commerce platforms. The decrease in full year TAP sales was partially offset by other aftermarket growth of 14%, driven by accessories and apparel demand through dealer, retail, and e-commerce channels.
Gross profit, as a percentage of sales, increased from 2019 to 2020, primarily due to favorable pricing and mix, partially offset by higher freight and logistics costs.
Boats:
Boat sales decreased three percent to $603.4 million in 2020 compared to 2019, primarily due to the temporary suspension of production in the first half of 2020 caused by the COVID-19 pandemic. We estimate that U.S. pontoon industry unit sales increased high-teens percent during 2020. Polaris U.S. pontoon unit retail sales to consumers was also up high-teens percent during 2020.
Gross profit, as a percentage of sales, decreased from 2019 to 2020, primarily due to costs associated with restructuring activities, partially offset by favorable pricing and margin enhancement initiatives.

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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, repurchase and retirement of common stock, capital investments, new product development and cash dividends to shareholders. The seasonality of production and shipments cause working capital requirements to fluctuate during the year.
Given the economic uncertainty as a result of the COVID-19 pandemic, we took actions in 2020 to improve our liquidity position, including reducing working capital, temporarily suspending share repurchases, postponing certain capital expenditures, and reducing operating costs by delaying research and development programs, reducing production, initiating workforce reductions and furloughs, and substantially reducing discretionary spending. These actions combined with the strength of our end markets in the second half of 2020 further bolstered our liquidity position heading into 2021. As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.
We believe that existing cash balances, cash flow to be generated from operating activities and borrowing capacity under the credit facility arrangement will be sufficient to fund operations, new product development, cash dividends, share repurchases, and capital requirements for the foreseeable future.
The following table summarizes the cash flows from operating, investing and financing activities for the years ended December 31, 2020, 2019 and 2018:
($ in millions)For the Years Ended December 31,
20202019Change
2020 vs. 2019
2018Change
2019 vs. 2018
Total cash provided by (used for):
Operating activities$1,018.6 $655.1 $363.5 $477.1 $178.0 
Investing activities(150.7)(239.3)88.6 (959.5)720.2 
Financing activities(415.4)(411.8)(3.6)523.4 (935.2)
Impact of currency exchange rates on cash balances8.7 (0.8)9.5 (9.5)8.7 
Increase in cash, cash equivalents and restricted cash$461.2 $3.2 $458.0 $31.5 $(28.3)
Operating Activities:
Net cash provided by operating activities was $1,018.6 million and $655.1 million in 2020 and 2019, respectively. The $363.5 million increase is primarily the result of improved working capital due to strong end-market demand. The impacts of demand on working capital have been a decrease in finished goods inventory and increases in raw materials and accounts payable. Further, excluding the impact of the non-cash impairment charge, net income was higher than the prior year comparable period which further added to the increase in net cash provided by operating activities.
Investing Activities:
Net cash used for investing activities was $150.7 million and $239.3 million in 2020 and 2019, respectively. The primary sources and uses of cash in 2020 were for the purchase of property and equipment and tooling for continued capacity and capability at our manufacturing and distribution facilities and for product development, as well as distributions from and contributions to Polaris Acceptance. As a result of the uncertainty associated with the COVID-19 related economic slowdown, the Company reduced or postponed certain planned capital expenditures. This decrease in expenditures combined with an increase in cash distributions from Polaris Acceptance due to lower dealer inventory levels resulted in less cash used for investing activities compared to the prior year.
Financing Activities:
Net cash used for financing activities was $415.4 million and $411.8 million in 2020 and 2019, respectively. We paid cash dividends of $152.5 million and $149.1 million in 2020 and 2019, respectively. Total common stock repurchased in 2020 and 2019 totaled $50.3 million and $8.4 million, respectively. Net repayments under debt arrangements, finance lease obligations and notes payable totaled $246.2 million and $270.0 million in 2020 and 2019, respectively. Proceeds from the issuance of stock under employee plans were $33.6 million and $15.7 million in 2020 and 2019, respectively.
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Financing Arrangements:
We are party to an unsecured credit agreement, which includes a $700.0 million variable interest rate revolving loan facility that expires in July 2023, under which we have unsecured borrowings. At December 31, 2020, there were no borrowings outstanding under this arrangement. Our credit agreement also includes a term loan facility, of which $940.0 million is outstanding as of December 31, 2020. On April 9, 2020, the Company amended the credit agreement to provide a new incremental 364-day term loan (the “incremental term loan”) in the amount of $300.0 million. The new incremental term loan, which was fully drawn on closing, was unsecured and set to mature on April 8, 2021, however, the incremental term loan was paid off in December 2020. Interest is charged at rates based on LIBOR or “prime” for these agreements. As of December 31, 2020, we had $695.3 million of availability on the revolving loan facility. The Company is also party to an unsecured Master Note Purchase Agreement, as amended and supplemented. At December 31, 2020 outstanding borrowings under the agreement totaled $425.0 million.
The credit agreement and the amended Master Note Purchase Agreement contain covenants that require Polaris to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. On May 26, 2020, the Company further amended the credit agreement and amended Master Note Purchase Agreement to temporarily decrease its minimum interest coverage ratio from not less than 3.00x to not less than 2.25x and temporarily increase its maximum leverage ratio from 3.50x to 4.75x on a rolling four quarter basis until March 31, 2021. Polaris was in compliance with all such covenants at December 31, 2020. On January 15, 2021 the Company further amended the credit agreement and amended Master Note Purchase Agreement to revert the financial covenants to those in place prior to the 2020 amendments.
As a component of the Boat Holdings merger agreement in 2018, Polaris has committed to make a series of deferred payments to the former owners following the closing date of the merger through July 2030. The original discounted payable was for $76.7 million, of which $66.5 million is outstanding as of December 31, 2020. The outstanding balance is included in long-term debt and current portion of long-term debt in the consolidated balance sheets.
At December 31, 2020 and 2019, we were in compliance with all debt covenants. Our debt to total capital ratio was 56 percent and 60 percent at December 31, 2020 and 2019, respectively.
Share Repurchases:
Our Board of Directors has authorized the cumulative repurchase of up to 90.5 million shares of our common stock through an authorized stock repurchase program. Of that total, approximately 87.9 million shares have been repurchased cumulatively from 1996 through December 31, 2020. We repurchased a total of 0.6 million shares of our common stock for $50.3 million during 2020, which had an immaterial impact on earnings per share. We have authorization from our Board of Directors to repurchase up to an additional 2.6 million shares of our common stock as of December 31, 2020. The repurchase of any or all such shares authorized remaining for repurchase will be governed by applicable SEC rules.
Wholesale Customer Financing Arrangements:
We have arrangements with certain finance companies to provide secured floor plan financing for our dealers. These arrangements provide liquidity by financing dealer purchases of our products without the use of our working capital. A majority of the worldwide sales of snowmobiles, ORVs, motorcycles, boats and related PG&A are financed under similar arrangements whereby we receive payment within a few days of shipment of the product. The amount financed by worldwide dealers under these arrangements related to snowmobiles, ORVs, motorcycles, boats and related PG&A as of December 31, 2020 and 2019, was approximately $1,064.0 million and $1,884.1 million, respectively. We participate in the cost of dealer financing up to certain limits.
Polaris Acceptance, a joint venture between Polaris and Wells Fargo Commercial Distribution Finance Corporation (“WFCDF”), a direct subsidiary of Wells Fargo Bank, N.A. (“Wells Fargo”), which is supported by a partnership agreement between their respective wholly owned subsidiaries, finances substantially all of our U.S. sales of snowmobiles, ORVs, motorcycles, and related PG&A, whereby we receive payment within a few days of shipment of the product. The partnership agreement is effective through February 2027.
Polaris Acceptance sells a majority of its receivables portfolio (the “Securitized Receivables”) to a securitization facility (“Securitization Facility”) arranged by Wells Fargo, a WFCDF affiliate. The sale of receivables from Polaris Acceptance to the Securitization Facility is accounted for in Polaris Acceptance’s financial statements as a “true-sale” under ASC Topic 860. Polaris Acceptance is not responsible for any continuing servicing costs or obligations with respect to the
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Securitized Receivables. The remaining portion of the receivable portfolio is recorded on Polaris Acceptance’s books, and is funded through a loan from an affiliate of WFCDF and through equity contributions from both partners. At December 31, 2020, the outstanding amount of net receivables financed for dealers under this arrangement, including Securitized Receivables, was $771.5 million, a 46 percent decrease from $1,423.4 million at December 31, 2019, as a result of significantly lower dealer inventory in the current year.
We account for our investment in Polaris Acceptance under the equity method. Polaris Acceptance is funded through equal equity cash investments from the partners and a loan from an affiliate of WFCDF. We do not guarantee the outstanding indebtedness of Polaris Acceptance. The partnership agreement provides that all income and losses of Polaris Acceptance are shared 50 percent by our wholly owned subsidiary and 50 percent by WFCDF’s subsidiary. Our total investment in Polaris Acceptance at December 31, 2020 was $59.4 million. Our exposure to losses of Polaris Acceptance is limited to our equity in Polaris Acceptance. Credit losses in the Polaris Acceptance portfolio have been modest, averaging less than one percent of the portfolio.
We have agreed to repurchase products repossessed by Polaris Acceptance up to an annual maximum of 15 percent of the aggregate average month-end outstanding Polaris Acceptance receivables and Securitized Receivables during the prior calendar year. For calendar year 2020, the potential 15 percent aggregate repurchase obligation was approximately $198.3 million. For calendar year 2021, the potential 15 percent aggregate repurchase obligation is approximately $138.7 million. Our financial exposure under this arrangement is limited to the difference between the amount paid to the finance company for repurchases and the amount received on the resale of the repossessed product. No material losses have been incurred under this agreement during the periods presented. However, an adverse change in retail sales could cause this situation to change and thereby require us to repurchase repossessed units subject to the annual limitation referred to above.
A subsidiary of TCF Financial Corporation (“TCF”) finances a portion of our United States sales of boats whereby we receive payment within a few days of shipment of the product. We have agreed to repurchase products repossessed by TCF up to a maximum of 100 percent of the aggregate outstanding TCF receivables balance. At December 31, 2020, the potential aggregate repurchase obligation was approximately $135.7 million. Our financial exposure under this arrangement is limited to the difference between the amounts unpaid by the dealer with respect to the repossessed product plus costs of repossession and the amount received on the resale of the repossessed product. No material losses have been incurred under this agreement during the periods presented. However, an adverse change in retail sales could cause this situation to change and thereby require us to repurchase repossessed units subject to the annual limitation referred to above.
Retail Customer Financing Arrangements:
We have agreements with certain financial institutions under which these financial institutions provide retail credit financing to end consumers of our products in the United States. The income generated from these agreements has been included as a component of income from financial services in the accompanying consolidated statements of income. At December 31, 2020, the agreements in place were as follows:
Financial institutionAgreement expiration date
Performance Finance
December 2021
Sheffield Financial
December 2024
Synchrony Bank
December 2025
During 2020, consumers financed 30 percent of our vehicles sold in the United States through the Performance Finance, Sheffield Financial and Synchrony Bank installment retail credit arrangements. The volume of installment credit contracts written in calendar year 2020 with these institutions was $1,515.9 million, a 21 percent increase from 2019.

Critical Accounting Policies
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. 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
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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. 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 indefinite-lived intangibles.
Revenue recognition. With respect to wholegood vehicles, boats, parts, garments and accessories, revenue is recognized when we transfer control of the product to our customer. With respect to services provided by us, revenue is recognized upon completion of the service or over the term of the service agreement in proportion to the costs expected to be incurred in satisfying the obligations over the term of the service period. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with our limited warranties are recognized as expense when the products are sold. We recognize revenue for vehicle service contracts that extend mechanical and maintenance coverage beyond our limited warranties over the life of the contract. Historically, product returns, whether in the normal course of business or resulting from repurchases made under the floor plan financing program, have not been material. However, we have agreed to repurchase products repossessed by the finance companies up to certain limits. Our financial exposure is limited to the difference between the amount paid to the finance companies and the amount received on the resale of the repossessed product. No material losses have been incurred under these agreements. Revenue from goods and services transferred to customers at a point-in-time accounts for the majority of our revenue.
Sales promotions and incentives. We provide for estimated sales promotion and incentive expenses, which are recognized as a component of sales in measuring the amount of consideration we expect to receive in exchange for transferring goods or providing services. Examples of sales promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and sales associate incentives. Sales promotion and incentive expenses are estimated based on current programs and historical rates for each product line. We record these amounts as a liability in the consolidated balance sheet until they are ultimately paid. At December 31, 2020 and 2019, accrued sales promotions and incentives were $138.1 million and $189.9 million, respectively. Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if the customer usage rate varies from historical trends. Adjustments to sales promotions and incentives 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. We 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 provide longer warranties related to certain promotional programs. 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. We record these amounts as a liability in the consolidated balance sheet until they are ultimately paid. At December 31, 2020 and 2019, the accrued warranty liability was $140.8 million and $136.2 million, respectively. Adjustments to the warranty reserve are made based on actual claims experience in order to properly estimate the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The warranty reserve includes the estimated costs related to recalls, which are accrued when probable and estimable. Factors that could have an impact on the warranty accrual include the following: changes in manufacturing quality, shifts in product mix, changes in warranty coverage periods, impacts on product usage (including weather), product recalls and changes in sales volume. While management believes that the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable could differ materially from what will ultimately transpire in the future, and have a material adverse effect on our financial condition.
Product liability. We are subject to product liability claims in the normal course of business. We carry excess insurance coverage for product liability claims. We self-insure product liability claims before the policy date and up to the purchased insurance coverage after the policy date. The estimated costs resulting from any uninsured losses are charged to operating expenses when it is probable a loss has been incurred and the amount of the loss is reasonably estimable. There is significant judgment and estimation required in evaluating the possible outcomes and potential losses of product liability matters. We utilize historical trends and actuarial analysis, along with an analysis of current claims, to assist in determining the appropriate loss reserve levels. At December 31, 2020 and 2019, we had accruals of $70.7 million and
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$57.0 million, respectively, for the probable payment of pending and expected claims related to product liability matters associated with our products. This accrual is included as a component of other accrued expenses in the consolidated balance sheets. While management believes the product liability reserves are adequate, adverse determination of material product liability claims made against us could have a material adverse effect on our financial condition.
Goodwill. Goodwill represents the excess of the purchase price of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed. Goodwill is tested at least annually for impairment and is tested for impairment more frequently when events or changes in circumstances indicate that the asset might be impaired. The Company completes its annual goodwill impairment test as of the first day of the fourth quarter.
The Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount. A qualitative assessment requires that we consider events or circumstances including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting unit’s net assets, and changes in our stock price. If, after assessing the totality of events or circumstances, it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or if the Company elects to bypass the qualitative test and proceed to a quantitative test, then the quantitative goodwill impairment test is performed. A quantitative test includes comparing the fair value of each reporting unit to the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, an impairment is recognized in an amount equal to the difference, limited to the total amount of goodwill allocated to that reporting unit.
Under the quantitative goodwill impairment test, the fair value of each reporting unit is determined using a discounted cash flow analysis and market approach. Determining the fair value of the reporting units requires the use of significant judgment, including discount rates, assumptions in the Company’s long-term business plan about future revenues and expenses, capital expenditures, and changes in working capital, which are dependent on internal forecasts, estimation of long-term growth for each reporting unit, and determination of the discount rate. These plans take into consideration numerous factors including historical experience, anticipated future economic conditions, including the impacts from the COVID-19 pandemic, changes in raw material prices and growth expectations for the industries and end markets in which the Company participates. These assumptions are determined over a five year long-term planning period. The five year growth rates for revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") vary for each reporting unit being evaluated. Revenues and EBITDA beyond five years are projected to grow at a terminal growth rate consistent with industry expectations. Actual results may significantly differ from those used in our valuations. The forecasted future cash flows are discounted using a discount rate developed for each reporting unit. The discount rates were developed using market observable inputs, as well as our assessment of risks inherent in the future cash flows of the respective reporting unit.
In estimating fair value using the market approach, we identify a group of comparable publicly traded companies for each reporting unit that are similar in terms of size and product offering. These groups of comparable companies are used to develop multiples based on total market-based invested capital as a multiple of EBITDA. We determine our estimated values by applying these comparable EBITDA multiples to the operating results of our reporting units. The ultimate fair value of each reporting unit is determined considering the results of both valuation methods. Inputs used to estimate these fair values included significant unobservable inputs that reflect the Company’s assumptions about the inputs that market participants would use and, therefore, the fair value assessments are classified within Level 3 of the fair value hierarchy.
In the second quarter of 2020, as a result of market and economic conditions resulting from the COVID-19 pandemic, as well as financial performance and restructuring actions, we identified indicators that it was more-likely-than-not that the fair value of the Aftermarket and Boats reporting units would be less than their respective carrying values. Our evaluation included consideration of changes in business performance assumptions compared to those used in our 2019 annual impairment test. As a result, we performed quantitative goodwill impairment tests of the Aftermarket and Boats reporting units.
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The level of judgment and estimation is inherently higher in the current environment considering the uncertainty created by the COVID-19 pandemic. We evaluated numerous factors disrupting our business and made significant assumptions which include the severity and duration of the business disruption, the potential impact on customer demand, the timing and degree of economic recovery and ultimately, the combined effect of these assumptions on our future operating results and cash flows.
As a result of this analysis, during the second quarter of 2020 we recorded impairment charges of $270.3 million related to goodwill of the Aftermarket reporting unit. Subsequent to the impairment charges recorded, there is no remaining goodwill for the Aftermarket reporting unit. There were no impairment charges recorded related to the Boats reporting unit. The Boats reporting unit did not have a difference between its fair value and carrying value that was lower than 10%.
In the fourth quarter of 2020, we completed the annual impairment test. It was determined that goodwill was not impaired as each reporting unit’s fair value exceeded its carrying value. We completed a qualitative assessment for the ORV, Snow, Motorcycles and Global Adjacent Markets reporting units and a quantitative goodwill test for the Boats reporting unit. No assessment was performed for the Aftermarket reporting unit as it did not have a goodwill balance as of the annual testing date.
The difference between the Boats reporting unit’s fair value and carrying value was not lower than 10%. While management believes the projections, discount rate, and other assumptions are reasonable, the estimated fair value of the reporting unit is particularly dependent on the strength of the pontoon industry and there is a high level of uncertainty regarding the long-term financial impacts of COVID-19 and the economic recovery. As a result, there can be no assurance that the estimates and assumptions made in our analysis will prove to be an accurate prediction of the future. To the extent future operating results differ from those in our current forecast or our assumptions change pertaining to the business disruption, its impact on customer demand and the related recovery, it is possible that an impairment charge could be recorded in a future accounting period.
Identifiable intangible assets. Our primary identifiable intangible assets include: dealer/customer relationships, brand/trade names, developed technology, and non-compete agreements. Identifiable intangibles with finite lives are amortized and those identifiable intangibles with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets with indefinite lives are tested for impairment annually or more frequently when events or changes in circumstances indicate that the asset might be impaired. We complete our annual impairment test as of the first day of the fourth quarter each year for identifiable intangible assets with indefinite lives.
Our identifiable intangible assets with indefinite lives include brand/trade names. The impairment test consists of a comparison of the fair value of the brand/trade name with its carrying value. The fair value is determined using the relief-from-royalty method. This method assumes the trade name has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brands, the appropriate royalty rate and the discount rate. Forecasted revenues are derived from our annual budget and long-term business plan and royalty rates were based on brand profitability. The discount rates are developed using the market observable inputs used in the development of the reporting unit discount rates, as well as our assessment of risks inherent in the future cash flows of the respective trade name.
In the second quarter of 2020, as a result of market and economic conditions resulting from the COVID-19 pandemic, as well as financial performance and restructuring actions, we determined that the conditions indicated that indefinite lived intangible assets within the Aftermarket and Boats reporting units were more-likely-than-not impaired and performed an impairment test to compare the fair value of these indefinite lived intangible assets, consisting of certain brand/trade names, with their carrying value. As a result of this analysis, during the second quarter of 2020 the Company recorded impairment charges of $108.9 million related to certain brand/trade names associated with Transamerican Auto Parts which are included in the Aftermarket reporting unit.
In the fourth quarter of 2020, we completed the annual impairment test. It was determined that the Company’s remaining indefinite lived intangible assets were not impaired.
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While management believes the projections, discount rate, royalty rate, and other assumptions are reasonable, the estimated fair value of the Aftermarket brand/trade names are particularly dependent on Aftermarket’s ability to execute the planned actions underlying the forecasted improvement in its performance and there is a high level of uncertainty regarding the ultimate financial impacts of COVID-19 and the economic recovery. Similarly, the estimated fair value of the Boats brand/trade names are particularly dependent on the continued strength of the pontoon industry. As a result, there can be no assurance that the estimates and assumptions made in our analysis will prove to be an accurate prediction of the future. To the extent future operating results differ from those in our current forecast or our assumptions change pertaining to the business disruption, its impact on customer demand and the related recovery, it is possible that an impairment charge could be recorded in a future accounting period.
New Accounting Pronouncements
See Item 8 of Part II, “Financial Statements and Supplementary Data—Note 1—Organization and Significant Accounting Policies—New accounting pronouncements.”

Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Inflation, Foreign Exchange Rates, and Interest Rates
Inflation:  
Despite modest inflation in recent years, rising costs, including tariffs and the cost of certain raw materials, continue to affect our operations throughout the world. We strive to minimize the effects of inflation through cost containment, productivity improvements and price increases.
We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials, including steel, aluminum, petroleum-based resins, certain rare earth metals and diesel fuel. In addition, we are a purchaser of components and parts containing various commodities, including steel, aluminum, rubber and others, which are integrated into the Company’s end products. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We generally buy these commodities and components based upon market prices that are established with the vendor as part of the purchase process. We do not hedge commodity prices. The total impact of commodities, including tariff costs, had a favorable impact on our gross profit margins for 2020 when compared to 2019. Based on our current outlook for commodity prices, the total impact of commodities, including tariff costs, is expected to have an unfavorable impact on our gross profit margins for 2021 when compared to 2020.
Foreign Exchange Rates:  
The changing relationships of the U.S. dollar to foreign currencies can have a material impact on our financial results.
Euro: We have operations in the Eurozone through wholly owned subsidiaries and distributors. We also purchase components from certain suppliers directly for our U.S. operations in transactions denominated in Euros. Fluctuations in the Euro to U.S. dollar exchange rate primarily impacts sales, cost of sales, and net income.
Canadian Dollar: We operate in Canada through a wholly owned subsidiary. The relationship of the U.S. dollar in relation to the Canadian dollar impacts both sales and net income.
Other currencies: We operate in various countries, principally in Europe, Mexico and Australia, through wholly owned subsidiaries. We also sell to certain distributors in other countries. We also purchase components from certain suppliers directly for our U.S. operations in transactions denominated in these foreign currencies. The relationship of the U.S. dollar in relation to these other currencies impacts sales, cost of sales and net income.
Foreign 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. 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 $23 million and a hypothetical 10 percent fluctuation of the U.S. dollar compared to the Canadian Dollar impacts annual operating income by approximately $39 million.
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We actively manage our exposure to fluctuating foreign currency exchange rates by entering into foreign exchange hedging contracts. A portion of our foreign currency exposure is mitigated with the following open foreign currency hedging contracts as of December 31, 2020:
Foreign Currency 
Foreign currency hedging contracts
Currency PositionNotional amounts (in millions of U.S. dollars)
Average exchange rate of open contracts 
Australian DollarLong$26.0 $0.73 to 1 AUD
Canadian DollarLong$169.8 $0.76 to 1 CAD
Mexican PesoShort$13.5 22 Peso to $1
In 2020, after consideration of the existing foreign currency hedging contracts, foreign currencies had a positive impact on net income compared to 2019. We expect currencies to have a positive impact on net income in 2021 compared to 2020.
The assets and liabilities in all our international entities are translated at the foreign exchange rate in effect at the balance sheet date. Translation gains and losses are reflected as a component of accumulated other comprehensive loss, net in the shareholders’ equity section of the accompanying consolidated balance sheets. Revenues and expenses in all of our international entities are translated at the average foreign exchange rate in effect for each month of the year. Certain assets and liabilities related to intercompany positions reported on our consolidated balance sheet that are denominated in a currency other than the entity’s functional currency are translated at the foreign exchange rates at the balance sheet date and the associated gains and losses are included in net income.
Interest Rates:  
We are a party to an unsecured credit agreement with various lenders consisting of a $700 million revolving loan facility and a $1,180 million term loan facility. Interest accrues on the revolving loan at variable rates based on LIBOR or “prime” plus the applicable add-on percentage as defined. As of December 31, 2020, there were no borrowings outstanding on the revolving loan and an outstanding balance of $940 million on the term loan. Based on the unhedged variable-rate debt included in our debt portfolio as of December 31, 2020, a 100 basis point increase or decrease in interest rates would increase or decrease interest expense by approximately $9 million.

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INDEX TO FINANCIAL STATEMENTS
 
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Item 8. Financial Statements and Supplementary Data

Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting of the Company. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting as of December 31, 2020. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—2013 Integrated Framework. Based on management’s evaluation and those criteria, management concluded that the Company’s system of internal control over financial reporting was effective as of December 31, 2020.
Management’s internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report appearing on the following page, in which they expressed an unqualified opinion thereon.
 
/S/ MICHAEL T. SPEETZEN
Michael T. Speetzen
Interim Chief Executive Officer
/S/ ROBERT P. MACK
Robert P. Mack
Interim Chief Financial Officer
February 16, 2021
Further discussion of our internal controls and procedures is included in Item 9A of this report, under the caption “Controls and Procedures.”
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Polaris Inc.
Opinion on Internal Control over Financial Reporting
We have audited Polaris Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Polaris Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a), and our report dated February 16, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 16, 2021
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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of
Polaris Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Polaris Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Product Liability Claims
Description of the MatterAt December 31, 2020, the Company had an accrual of $70.7 million related to product liability claims associated with the Company’s products. As discussed in Note 13 to the consolidated financial statements, the Company is subject to product liability claims in the normal course of business. The Company records product liability reserves for losses that are probable and reasonably estimable, using methods which include analysis of current and historical claims experience, actuarial analysis and management’s judgment.

Auditing management’s accounting for product liability claims was especially challenging due to the significant judgment and estimation required in evaluating the probability and amount of loss, as well as the actuarial methods applied.
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How We Addressed the Matter in Our Audit
We identified and tested controls over the identification and evaluation of product liability claims, including the Company’s assessment and measurement of the estimate of the probable liability. We tested controls over management's review of the methods, significant assumptions, and the completeness and accuracy of the underlying data used by management’s actuarial specialist to assist management in estimating the product liability reserve.

To test management’s assessment of the probability of occurrence of a loss and whether the amount of loss was reasonably estimable, we inquired of internal counsel and other members of management to discuss the facts and circumstances, including possible outcomes and potential losses. In addition, we received internal and external legal counsel inquiry letters and obtained a representation letter from the Company. To test the measurement of the product liability claims, we evaluated the method of measuring the contingency and tested the accuracy and completeness of the data used to determine a range of loss. In addition, we involved internal actuarial specialists to assist with our procedures related to the measurement of the product liability reserve. To evaluate the historical accuracy of management’s estimates, we performed a retrospective analysis of resolved claims to management’s previous estimates.
Valuation of Goodwill and Indefinite lived Intangible Assets of the Aftermarket and Boats Reporting Units
Description of the Matter
At December 31, 2020, goodwill for the Boats reporting unit was $227.1 million. Indefinite lived intangible assets (brand/trade names) associated with the Aftermarket and Boats reporting units were $86.0 million and $210.7 million, respectively. As discussed in Notes 1 and 7 of the consolidated financial statements, these assets are tested at least annually for impairment or when events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting unit level. As a result of market and economic conditions resulting from the COVID-19 pandemic, as well as other factors, in the second quarter of 2020 the Company performed interim impairment tests of goodwill and indefinite lived intangible assets of the Aftermarket and Boats reporting units. As a result of the interim impairment tests, the Company recorded impairment charges of $270.3 million related to goodwill of the Aftermarket reporting unit and $108.9 million related to certain brand/trade names included in the Aftermarket reporting unit. There were no impairment charges resulting from the interim impairment test of the Boats reporting unit or related indefinite lived intangibles assets. In addition, there were no impairment charges resulting from the Company’s annual impairment tests.

Auditing the goodwill and indefinite lived intangible asset impairment tests of the Aftermarket and Boats reporting units was complex and highly judgmental due to the significant estimation required in determining the fair value of the Aftermarket and Boats reporting units and the related indefinite lived intangible assets. For goodwill, the estimate of fair value for the Aftermarket and Boats reporting units was sensitive to significant assumptions, such as the discount rates, forecasted revenues and earnings before interest, taxes, depreciation and amortization (EBITDA) margins. For Aftermarket and Boats indefinite lived intangible assets, the estimated fair values were sensitive to significant assumptions such as the discount rates, forecasted revenues and royalty rates.
How We Addressed the Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and indefinite lived intangible asset impairment testing process, including controls over management’s budgeting and forecasting process used to develop the forecasted revenues and EBITDA margins used in the fair value estimates, as well as controls over management’s review of the significant assumptions described above.

To test the estimated fair value of the Aftermarket and Boats reporting units and the related indefinite lived intangible assets, we performed audit procedures that included, among others, assessing the valuation methodologies used by management and testing the significant assumptions discussed above. We compared the significant assumptions used by management to current market and economic information, as well as other relevant factors. We assessed the reasonableness of forecasted future revenues and EBITDA margins by comparing the forecasts to historical results. We involved our internal valuation specialists to assist in our evaluation of the valuation models, methodologies and significant assumptions used by the Company, specifically the discount rates and royalty rates. We also performed sensitivity analyses of significant assumptions to evaluate the significance of changes in the fair value that would result from changes in assumptions.
/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.
Minneapolis, Minnesota
February 16, 2021

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POLARIS INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
AssetsDecember 31, 2020December 31, 2019
Current assets:
Cash and cash equivalents $634.7 $157.1 
Trade receivables, net 257.2 190.4 
Inventories, net 1,177.6 1,121.1 
Prepaid expenses and other 134.1 125.9 
Income taxes receivable 3.9 32.5 
Total current assets2,207.5 1,627.0 
Property and equipment:
Land, buildings and improvements517.2 502.9 
Equipment and tooling1,499.5 1,390.5 
2,016.7 1,893.4 
Less: accumulated depreciation(1,127.9)(993.6)
Property and equipment, net888.8 899.8 
Investment in finance affiliate 59.4 110.6 
Deferred tax assets 177.7 93.3 
Goodwill and other intangible assets, net 1,083.7 1,490.2 
Operating lease assets125.4 110.2 
Other long-term assets 90.2 99.4 
Total assets $4,632.7 $4,430.5 
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of debt, finance lease obligations, and notes payable $142.1 $166.7 
Accounts payable 782.2 450.2 
Accrued expenses:
Compensation 215.4 184.5 
Warranties 140.8 136.2 
Sales promotions and incentives 138.1 189.9 
Dealer holdback 121.7 145.8 
Other 292.4 213.9 
Current operating lease liabilities34.7 34.9 
Income taxes payable 22.0 5.9 
Total current liabilities 1,889.4 1,528.0 
Long-term income taxes payable 14.4 28.1 
Finance lease obligations 14.7 14.8 
Long-term debt 1,293.9 1,512.0 
Deferred tax liabilities4.4 4.0 
Long-term operating lease liabilities92.3 77.9 
Other long-term liabilities 166.5 143.9 
Total liabilities $3,475.6 $3,308.7 
Deferred compensation$12.3 $13.6 
Shareholders’ equity:
Preferred stock $0.01 par value, 20.0 shares authorized, no shares issued and outstanding  
Common stock $0.01 par value, 160.0 shares authorized, 61.9 and 61.4 shares issued and outstanding, respectively$0.6 $0.6 
Additional paid-in capital 983.9 892.8 
Retained earnings 218.4 287.3 
Accumulated other comprehensive loss, net (58.4)(72.7)
Total shareholders’ equity 1,144.5 1,108.0 
Noncontrolling interest0.3 0.2 
Total equity1,144.8 1,108.2 
Total liabilities and equity $4,632.7 $4,430.5 
The accompanying footnotes are an integral part of these consolidated statements.
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POLARIS INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
For the Years Ended December 31,
2020