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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11411
POLARIS INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MINNESOTA 41-1790959
(State or other jurisdiction (IRS employer
of incorporation or organization) identification
no.)
1225 HIGHWAY 169 NORTH 55441
MINNEAPOLIS, MN (Zip Code)
(Address of principal executive
offices)
(612) 542-0500
(Registrant's telephone number,
including area code)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
- ------------------------------------ -------------------------------
<C> <S>
Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock of the registrant as of March 13,
1994 (based upon the closing reported sale price of the Common Stock at that
date on the New York Stock Exchange) held by non-affiliates (16,323,050 shares)
was approximately $759,021,825.
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of March 13, 1995, 18,206,258 shares of Common Stock of the registrant
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 10, 1995 filed with the Securities and Exchange Commission (the "1995
Proxy Statement") are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Polaris Industries Inc. (the "Company"), a Minnesota corporation, was formed
in 1994 for the purpose of merging (the "Merger") a subsidiary of the Company
into Polaris Industries Partners L.P., a Delaware limited partnership (the
"Partnership") and merging Polaris Industries L.P., a Delaware limited
partnership, into the Partnership. The Merger took place on December 22, 1994.
Upon consummation of the Merger, each unit of Beneficial Assignment of Class A
Limited Partnership Interests of the Partnership was exchanged for one share of
common stock, $.01 par value of the Company. The Company, directly or
indirectly, owns 100% of the Partnership and continues to conduct the business
and operations of Polaris Industries L.P. The term "Polaris" as used herein
refers to the business and operations of the Partnership and its predecessor,
Polaris Industries L.P.
Polaris designs, engineers and manufactures snowmobiles, four-and six-wheel
all terrain recreational and utility vehicles ("ATVs"), and personal watercraft
("PWC") and markets them, together with related accessories, clothing and
replacement parts through dealers and distributors principally located in the
United States, Canada and Europe. Snowmobiles, ATVs, PWC and clothing,
accessories and parts, accounted for the following approximate percentages of
Polaris' sales for the periods indicated.
<TABLE>
<CAPTION>
CLOTHING,
YEAR ENDED ACCESSORIES
DECEMBER 31 SNOWMOBILES ATVS PWC AND PARTS
- ---------------------------------------- ----------- ---- --- -----------
<S> <C> <C> <C> <C>
1994.................................... 44% 29% 14% 13%
1993.................................... 50% 26% 9% 15%
1992.................................... 54% 25% 7% 14%
</TABLE>
INDUSTRY BACKGROUND
SNOWMOBILES. In the early 1950s, a predecessor to Polaris produced a "gas
powered sled" which became the forerunner of the Polaris snowmobile. Snowmobiles
have been manufactured under the Polaris name since 1954.
Originally conceived as a utility vehicle for northern, rural environments,
the snowmobile gained popularity as a recreational vehicle. From the mid-1950s
through the late 1960s, over 100 producers entered the snowmobile market and
snowmobile sales reached a peak of approximately 495,000 units in 1971. The
Polaris product survived the industry decline in which snowmobile sales fell to
a low point of approximately 87,000 units in 1983 and the number of snowmobile
manufacturers serving the North American market declined to four: Yamaha,
Bombardier, Arctco and Polaris. Polaris estimates that industry sales of
snowmobiles on a world wide basis were approximately 198,000 units for the
season ended March 31, 1995.
ALL TERRAIN VEHICLES. ATVs are four-wheel and six-wheel vehicles with
balloon style tires designed for off road use and traversing rough terrain,
swamps and marshland. ATVs are used for recreation, in such sports as fishing
and hunting, as well as for utility purposes on farms, ranches and construction
sites.
ATVs were introduced to the North American market in 1971 by Honda. By 1980,
the number of ATV units sold in the North American market had increased to
approximately 140,000 units. Other Japanese motorcycle manufacturers, Yamaha,
Kawasaki and Suzuki, entered the North American market in the late 1970s and
early 1980s, and in August 1994, Arctco announced its intention to enter the ATV
market commencing in 1995. In 1985, the number of three-and four-wheel ATVs sold
in North America peaked at approximately 650,000 units. Polaris estimates that
since declining from that level the industry has stabilized and begun growing
slowly with approximately 270,000 ATVs sold worldwide during the calendar year
1994.
PERSONAL WATERCRAFT. PWC are sit-down versions of water scooter vehicles,
and designed for use on lakes, rivers, oceans and bays. PWC are used primarily
for recreational purposes and are designed
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for one, two or three passengers. Polaris entered the PWC market in 1992.
Polaris estimates that the worldwide market for PWC was approximately 160,000
units in 1994. Other major PWC manufacturers are Yamaha, Bombardier, Kawasaki
and Arctco.
PRODUCTS
SNOWMOBILES. Polaris produces a full line of snowmobiles, consisting of
twenty-six models, ranging from utility and economy models to performance and
competition models, with 1994 suggested retail prices ranging from approximately
$2,550 to $8,250. Polaris snowmobiles are sold principally in the United States,
Canada and Europe. Polaris believes it has the largest share of the worldwide
snowmobile market.
Polaris believes that the Polaris snowmobile has a long-standing reputation
for quality, dependability and performance. Polaris believes that it and its
predecessors were the first to develop several features for commercial use in
snowmobiles, including independent front suspension, variable transmission,
hydraulic disc brakes, liquid cooled engines and brakes and a three cylinder
engine. Polaris also markets a full line of snowmobile accessories, such as
luggage, tow hitches, hand warmers, specialized instrumentation, reverse gear,
special traction products, cargo racks, oils, lubricants, paints and parts.
For the year ended December 31, 1994, snowmobiles accounted for
approximately 44% of Polaris' sales.
ALL TERRAIN VEHICLES. Polaris entered the ATV market in the spring of 1985
with both a three-wheel and a four-wheel product. Polaris currently produces
four-wheel and six-wheel ATV products, which provide more stability for the
rider than the earlier three-wheel versions. Polaris' line of ATVs consisting of
ten models, includes general purpose, sport and four-and six-wheel drive utility
models, with 1994 suggested retail prices ranging from approximately $2,900 to
$6,200.
Polaris' ATV features the totally automatic Polaris variable transmission
which requires no manual shifting and a MacPherson strut front suspension, which
Polaris believes enhances control and stability. Polaris' ATV is also the only
ATV in its class that uses a two cycle engine and chain drive, which Polaris
believes improves performance and efficiency.
Prior to 1989, the ATV industry experienced some reduced demand arising from
publicity surrounding safety-related and environmental concerns. However,
management believes that this market has stabilized somewhat since 1989 and has
begun to resume modest growth.
For the year ended December 31, 1994, ATVs accounted for approximately 29%
of Polaris' sales.
PERSONAL WATERCRAFT. In 1992, Polaris introduced the SL650 personal
watercraft, Polaris' first entry into this product category. In 1993, Polaris
added its SL750 with more power and performance. Management believes that the
SL650 and SL750 have the industry's first three-cylinder engines developed
specifically for PWC. The introduction of the PWC made use of Polaris'
engineering, production and distribution strengths, and also reduced Polaris'
dependence on its then existing product lines for overall sales and earnings. In
late 1993 Polaris introduced a new, three passenger PWC, the Polaris SLT750. The
1994 suggested retail prices for Polaris' PWC range from approximately $5,500 to
$6,300.
For the year ended December 31, 1994, PWC accounted for approximately 14% of
Polaris' sales.
CLOTHING, ACCESSORIES AND REPLACEMENT PARTS. Polaris produces or supplies a
variety of replacement parts and accessories for its snowmobiles, ATVs and PWC.
Polaris also markets a full line of recreational clothing, which includes suits,
helmets, gloves, boots, hats, sweaters and jackets for its snowmobile, ATV and
PWC lines. The clothing is designed to Polaris' specifications, purchased from
independent vendors and sold by Polaris through its dealers and distributors
under the Polaris brand name. Replacement parts and accessories are also
marketed by Polaris.
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For the year ended December 31, 1994, clothing, accessories and parts
accounted for approximately 13% of Polaris' sales.
MANUFACTURING OPERATIONS
Polaris' products are assembled at its manufacturing facility at Roseau,
Minnesota. Since snowmobiles, ATVs and PWC incorporate similar technology,
substantially the same equipment and personnel are employed in their production.
Polaris emphasizes vertical integration in its manufacturing process, which
includes machining, stamping, welding, clutch assembly and balancing, painting,
cutting and sewing, and manufacture of foam seats. Engines, fuel tanks, hoods
and hulls, tracks, tires and instruments, and certain other component parts are
purchased from third party vendors. Polaris manufactures a number of other
components for its snowmobiles, ATVs and PWC. Raw materials or standard parts
are readily available from multiple sources for the components manufactured by
Polaris. Polaris' work force is familiar with the use, operation and maintenance
of the product, since many employees own snowmobiles, ATVs and PWC. In August of
1991, Polaris acquired an additional manufacturing facility in Osceola,
Wisconsin to manufacture component parts previously produced by third party
suppliers. In August 1994, Polaris signed a one-year lease agreement for a
223,000 square foot assembly facility located on 24 acres of land in Spirit
Lake, Iowa. Polaris has an option to purchase the facility for $1.85 million at
the end of the lease term. Polaris currently uses the facility to assemble its
PWC product line, and potentially certain snowmobile and ATV models in the
future.
Pursuant to informal agreements between Polaris and Fuji Heavy Industries
Ltd. ("Fuji"), Fuji has been the exclusive manufacturer of the Polaris two-cycle
snowmobile engines since 1968. Fuji has manufactured engines for Polaris' ATV
products since their introduction in the spring of 1985 and also supplies
engines for Polaris' PWC products. Such engines are developed by Fuji to the
specific requirements of Polaris. Polaris believes its relationship with Fuji to
be excellent. If, however, its informal relationship were terminated by Fuji,
interruption in the supply of engines would adversely affect Polaris' production
pending the establishment of substitute supply arrangements.
In February, 1995, Polaris entered into a agreement with Fuji to form Robin
Manufacturing, U.S.A. ("Robin"). Under the agreement, Polaris will initially
invest $800,000 for a 40% ownership position in Robin, which will build engines
in the United States for recreational and industrial products. Management
anticipates that, through Robin, Polaris may experience reduced foreign exchange
risk, lower shipping costs and less dependence on a single source for engines.
Polaris anticipates no significant difficulties in obtaining substitute
supply arrangements for other raw materials or components for which it relies
upon limited sources of supply.
Polaris' products are shipped from its manufacturing facilities by a
contract carrier.
PRODUCTION SCHEDULING
Snowmobiles are used principally in the northern United States, Canada and
northern Europe in what is referred to as the "snow belt." Delivery of
snowmobiles to consumers begins in the fall and continues during the winter
season. Orders for each year's production of snowmobiles are placed in the
spring and orders for ATVs and PWC are placed in fall and winter, after meetings
with dealers and distributors, and units are built to order each year. In
addition, non-refundable deposits made by consumers to dealers in the spring for
snowmobiles assist in production planning. The budgeted volume of units to be
produced each year is sold to dealers and distributors prior to production.
Sales activity at the dealer level is monitored on a monthly basis for each of
snowmobiles, ATVs and PWC.
Manufacture of snowmobiles commences in the spring and continues through
late autumn or early winter. Polaris manufactures PWC during the fall, winter
and spring months. Since May 1993, Polaris has the ability to manufacture ATVs
year round. Generally, Polaris commences ATV production in late autumn and
continues through early autumn of the following year. For the past several
years, Polaris has had virtually no carryover inventory at the dealer level of
its production of snowmobiles, ATVs and PWC.
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SALES AND MARKETING
With the exception of Illinois, upper Michigan, eastern Wisconsin and
offshore markets, where Polaris sells its snowmobiles through independent
distributors, Polaris sells its snowmobiles directly to dealers in the snowbelt
regions of the United States and Canada. Over the past several years, Polaris
has placed an increasing emphasis on dealer-direct, as opposed to independent
distributor, sales. Snowmobile sales in Europe are handled through independent
distributors. See Note 7 of Notes to Financial Statements for discussion of
foreign and domestic operations and export sales.
Most dealers and distributors of Polaris snowmobiles also distribute
Polaris' ATVs and PWC. In the southern region of the United States, where
snowmobiles are not used, Polaris has established a direct dealer network. Since
the beginning of 1986, Polaris has established approximately 500 dealerships in
the southern United States. Unlike its competitors, which market their ATV
products principally through their affiliated motorcycle dealers, Polaris also
sells its ATVs and PWC through lawn and garden, boat and marine, and farm
implement dealers.
Dealers and distributors sell Polaris' products under contractual
arrangements pursuant to which the dealer or distributor is authorized to market
specified products, required to carry certain replacement parts and perform
certain warranty and other services. The dealer and distributor contracts may be
canceled by either party on specified notice. Changes in dealers and
distributors take place from time to time. Polaris believes that a sufficient
number of qualified dealers and distributors exists in all areas to permit
orderly transition whenever necessary.
Polaris has arrangements with Transamerica Commercial Finance Corporation,
Canadian Imperial Bank of Commerce, The Bank of Nova Scotia and ITT Commercial
Finance, a division of ITT Industries of Canada, to provide floor plan financing
for its dealers and distributors. Substantially all of Polaris' sales of
snowmobiles, ATVs and PWC are financed under arrangements in which Polaris is
paid within a few days of shipment of its product. Polaris participates in the
cost of dealer and distributor financing and is required to repurchase products
from the finance companies under certain circumstances and subject to certain
limitations. Polaris has not historically recorded a sales return allowance
because it has not been required to repurchase a significant number of units in
the past. However, there can be no assurance that this will continue to be the
case. If necessary, Polaris will record a sales return allowance at the time of
sale should management anticipate material repurchases of units financed through
the finance companies. See Notes 1 and 4 of Notes to Financial Statements.
Polaris does not directly finance the purchase of Polaris snowmobiles, ATVs
or PWC by consumers. However, retail financing plans are offered by certain of
the dealers and Polaris has programs to make consumer financing available to its
dealers through unaffiliated third parties.
Polaris' marketing activities are designed primarily to promote and
communicate directly with consumers and secondarily to assist the selling and
marketing efforts of its dealers and distributors. From time to time Polaris
makes available discount or rebate programs or other incentives for its dealers
and distributors to remain price competitive in order to accelerate reduction of
retail inventories. Polaris advertises its products directly using print
advertising in the industry press and in user group publications, on billboards,
and, less extensively, on television and radio. Polaris also provides media
advertising and partially underwrites dealer and distributor media advertising
to a degree and on terms which vary by product and from year to year. Most
dealer and distributor advertising appears in newspapers and on radio. Each
season Polaris produces a promotional film for its snowmobiles, ATVs and PWC
which is available to dealers for use in the showroom or at special promotions.
Polaris also provides product brochures, leaflets, posters, dealer signs, and
miscellaneous other promotional items for use by dealers. It is anticipated that
during 1995 Polaris will centralize its sales, marketing and dealer and
distributor support activities in a wholly owned subsidiary corporation.
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ENGINEERING, RESEARCH AND DEVELOPMENT
Polaris employs approximately 200 persons who are engaged in the development
and testing of existing products and research and development of new products
and improved production techniques. Polaris believes that Polaris and its
predecessors were the first to develop, for commercial use, independent front
end suspension for snowmobiles, the long travel rear suspension for snowmobiles,
direct drive of the snowmobile track, the use of liquid cooling in snowmobile
engines and brakes, the use of hydraulic brakes in snowmobiles, the three
cylinder engine in snowmobiles and PWC, the adaptation of the MacPherson strut
front suspension and "on demand" four-wheel drive systems for use in ATVs and
the application of a forced air cooled variable power transmission system to
ATVs.
Polaris utilizes internal combustion engine testing facilities to design and
optimize engine configurations for its products. Polaris utilizes specialized
facilities for matching engine, exhaust system and clutch performance parameters
in its products to achieve desired fuel consumption, power output, noise level
and other objectives. Polaris' engineering department is equipped to make small
quantities of new product prototypes for testing by Polaris' testing teams and
for the planning of manufacturing procedures. In addition, Polaris'
manufacturing facility in Roseau, Minnesota has a proving ground where each of
the products is extensively tested under actual use conditions.
Polaris expended for research and development approximately $13.5 million
for 1994, $11.1 million for 1993, and $7.4 million for 1992, which amounts were
included as a component of the cost of sales in the period incurred.
COMPETITION
The snowmobile, ATV and PWC markets in the United States and Canada 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 sales and marketing support programs (such as financing and
cooperative advertising). Certain of Polaris' competitors are more diversified
and have financial marketing resources which are substantially greater than
those of Polaris.
Polaris snowmobiles, ATVs and PWC are competitively priced and management
believes Polaris' sales and marketing support programs for dealers are
comparable to those provided by its competitors. Polaris' 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.
PRODUCT SAFETY AND REGULATION
Snowmobiles, ATVs and PWC are motorized machines which may be operated at
high speeds and in a careless or reckless manner. Accidents involving property
damage, personal injuries and deaths occur in the use of snowmobiles, ATVs and
PWC.
Laws and regulations have been promulgated or are under consideration in a
number of states relating to the use or manner of use of snowmobiles, ATVs and
PWC. State approved trails and recreational areas for snowmobile and ATV use
have been developed in response to environmental and safety concerns. Polaris
has supported laws and regulations pertaining to safety and noise abatement and
believes that its products would be no more adversely affected than those of its
competitors by the adoption of any pending laws or regulations.
In September 1986, the staff of the Consumer Products Safety Commission
("CPSC") ATV Task Force issued a report on regulatory options for ATVs. The Task
Force recommended that the ATV industry voluntarily cease marketing ATVs
intended for use by children under 12 years of age. It proposed that warning
labels be placed on ATVs intended for use by children under age 14 stating that
these ATVs are not recommended for use by children under 12, and on adult-sized
ATVs stating that these ATVs are not recommended for use by children under the
age of 16. Warning labels were recommended for use on all ATVs stating that
operator training is necessary to reduce risk of injury or death.
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Based upon its findings that most states have not enacted laws regulating
ATVs, the Task Force recommended that the CPSC work closely with states and
other federal agencies to develop practical uniform state legislation. Topics to
be addressed included minimum operator age recommendations, licensing or
certification standards requiring operator training, helmet requirements, and
prohibitions on the use of alcohol and controlled-substances while operating
ATVs.
In December 1986, in a follow-up measure to the Task Force Report, the CPSC
voted unanimously to continue efforts with the ATV industry to develop a
voluntary standard regarding the dynamic stability characteristics of ATVs. In
February 1987, the CPSC formally requested that the Justice Department initiate
an enforcement action against the ATV industry seeking a voluntary recall of all
three-wheel ATVs and four-wheel ATVs sold with the intention that they be used
by children under 16, as well as a requirement that ATV purchasers receive
"hands-on" training.
Except for 1,700 three-wheel models initially produced, Polaris manufactures
only four-wheel and six-wheel ATVs. Polaris has always placed warning labels on
its ATVs stating that they are designed for use only by persons aged 16 or older
(which warning was revised in 1987 to provide that only adults over age 18
should operate the vehicle), that operators should always wear proper safety
helmets and that riders should complete proper training prior to operating an
ATV.
On December 30, 1987, Polaris reached an agreement with the CPSC regarding
ATV safety. The agreement called for the repurchase of all three-wheel ATVs
remaining in the hands of its distributors and dealers, the provision of
additional safety oriented point-of-purchase materials in all Polaris ATV
dealerships, and the addition of a mandatory "hands on" consumer and dealer
safety training program designed to give all Polaris ATV dealers and consumers
maximum exposure to safe riding techniques, as outlined by the Specialty Vehicle
Institute of America. Polaris conditions its ATV warranties described below
under "-- Product Liability" on completion of the mandatory "hands on" consumer
training program.
Pursuant to the agreement with the CPSC, Polaris has procedures in place for
ascertaining dealer compliance with the provisions of the CPSC consent decree,
including random "undercover" on-site inspections of dealerships to ensure
compliance with the age restriction.
Polaris continually attempts to assure that its dealers are in compliance
with the provisions of the CPSC consent decree. Polaris has notified its dealers
that it will terminate any dealer it determines to have violated the provisions
of the CPSC consent decree. To date, it has terminated five dealers for such
reason.
The Company does not believe that the agreement with the CPSC has had or
will have a material adverse effect on Polaris. Nevertheless, there can be no
assurance that future recommendations or regulatory actions by the CPSC, the
Justice Department or individual states would not have an adverse effect on the
Company. Certain state attorneys-general have asserted that the CPSC agreement
is inadequate and have indicated that they will seek stricter ATV regulation.
Polaris is unable to predict the outcome of such action or the possible effect
on its ATV business.
Certain states, notably California and New York, have proposed certain
legislation involving more stringent emissions standards for two-cycle engines.
Such engines are used on Polaris' snowmobiles, ATVs and PWC. However, Polaris
has developed and currently sells a four-cycle engine for its ATVs which
produces lower emissions. Polaris currently is unable to predict whether such
legislation will be enacted and, if so, the ultimate impact on Polaris and its
operations. Finally, local ordinances have been and may from time to time be
considered and adopted which restrict the use of PWC to specified hours and
locations.
PRODUCT LIABILITY
Polaris' product liability insurance limits and coverages have been
adversely affected by the general decline in the availability of liability
insurance. As a result of the high cost of premiums, and in view of the
historically small amount of claims paid by Polaris, Polaris has been
self-insured since June 1985.
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Product liability claims are made against Polaris from time to time. Since
its inception in 1981 through December 31, 1994, Polaris has paid an aggregate
of less than $1.5 million in product liability claims and had accrued $5.0
million at December 31, 1994, for the defense and possible payment of pending
claims. Polaris believes such accruals are adequate. Polaris does not believe
that the outcome of any pending product liability litigation will have a
material adverse effect on the operations of Polaris. However, no assurance can
be given that its historical claims record, which did not include ATVs prior to
1985, or PWC prior to 1992, will not change or that material product liability
claims against Polaris will not be made in the future. Adverse determination of
material product liability claims made against Polaris would have a material
adverse effect on Polaris' financial condition. See Note 8 of Notes to Financial
Statements.
Polaris warrants its snowmobiles, ATVs and PWC under a "limited warranty"
for a period of one year, six months, and one year, respectively. Although
Polaris employs quality control procedures, a product is sometimes distributed
which needs repair or replacement. Historically, product recalls have been
administered through Polaris' dealers and distributors and have not had a
material effect on Polaris' business.
EFFECTS OF WEATHER
Lack of snowfall in any year in any particular region of the United States
or Canada may adversely affect snowmobile retail sales in that region. Polaris
seeks to minimize this potential effect by stressing pre-season sales (see "--
Production Scheduling") and shifting dealer inventories from one location to
another. However, there is no assurance that weather conditions would not have a
material effect on Polaris' sales of snowmobiles, ATVs or PWC.
EMPLOYMENT
Polaris employed a total of approximately 2,850 persons at December 31,
1994. Approximately 600 of its employees are salaried. Polaris considers its
relations with its personnel to be excellent.
Historically, Polaris' snowmobile business has been seasonal, resulting in
significant differences in employment levels during the year. Despite such
variations in employment levels, employee turnover has not been high. With the
introduction of the ATV line in 1985, Polaris' employment levels have become
more stable. Polaris' employees have not been represented by a union since July
1982.
ITEM 2. PROPERTIES
Polaris owns its principal manufacturing facility in Roseau, Minnesota. The
facility consists of approximately 456,000 square feet of manufacturing space
located on approximately 100 acres. In 1991 Polaris acquired a fabricating
facility in order to bring more component parts manufacturing in-house. This
facility consists of a 190,000 square foot plant situated on 38 acres and is
located in Osceola, Wisconsin. Polaris makes ongoing capital investments in its
facilities. In August, 1994, Polaris signed a one-year lease agreement for a
223,000 square foot assembly facility located on 24 acres of land in Spirit
Lake, Iowa. Polaris has an option to purchase the facility for $1.85 million at
the end of the lease term. Polaris currently uses the facility to assemble its
PWC product line, and potentially certain snowmobile and ATV models in the
future. These investments have increased production capacity for snowmobiles,
ATVs and PWC. The Company believes that Polaris' manufacturing facilities are
adequate in size and suitability for its present manufacturing needs.
Polaris owns all tooling and machinery (including heavy presses,
conventional and computer-controlled welding facilities for steel and aluminum,
assembly lines, paint lines, and sewing lines) used in the manufacture of its
products. Although Polaris holds numerous patents and uses various registered
trademarks and names, it believes that the loss of any of them would not have a
material effect on its business.
Polaris leases 92,000 square feet of headquarters and warehouse space in
Minneapolis, Minnesota from related parties pursuant to a lease that will
terminate in 1997. Polaris also leases an additional
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45,000 square feet of warehouse space in Minneapolis, Minnesota and 42,000
square feet of office and warehouse space in Winnipeg, Manitoba. Polaris does
not anticipate any difficulty in securing alternate facilities on competitive
terms, if necessary, upon the termination of any of its leases.
ITEM 3. LEGAL PROCEEDINGS
Polaris is involved in a number of legal proceedings, none of which is
expected to have a material effect on the financial condition or the business of
Polaris.
Injection Research Specialists commenced an action in June 1990 against
Polaris in Colorado federal court alleging various claims arising out of
Polaris' advertisement and sale of electronic fuel injection snowmobiles.
Injection Research Specialists seeks compensatory and punitive damages, its fees
and costs, and injunctive relief. Fuji and UNISIA Japanese Electronic Control
Systems also are parties to the action. Polaris has filed counterclaims in that
action and has instructed its counsel to contest the matter vigorously.
Management does not believe that any judgment rendered against it in this matter
would have a material adverse effect on the financial condition of Polaris.
In 1990, the Canadian income tax authorities proposed certain adjustments,
principally relating to the original purchase price allocation to the Canadian
subsidiary and transfer pricing matters for additional income taxes payable by
Polaris' Canadian subsidiary for 1987 and 1988. The resolution of these proposed
adjustments may also affect the Company's Canadian income tax expense for years
subsequent to 1988. The Company has been informed of the Canadian income tax
authorities' intent to initiate an audit of the tax years 1989 through 1991.
Management intends to vigorously contest a substantial amount of the proposed
adjustments. Management does not believe that the outcome of this matter will
have a materially adverse impact on the financial position or continuing
operations of Polaris. See Note 8 of Notes to Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting (the "Special Meeting") of the holders of units of
Beneficial Assignment of Class A Limited Partnership Interests ("BACs") of the
Partnership was held on December 22, 1994. At the Special Meeting, BAC holders
voted upon the following resolution:
RESOLVED, that the Agreement and Plan of Conversion, dated as of
September 29, 1994, by and among Polaris Industries Partners L.P.,
Polaris Industries Inc., EIP Associates L.P., Polaris Industries L.P.,
EIP Capital Corporation and the other persons named therein in the form
attached as an exhibit to the proxy statement for this meeting, pursuant
to which, among other matters, a newly formed subsidiary of Polaris
Industries Inc. will be merged with and into the Polaris Industries
Partners L.P., with Polaris Industries Partners L.P. as the surviving
entity, and each BAC then outstanding will be exchanged for one share of
common stock of Polaris Industries Inc. shall be and hereby is approved.
At the Special Meeting:
(i) 11,813,540 of all BACs outstanding were voted in favor of the
resolution, approximately 426,300 of all BACs outstanding were voted
against the resolution or abstained, and the vote in favor was
approximately 73% of all outstanding BACs;
(ii) 9,727,422 of the BACs held by BAC holders other than the sponsors and
affiliates of the general partner of Polaris Industries Partners L.P.
were voted in favor of the resolution, approximately 426,300 of the BACs
held by such unaffiliated BAC holders were voted against the resolution
or abstained, and the vote in favor was approximately 69% of the BACs
held by unaffiliated BAC holders; and
(iii) accordingly, the resolution was approved.
8
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names of the executive officers of the Company as of
March 23, 1995, their ages, titles, the year first appointed as an executive
officer of the Company and employment for the past five years:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------ --- -----------------------------------------------------------
<S> <C> <C>
W. Hall Wendel, Jr. 52 Chairman and Chief Executive Officer
Kenneth D. Larson 54 President and Chief Operating Officer
John H. Grunewald 58 Executive Vice President, Chief Financial Officer and
Secretary
Charles A. Baxter 47 Vice President -- Engineering and Product Safety
Ed Skomoroh 57 Vice President -- Sales and Marketing
Jeffrey A. Bjorkman 35 Vice President -- Manufacturing
Michael W. Malone 36 Vice President and Treasurer
</TABLE>
Executive officers of the Company are elected at the discretion of the Board
of Directors with no fixed term. There are no family relationships between or
among any of the executive officers or directors of the Company.
Mr. Wendel has served as a Chairman and Chief Executive Officer since the
Company's formation in 1994. Mr. Wendel was the Chief Executive Officer of
Polaris Industries Capital Corporation ("PICC"), which was the managing general
partner of Polaris Industries Associates L.P., which was the operating general
partner of Polaris Industries L.P. from 1987 to December 1994. From 1981 to
1987, Mr. Wendel was Chief Executive Officer of a predecessor of Polaris, which
was formed to purchase the snowmobile assets of the Polaris E-Z-GO Division of
Textron Inc. Before that time, Mr. Wendel was President of the Polaris E-Z-GO
Division for two years and prior thereto, held marketing positions as Vice
President of Sales and Marketing and National Sales Manager since 1974.
Mr. Larson has been President and Chief Operating Officer of the Company
since 1994. Mr. Larson was President and Chief Operating Officer of PICC from
October 1988 to December 1994. Prior thereto, Mr. Larson was Executive Vice
President of Toro Company and was responsible for its commercial, consumer and
international equipment business, and had held a number of general management
positions since joining Toro Company in 1975.
Mr. Grunewald has been Executive Vice President, Chief Financial Officer and
Secretary of the Company since its formation and was Executive Vice President,
Finance and Administration of PICC from September 1993 through December 1994.
Prior to joining Polaris, Mr. Grunewald was employed for 16 years by Pentair,
Inc., a diversified manufacturer of industrial products, most recently as
Executive Vice President, Chief Financial Officer and Secretary.
Mr. Baxter has been Vice President -- Engineering and Product Safety of the
Company since December 1994 and held that position with PICC or its predecessor
since 1981. Prior thereto, since 1970, Mr. Baxter was employed as Director of
Engineering of the Polaris E-Z-GO Division of Textron.
Mr. Skomoroh has been Vice President -- Sales and Marketing of the Company
since December 1994 and held that position with PICC since October 1988. Prior
thereto, he was Vice President, Polaris Canada and President, Secretary and
Director of Polaris Industries, Inc., an Ontario corporation and a wholly owned
subsidiary of Polaris Industries Partners L.P. Mr. Skomoroh joined Polaris in
1982 as General Manager, Canada, and was prior thereto the General Manager of
the Canadian operations of Arctic Enterprises, Inc., a snowmobile manufacturer.
9
<PAGE>
Mr. Bjorkman has been Vice President -- Manufacturing of the Company since
January 1995, and prior thereto held positions of Plant Manager and
Manufacturing Engineering Manager since July 1990. Prior to joining Polaris, Mr.
Bjorkman was employed by General Motors Corporation in various management
positions for nine years.
Mr. Malone has been Treasurer of the Company since December 1994 and was
Chief Financial Officer and Treasurer of PICC from January 1993 to December
1994. Prior thereto and since 1986, he was Assistant Treasurer of PICC or its
predecessor. Mr. Malone joined Polaris in 1984 after four years with Arthur
Andersen & Co.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
During 1993, and through December 21, 1994, BACs of the Partnership traded
on the American Stock Exchange ("AMEX") and the Pacific Stock Exchange ("PSE")
under the symbol "SNO." On December 22, 1994, a subsidiary of the Company was
merged into the Partnership, each BAC was exchanged for one share of common
stock, $.01 par value, of the Company (the "Shares") and the Shares commenced
trading on the AMEX and the PSE under the Symbol "SNO." On February 24, 1995,
the Shares began trading on the New York Stock Exchange (in lieu of the AMEX)
and on the PSE under the symbol "PII."
The following table reflects the high and low closing sale prices of the
BACs or the Shares, as the case may be, on the aforementioned exchanges for the
periods indicated, all as adjusted to reflect a two-for-one split which became
effective on August 18, 1993:
<TABLE>
<CAPTION>
1994 HIGH LOW
- ---------------------------------------- --------- ---------
<S> <C> <C>
Fourth Quarter.......................... 52 1/4 37 5/8
Third Quarter........................... 39 32 1/8
Second Quarter.......................... 35 7/8 30 1/8
First Quarter........................... 37 3/8 29 1/8
<CAPTION>
1993 HIGH LOW
- ---------------------------------------- --------- ---------
<S> <C> <C>
Fourth Quarter.......................... 38 1/2 32 1/4
Third Quarter........................... 36 27 15/16
Second Quarter.......................... 30 15/16 25 13/16
First Quarter........................... 26 9/16 21 13/16
</TABLE>
As of March 13, 1995, there were approximately 4,820 holders of record of
the Shares.
The Partnership declared the following distributions per unit to BAC holders
during the years ended December 31, 1994 and 1993, all as adjusted for a
two-for-one unit split which became effective on August 18, 1993:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
First Quarter................................................. $0.630 $0.625
Second Quarter................................................ $0.630 $0.625
Third Quarter................................................. $0.630 $0.630
Fourth Quarter................................................ $0.630 $0.630
</TABLE>
On January 26, 1995, the Company declared a regular quarterly dividend of
$0.15 per share which was paid on February 15, 1995 to holders of record on
February 6, 1995 and also declared a special cash distribution of $1.92 per
share to be paid on or about April 1, 1995 to holders of record on March 17,
1995. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of factors or restrictions that may
reduce materially future payments of dividends by the Company.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data presented below are qualified in their entirety
by, and should be read in conjunction with, the Financial Statements and Notes
thereto and other financial and statistical information referenced elsewhere in
this Report including the information referenced under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
POLARIS INDUSTRIES INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND PER UNIT DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1994* 1993 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Sales data
Total dollars......................... $826,286 $528,011 $383,818 $297,677 $296,147 $242,618 $171,497
% change from prior year............ 56% 38% 29% 1% 22% 41% 24%
Sales mix by product (%)
Snowmobiles......................... 44% 50% 54% 60% 67% 67% 70%
ATVs................................ 29% 26% 25% 25% 19% 19% 16%
PWC................................. 14% 9% 7% -- -- -- --
Parts, garments and access.......... 13% 15% 14% 15% 14% 14% 14%
Sales mix by customer (%)
Dealer-direct....................... 88% 87% 86% 84% 84% 76% 64%
Distributor......................... 12% 13% 14% 16% 16% 24% 36%
Gross profit data
Total dollars......................... $183,283 $130,287 $104,926 $ 88,440 $ 89,349 $ 77,320 $ 52,247
% to sales.......................... 22% 25% 27% 30% 30% 32% 30%
Operating expense data
Amortization of intangibles and First
Rights compensation.................. $ 14,321 $ 13,466 $ 11,997 $ 13,108 $ 12,116 $ 15,717 $ 8,645
Conversion costs...................... 12,315 -- -- -- -- -- --
Other operating expenses.............. 80,985 63,594 52,238 43,614 46,421 35,302 25,139
% to sales.......................... 10% 12% 14% 15% 16% 15% 15%
Net income data*
Total net income...................... $128,950 $ 45,813 $ 34,701 $ 31,462 $ 31,363 $ 26,190 $ 17,605
Net income per unit................... $ 2.25 $ 1.73 $ 1.65 $ 1.65 $ 1.65 $ 1.23
Net income per share.................. $ 7.00
Pro forma data*
Pro forma operating income............ $ 87,977 $ 53,227 $ 40,691 $ 31,718 $ 30,812 $ 26,301 $ 18,463
% to sales.......................... 11% 10% 11% 11% 10% 11% 11%
Pro forma net income.................. $ 54,703 $ 33,027 $ 24,602 $ 20,727 $ 20,465 $ 16,657 $ 11,538
Pro forma net income per share........ $ 2.97 $ 1.81 $ 1.37 $ 1.21 $ 1.19 $ 0.97 $ 0.71
CASH FLOW DATA
Cash flow from operating activities..... $111,669 $ 79,323 $ 55,316 $ 46,642 $ 54,782 $ 44,447 $ 37,542
Cash purchases of property and
equipment.............................. 32,529 18,126 12,295 15,988 7,158 7,065 2,724
Cash distributions declared............. 50,942 47,217 44,507 42,581 42,582 32,514 17,722
Cash distributions declared per unit.... $ 2.52 $ 2.51 $ 2.50 $ 2.50 $ 2.50 $ 2.27 $ 1.20
BALANCE SHEET DATA (AT END OF YEAR)
Cash and cash equivalents............... $ 62,881 $ 33,798 $ 19,094 $ 20,098 $ 32,025 $ 27,886 $ 15,599
Current assets.......................... 206,489 109,748 74,999 59,200 66,893 60,344 36,377
Total assets............................ 331,166 180,548 146,681 135,509 138,704 137,628 118,070
Current liabilities..................... 161,457 98,055 69,054 52,646 46,602 38,875 20,665
Shareholders' equity/Partners'
capital................................ 169,709 82,493 77,627 82,863 92,102 98,753 97,405
<FN>
- ------------------------------
*The comparability of the information reflected in the Selected Financial Data
is materially affected by the conversion from a master limited partnership to a
corporation on December 22, 1994, which resulted in the Company recording a net
deferred tax asset of $65.0 million, conversion expenses of $12.3 million and a
corresponding net increase in 1994 net income (see Notes 1 and 5 of Notes to
the Financial Statements). Pro forma data is presented to assist in comparing
the continuing results of operations of the Company exclusive of the conversion
costs and as if the Company was a taxable corporation for each period presented
(see Note 10 of Notes to the Financial Statements).
</TABLE>
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion pertains to the results of operation and financial
position of the Company for each of the three years in the period ended December
31, 1994, and should be read in conjunction with the Financial Statements
included elsewhere herein.
RESULTS OF OPERATIONS
1994 VS. 1993
Sales increased to $826.3 million in 1994, representing a 56 percent
increase over the $528.0 million of sales in 1993. Total finished goods unit
shipments for 1994 increased 52 percent over 1993. The increase in sales is
primarily attributable to the broadening of the three product lines and the
continued popularity of all Polaris products. Additional factors include the
growth of the worldwide market for all three product lines, the continuing
favorable U.S. economy and a competitive pricing strategy.
Snowmobile unit sales volume increased 34 percent during 1994, primarily
because of the introduction of new models, including the XLT Special and RXL
with Polaris' new XTRA suspension system.
ATV unit sales volume increased 55 percent during 1994, primarily because of
the continued growth in the utility and sports-enthusiasts' markets and the
improvement in product availability at the dealer level as a result of the
dedicated ATV production line. The average per unit sales price increased by 11
percent for ATVs in 1994, principally through the sale of new, more
high-performance models that have a higher selling price than economy models.
The Company introduced several new models in 1994, including the Magnum, Xplorer
and Scrambler.
PWC unit sales volume increased 146 percent during 1994, primarily because
of the fast growth in the PWC market and the introduction of models aimed at
both the family and sports rider market segments.
Sales of related parts, garments and accessories increased 36 percent in
1994 as a result of the increased sales volume of all three product lines.
Gross profit increased to $183.3 million in 1994, representing a 41 percent
increase over gross profit of $130.3 million. The gross profit margin percentage
decreased to 22.2 percent for 1994, from 24.7 percent for 1993. This decrease in
gross margin percentage is primarily a result of: (a) the change in product mix
towards a greater percentage of sales from ATVs and PWC which generate lower
gross margins than snowmobiles; (b) continued increases in raw material purchase
prices for engines and certain other component parts because of the weakening of
the U.S. dollar in relation to the Japanese yen; (c) strengthening of the U.S.
dollar in relation to the Canadian dollar, which results in lower gross margins
from the Company's Canadian subsidiary operation; and (d) increase in warranty
expenses as a result of the emphasis on technological innovation and
introduction of new high-performance models.
The Company has continued to invest in new product development, particularly
in the areas of innovation and product diversification. New product research and
development costs are recorded as cost of sales in the statements of operations.
Research and development expenses were $13.5 million (1.6 percent of sales) in
1994, and $11.1 million (2.1 percent of sales) in 1993. In addition, the Company
incurred tooling expenditures for new products of $12.6 million in 1994 and $9.3
million in 1993. In 1994, more than 70 percent of sales came from products
introduced in the past three years.
Operating expenses (exclusive of $12.3 million of costs of conversion to a
corporation) increased $18.2 million (24 percent) in 1994 as a result of the
sales volume increases, but as a percentage of sales, decreased to 11.5 percent
for 1994, from 14.6 percent in 1993. The percentage decrease is due primarily to
the Company supporting an increasing level of sales without a corresponding
increase in selling and administrative expenses.
12
<PAGE>
Income tax expense (exclusive of the income tax adjustment for the change in
tax status) increased $4.5 million in 1994 compared to 1993. This increase is
attributable primarily to additional reserves established relating to certain
open tax years in the United States and Canada, some of which are under audit by
Revenue Canada (see Note 8 of Notes to the Financial Statements).
Pro forma information is presented in the Statements of Operations to assist
in comparing the continuing results of operations of the Company exclusive of
the conversion costs and as if the Company was a taxable corporation for each
period presented. The pro forma provision for income taxes was calculated at an
effective tax rate of 38 percent. Pro forma net income increased 66 percent to
$54.7 million in 1994 from $33.0 million in 1993. Pro forma net income as a
percent of sales was 6.6 percent and 6.3 percent in 1994 and 1993, respectively.
Pro forma net income per share increased 64 percent to $2.97 in 1994 from $1.81
in 1993.
1993 VS. 1992
Sales for 1993 were $528.0 million, an increase of 38 percent over 1992
sales of $383.8 million. Total finished goods unit shipments for 1993 increased
34 percent over 1992.
Management believes Polaris' success in the snowmobile market is
attributable to product superiority, aggressive consumer promotional programs
and a strong dealer network. The 1993 sales increase resulted from the
introduction of new models and the continued success of other popular models,
including the lightweight XLT model. Snowmobile unit sales volume increased by
26 percent in 1993 over 1992.
In 1993, the Company's ATV product lines sales grew by 41 percent over 1992
sales as retail sales rose to the highest level in Polaris' history. Management
believes Polaris has been successful by targeting the all-purpose segment of the
ATV market with new and improved products. Polaris introduced several new models
in 1993, including the Sportsman 4x4.
Manufacturing and sales of PWC commenced in the first quarter of 1992 with
the introduction of the SL650 model. In 1993, the Company added the SL750 and
the three-passenger SLT750 models designed for families and sports riders. PWC
unit sales volume increased 62 percent in 1993 over the initial shipments of PWC
products in 1992.
Sales of related parts, garments and accessories increased 43 percent in
1993 over 1992 as a result of the increased finished goods shipments.
Gross profit increased to $130.3 million in 1993, a 24 percent increase over
1992. However, the gross profit percentage decreased to 24.7 percent in 1993
compared to 27.3 percent in 1992, primarily due to an aggressive pricing
strategy, changes in the product mix and foreign exchange rates. The growing ATV
and PWC businesses provided a lower gross profit percentage than did the
snowmobile business. Raw material purchase prices increased for engines and
certain other component parts because of the weakening of the U.S. dollar in
relation to the Japanese yen. Strengthening of the U.S. dollar in relation to
the Canadian dollar caused gross margin erosion of the Canadian subsidiary
operation.
Operating expenses increased $12.8 million in 1993, but as a percentage of
sales decreased to 14.6 percent in 1993 from 16.7 percent in 1992. Operating
expenses as a percentage of sales decreased because the Company was able to
increase sales without incurring a corresponding amount of general and
administrative expenses. In addition, because of the strong demand and
competitive pricing for the Company's products, sales and marketing program
expenses remained relatively constant between 1993 and 1992.
The provision for income taxes in 1993 increased over the prior year at a
rate greater than the growth in income from the Canadian subsidiary because the
Company continued to accrue for open tax years in the United States and Canada
(see Note 8 of Notes to the Financial Statements).
13
<PAGE>
CASH DISTRIBUTIONS
Since its inception, and prior to the conversion to a corporation in 1994,
the Partnership paid cumulative cash distributions to holders of its BACs in the
amount of $16.37 per BAC, which, together with cash distributions paid to its
general partner, aggregated $282.4 million.
On January 26, 1995, the Board of Directors of the Company declared a
regular dividend of $0.15 per share to holders of record on February 6, 1995,
payable on February 15, 1995, and a special cash distribution of $1.92 per share
to holders of record on March 17, 1995, payable on April 1, 1995. Management has
recommended to the Company's Board of Directors that it establish an initial
cash dividend rate of $0.15 per share per quarter, and pay two additional
special cash distributions, each of $1.92 per share, payable during the third
and fourth quarters of 1995. Management expects to incur indebtedness of up to
$70 million in connection with the payment of the special cash distributions.
However, the timing and amount of future dividends and distributions will be at
the discretion of the Board of Directors of the Company and will depend, among
other things, on continuing levels of performance and the financial strength of
the Company. There can be no assurance that the recommended dividends or cash
distributions for 1995 will be declared and paid.
LIQUIDITY AND CAPITAL RESOURCES
Polaris' primary sources of funds have been cash provided by operating
activities, a line of credit and a dealer financing program provided by third
parties. Polaris' primary uses of funds have been for cash distributions to
partners, capital investments and for new product development.
During 1994, Polaris generated net cash from operating activities of $111.7
million, which was utilized to fund cash distributions to partners of $50.1
million and capital expenditures of $32.5 million. In 1993, Polaris generated
net cash from operating activities of $79.3 million, which was utilized to fund
cash distributions to partners of $46.5 million and capital expenditures of
$18.1 million. At December 31, 1994, cash and cash equivalents totaled $62.9
million, an increase of $29.1 million from December 31, 1993. Working capital
totaled $45.0 million at December 31, 1994.
The seasonality of production and shipments causes working capital
requirements to fluctuate during the year. The Company has a $40 million
unsecured bank line of credit arrangement expiring May 1, 1995 to provide
letters of credit and borrowings for working capital needs. Borrowings under the
line of credit bear interest at the prime interest rate, or at CD-based or
LIBOR-based rates. At December 31, 1994, the Company had no short-term debt
under this line of credit and had utilized its bank line to the extent of
letters of credit outstanding of $15.5 million related to purchase obligations
for raw materials. The Company is currently in negotiations to obtain a $125
million unsecured bank line of credit arrangement to replace its current line of
credit arrangements.
The Company has arrangements with unrelated finance companies to provide
floor plan financing for its distributors and dealers. These arrangements
provide liquidity by financing distributor and dealer purchases of snowmobiles,
ATVs and PWC without the use of the Company's working capital. Substantially all
of the sales of snowmobiles, ATVs and PWC are financed under these arrangements
whereby the Company receives payment within a few days of shipment of the
product. The amount financed by distributors and dealers under these
arrangements at December 31, 1994 and 1993, was approximately $108.0 million and
$64.9 million, respectively. From time to time, the Company participates in the
cost of dealer and distributor financing up to certain limits. The Company has
agreed to repurchase products repossessed by the finance companies to an annual
maximum of 15 percent of the average amount outstanding during the prior
calendar year. The Company's financial exposure under these agreements 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. However, an adverse change in the
economy could cause this situation to change and thereby require the Company to
repurchase financed units. Management intends to record a sales allowance when
it becomes probable that returns under this program will be material.
14
<PAGE>
The Company has made capital investments to increase production capacity,
quality and efficiency, and for new product development. Over the past several
years, these investments have included the introduction of the PWC product line,
the introduction of new snowmobile and ATV models to broaden those product
lines, the expansion of manufacturing capacity, the purchase of enhanced
fabrication and assembly equipment, the expansion of computer-aided engineering
and design systems, installation of a new state-of-the art metals paint system,
and the continuing development and implementation of systems and programs to
improve quality and efficiency and to reduce costs. Improvements in
manufacturing capacity include the $8.0 million purchase of a component parts
fabrication facility in 1991, the addition of an assembly line dedicated to
year-round production of ATVs in 1993, improvements in plant layout and the
expansion to a new leased assembly facility in 1994. The Company anticipates
that capital expenditures, including tooling, for 1995 will approximate $45
million.
The Canadian income tax authorities have proposed adjustments to the 1987
and 1988 income tax returns of the Canadian subsidiary. The resolution of these
proposed adjustments may also affect the Canadian income tax returns for years
subsequent to 1988. The Company has been informed of the Canadian income tax
authorities' intent to initiate audits of the tax years 1989 through 1991. The
proposed adjustments relate primarily to the original purchase price allocation
of the Canadian subsidiary and certain transfer pricing matters. Management
continues to vigorously contest a certain amount of the proposed adjustments.
Management does not believe the outcome of this matter will have a materially
adverse impact on the financial position or continuing operations of the
Company. At December 31, 1994, the Company has accrued $14.3 million for income
taxes related to certain open tax years in the United States and Canada.
The conversion to a corporation effective in December 1994 will
significantly impact future liquidity and capital resources. Management has
recommended to the Company's Board of Directors that it make special cash
distributions aggregating approximately $105 million during 1995. As a
corporation, the Company will be responsible for payment of corporate federal,
state and certain foreign income taxes on current earnings. The combined tax
rate is estimated to be approximately 38 percent of pre-tax income, net of
related research and development credits and foreign sales corporations
benefits. As a result of the conversion, the Company has recorded a deferred tax
asset of $65 million in 1994 which will have the effect of reducing income taxes
payable in future periods.
Management believes that existing cash balances, cash flow to be generated
from operating activities and available borrowing capacity under the new line of
credit arrangement currently being negotiated will be sufficient to fund
operations, regular dividends, special cash distributions and capital
expenditure requirements for 1995. At this time, management is not aware of any
factors that would have a materially adverse impact on cash flow beyond 1995.
INFLATION AND EXCHANGE RATES
The Company does not believe that inflation has had a material impact on the
results of its operations. However, the changing relationships of the U.S.
dollar to the Canadian dollar and Japanese yen have had a material impact from
time-to-time.
Over the past several years, weakening of the U.S. dollar in relation to the
yen has resulted in higher raw material purchase prices. During 1994, purchases
totaling 28 percent of the Company's cost of sales were from Japanese suppliers.
Management believes that such cost increases also affect its principal
competitors in ATVs, and, to varying degrees, some of its snowmobile and PWC
competitors.
The Company operates in Canada through a wholly-owned subsidiary. Sales of
the Canadian subsidiary comprised 16 percent of total Company sales in 1994.
Strengthening of the U.S. dollar in relation to the Canadian dollar has caused
unfavorable foreign currency fluctuations from prior periods resulting in lower
gross margin levels.
15
<PAGE>
In the past, the Company has been a party to, and in the future may enter
into, foreign exchange hedging contracts for both the Japanese yen and the
Canadian dollar to minimize the impact of exchange rate fluctuations within each
year. To date, such contracts have not had a material impact on earnings. There
were no open contracts as of December 31, 1994.
In February 1995, the Company entered into a venture with Fuji Heavy
Industries Ltd. to build engines in the United States for recreational and
industrial products. Potential advantages to the Company of participation in the
joint venture include reduced foreign exchange risk, lower shipping costs and
less dependence on a single source for engines.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are as set forth in the
Financial Statements of the Company. Reference is made to the Index to the
Financial Statements and Supporting Schedule which appears on page F-1. Such
Financial Statements are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant
The information under the caption "Election of Directors" in the Company's
1995 Proxy Statement is incorporated herein by reference.
(b) Executive Officers of the Registrant
Information concerning Executive Officers of the Company is included in this
Report under Item 4, "Executive Officers of the Registrant."
(c) Compliance with Section 16(a) of the Exchange Act
The information under the caption "Compliance with Beneficial Ownership
Reporting Rules" in the Company's 1995 Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation and Other
Information" and "Election of Directors -- Directors' Remuneration" in the
Company's 1995 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Certain Beneficial
Owners and Management" in the Company's 1995 Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Relationships and Related
Transactions" in the Company's 1995 Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Financial Statements
Reference is made to the Index to Financial Statements and Supporting
Schedule which appears on page F-1.
16
<PAGE>
(2) Financial Statement Schedules
Reference is made to the Index to Financial Statements and Supporting
Schedule, which appears on page F-1.
(3) Exhibits
The Exhibits to this Report are listed in the Exhibit Index on page E-1
which follows the Financial Statement Schedule.
A copy of any of these Exhibits will be furnished at a reasonable cost to
any person who was a shareholder of the Company as of March 13, 1995, upon
receipt from any such person of a written request for any such exhibit. Such
request should be sent to Polaris Industries Inc., 1225 Highway 169 North,
Minneapolis, Minnesota 55441, Attention: Investor Relations.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended December 31, 1994.
(c) Exhibits
Included in Item 14(a)(3) above.
(d) Financial Statement Schedules
Included in Item 14(a)(2) above.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota on March 24, 1995.
POLARIS INDUSTRIES INC.
By: /s/ W. HALL WENDEL, JR.
-----------------------------------
W. Hall Wendel, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- ------------------
<C> <S> <C>
/s/ W. HALL WENDEL, JR.
------------------------------------------- Chief Executive Officer and Director March 24, 1995
W. Hall Wendel, Jr. (Principal Executive Officer)
Executive Vice President, Chief
/s/ JOHN H. GRUNEWALD Financial Officer and Secretary
------------------------------------------- (Principal Financial and Accounting March 24, 1995
John H. Grunewald Officer)
*
------------------------------------------- Director March 24, 1995
Beverly F. Dolan
*
------------------------------------------- Director March 24, 1995
Robert S. Moe
*
------------------------------------------- Director March 24, 1995
Kenneth D. Larson
*
------------------------------------------- Director March 24, 1995
Stephen G. Shank
*
------------------------------------------- Director March 24, 1995
Gregory R. Palen
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- ------------------
<C> <S> <C>
*
------------------------------------------- Director March 24, 1995
Andris A. Baltins
*By: /s/ W. HALL WENDEL, JR.
-------------------------------------- March 24, 1995
(W. Hall Wendel, Jr. Attorney-in-Fact)
<FN>
- ------------------------
*W. Hall Wendel, Jr., pursuant to Powers of Attorney executed by each of the
officers and directors listed above whose name is marked by an "*" and filed as
an exhibit hereto, by signing his name hereto does hereby sign and execute this
Report of Polaris Industries Inc. on behalf of each of such officers and
directors in the capacities in which the names of each appear above.
</TABLE>
19
<PAGE>
POLARIS INDUSTRIES INC.
FINANCIAL STATEMENTS AND SUPPORTING SCHEDULE
INCLUDED IN ANNUAL REPORT ON FORM 10-K
Page numbers refer to pages in the attached financial statements.
<TABLE>
<CAPTION>
INDEX PAGE
- ---------------------------------------------------------------------------------------------------------- ---------
<S> <C>
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS.................................................. F-2
FINANCIAL STATEMENTS
Balance sheets.......................................................................................... F-3
Statements of operations................................................................................ F-5
Statements of shareholders' equity...................................................................... F-6
Statements of cash flows................................................................................ F-7
Notes to financial statements........................................................................... F-8
</TABLE>
The following financial statement schedule of Polaris Industries Inc. for
the years ended December 31, 1994, 1993 and 1992, is filed as part of this
report and should be read in conjunction with the financial statements.
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE......................... FS-1
SCHEDULE II -- Valuation and qualifying accounts..................................... FS-2
</TABLE>
Schedules not listed above have been omitted because they are not applicable
or are not required or the information requested to be set forth therein is
included in the financial statements or notes thereto.
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Polaris Industries Inc.
Minneapolis, Minnesota
We have audited the accompanying balance sheets of POLARIS INDUSTRIES INC.
(formerly Polaris Industries Partners L.P.) as of December 31, 1994 and 1993,
and the related statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Polaris Industries Inc. as
of December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
February 2, 1995
F-2
<PAGE>
POLARIS INDUSTRIES INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 2)..................................................... $ 62,881 $ 33,798
Trade receivables...................................................................... 29,700 21,340
Inventories (Note 3)................................................................... 88,714 52,057
Prepaid expenses and other............................................................. 5,194 2,553
Deferred tax assets (Note 5)........................................................... 20,000 --
---------- -----------
Total current assets............................................................... 206,489 109,748
---------- -----------
DEFERRED TAX ASSETS (NOTE 5)............................................................. 45,000 --
---------- -----------
PROPERTY AND EQUIPMENT, at cost
Land, buildings and improvements....................................................... 14,913 10,737
Equipment and tooling.................................................................. 77,116 56,480
---------- -----------
92,029 67,217
Less accumulated depreciation.......................................................... 38,368 27,486
---------- -----------
53,661 39,731
---------- -----------
INTANGIBLES
Cost in excess of net assets of business acquired, net of amortization of $5,722, 1994
and $4,968, 1993...................................................................... 24,956 25,710
Dealer network, net of amortization of $44,000, 1994 and $39,811, 1993................. -- 4,189
Other, net of amortization of $2,421, 1994 and $2,311, 1993............................ 1,060 1,170
---------- -----------
26,016 31,069
---------- -----------
$ 331,166 $ 180,548
---------- -----------
---------- -----------
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
POLARIS INDUSTRIES INC.
BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable....................................................................... $ 58,932 $ 36,122
Distributions payable.................................................................. 12,736 11,851
Accrued expenses:
Compensation (Note 6)................................................................ 33,349 20,060
Warranties........................................................................... 23,838 11,412
Other................................................................................ 17,447 10,856
Income taxes payable (Notes 5 and 8)................................................... 15,155 7,754
---------- -----------
Total current liabilities.......................................................... 161,457 98,055
---------- -----------
COMMITMENTS AND CONTINGENCIES (NOTES 4, 6, 8 AND 9)
PARTNERS' CAPITAL........................................................................ -- 82,493
SHAREHOLDERS' EQUITY (NOTES 6 AND 8)
Preferred stock $0.01 par value, authorized 20,000 shares, no issued and outstanding
shares................................................................................ -- --
Common stock $0.01 par value, authorized 80,000 shares, issued and outstanding, 18,111
shares 1994........................................................................... 181 --
Additional paid-in capital............................................................. 103,935 --
Compensation payable in common stock................................................... 12,251 --
Retained earnings...................................................................... 53,342 --
---------- -----------
169,709 82,493
---------- -----------
$ 331,166 $ 180,548
---------- -----------
---------- -----------
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
POLARIS INDUSTRIES INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1994 1993 1992
---------- ----------- -----------
<S> <C> <C> <C>
Sales....................................................................... $ 826,286 $ 528,011 $ 383,818
Cost of Sales............................................................... 643,003 397,724 278,892
---------- ----------- -----------
Gross profit............................................................ 183,283 130,287 104,926
---------- ----------- -----------
Operating Expenses
Selling, general and administrative....................................... 80,985 63,594 52,238
First Rights compensation................................................. 9,268 6,300 4,570
Amortization of intangibles............................................... 5,053 7,166 7,427
Conversion (Note 1)....................................................... 12,315 -- --
---------- ----------- -----------
Total operating expenses................................................ 107,621 77,060 64,235
---------- ----------- -----------
Operating income........................................................ 75,662 53,227 40,691
Nonoperating Expense (Income), net.......................................... (254) (43) 1,010
---------- ----------- -----------
Income before income taxes.............................................. 75,916 53,270 39,681
Provision for Income Taxes (Notes 5 and 8).................................. 11,966 7,457 4,980
---------- ----------- -----------
63,950 45,813 34,701
Income Tax Adjustment for Change in Tax Status (Note 5)..................... (65,000) -- --
---------- ----------- -----------
Net income.............................................................. $ 128,950 $ 45,813 $ 34,701
---------- ----------- -----------
---------- ----------- -----------
Net Income Per Share (Note 1)............................................... $ 7.00
----------
----------
Weighted Average Number of Common and Common Equivalent Shares Outstanding
(Note 1)................................................................... 18,423 18,215 17,968
---------- ----------- -----------
---------- ----------- -----------
Pro Forma Information (Note 10)
Income before income taxes................................................ $ 88,231 $ 53,270 $ 39,681
Provision for income taxes................................................ 33,528 20,243 15,079
---------- ----------- -----------
Net income.............................................................. $ 54,703 $ 33,027 $ 24,602
---------- ----------- -----------
---------- ----------- -----------
Net income per share...................................................... $ 2.97 $ 1.81 $ 1.37
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
POLARIS INDUSTRIES INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
------------------------------------------------------
LIMITED PARTNERS' INTEREST
--------------------------------------------
SHAREHOLDERS' EQUITY FIRST RIGHTS
--------------------------------------- ----------------------- TOTAL
ADDITIONAL COMPENSATION GENERAL ASSIGNED LIMITED
COMMON PAID-IN PAYABLE IN RETAINED PARTNER'S CAPITAL DEFERRED PARTNERS'
STOCK CAPITAL COMMON STOCK EARNINGS INTEREST BACS VALUE COMPENSATION INTEREST TOTAL
------ ---------- ------------ -------- -------- --------- -------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1991.................... $-- $ -- $ -- $ -- $(5,066 ) $ 71,499 $ 19,114 $(2,684) $ 87,929 $ 82,863
First Rights conversion
to BACs............... -- -- -- -- -- 12,407 (12,407) -- -- --
First Rights grants and
amortization.......... -- -- -- -- -- -- 2,395 2,175 4,570 4,570
Cash distributions
declared.............. -- -- -- -- (9,257 ) (35,250) -- -- (35,250) (44,507)
Net income for the
year.................. -- -- -- -- 7,218 27,483 -- -- 27,483 34,701
------ ---------- ------------ -------- -------- --------- -------- ------------- --------- --------
Balance, December 31,
1992.................... -- -- -- -- (7,105 ) 76,139 9,102 (509) 84,732 77,627
First Rights conversion
to BACs............... -- -- -- -- -- 6,042 (6,072) -- (30) (30)
First Rights grants and
amortization.......... -- -- -- -- -- -- 5,791 509 6,300 6,300
Cash distributions
declared.............. -- -- -- -- (9,821 ) (37,396) -- -- (37,396) (47,217)
Net income for the
year.................. -- -- -- -- 9,529 36,284 -- -- 36,284 45,813
------ ---------- ------------ -------- -------- --------- -------- ------------- --------- --------
Balance, December 31,
1993.................... -- -- -- -- (7,397 ) 81,069 8,821 -- 89,890 82,493
First Rights conversion
to BACs............... -- -- -- -- -- 5,778 (5,838) -- (60) (60)
First Rights grants.... -- -- -- -- -- -- 9,268 -- 9,268 9,268
Cash distributions
declared.............. -- -- -- -- (10,596 ) (40,346) -- -- (40,346) (50,942)
Net income for the year
(Note 1).............. -- -- -- 53,342 15,726 59,882 -- -- 59,882 128,950
Conversion (Note 1).... 181 103,935 12,251 -- 2,267 (106,383) (12,251) -- (118,634) --
------ ---------- ------------ -------- -------- --------- -------- ------------- --------- --------
Balance, December 31,
1994.................... $ 181 $ 103,935 $ 12,251 $53,342 $ -- $ -- $ -- $-- $ -- $169,709
------ ---------- ------------ -------- -------- --------- -------- ------------- --------- --------
------ ---------- ------------ -------- -------- --------- -------- ------------- --------- --------
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
POLARIS INDUSTRIES INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................................. $ 128,950 $ 45,813 $ 34,701
Adjustments to reconcile net income to cash flow from operating activities
Depreciation............................................................. 18,599 12,446 9,830
Amortization............................................................. 5,053 7,166 7,427
First Rights compensation................................................ 9,268 6,300 4,570
Deferred income taxes.................................................... (65,000) -- --
Changes in current operating items
Trade receivables...................................................... (8,360) (4,465) (6,372)
Inventories............................................................ (36,657) (14,481) (10,528)
Accounts payable....................................................... 22,810 11,176 11,605
Accrued expenses....................................................... 32,306 12,977 1,167
Income taxes payable................................................... 7,401 4,124 3,154
Other.................................................................. (2,701) (1,733) (238)
---------- ---------- ----------
Net cash provided by operating activities............................ 111,669 79,323 55,316
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment......................................... (32,529) (18,126) (12,295)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions......................................................... (50,057) (46,493) (44,025)
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents..................... 29,083 14,704 (1,004)
CASH AND CASH EQUIVALENTS
Beginning.................................................................. 33,798 19,094 20,098
---------- ---------- ----------
Ending..................................................................... $ 62,881 $ 33,798 $ 19,094
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION: Polaris Industries Inc. (the Corporation) was formed for the
purpose of effecting the conversion of Polaris Industries Partners L.P., a
Delaware limited partnership (the Partnership), from a publicly traded limited
partnership to a publicly traded corporation on December 22, 1994 (the
Conversion). The Corporation issued 16,010,441 shares of $0.01 par value common
stock to the Partnership's Limited Partners in exchange for their limited
partner interests, 2,100,243 shares of common stock to the affiliates of EIP
Associates L.P. (the General Partner) in exchange for the entire general
partnership interests and rights and ultimately 312,500 shares of common stock
to the holders of 312,500 First Rights. As a result of the Conversion, the
Corporation owns all of the general and limited partnership interests in the
Partnership. The Corporation had no operations prior to the conversion and is
continuing the business of the Partnership with the same operating management,
but without management involvement by the General Partner. The activities of the
Partnership and the Corporation are referred to herein as activities of the
Company.
The Conversion has been accounted for as a reorganization of affiliated
entities, with the assets and liabilities of the Partnership recorded at their
historical cost basis, except that deferred taxes relating to the temporary
differences between the financial reporting and the income tax bases of certain
assets and liabilities at the date of the Conversion were recorded by the
Corporation (Note 5). The statements of operations, shareholders' equity and
cash flows for 1992, 1993 and for 1994 through the date of the Conversion
reflect the operations of the Partnership. The costs of the Conversion were
recorded as an expense of the Corporation in the statement of operations at the
time of the Conversion. Other than the effect of recording deferred taxes and
the costs of the Conversion, net income for the year ended December 31, 1994,
has been prorated between retained earnings of the Corporation and partners'
capital of the Partnership for purposes of the statement of shareholders'
equity.
BUSINESS: The Company is engaged in a single industry segment consisting of
the design, engineering and manufacture of recreational and utility vehicles and
markets them together with related parts, garments and accessories through a
network of dealers, distributors and its Canadian subsidiary.
BASIS OF PRESENTATION: The financial statements of the Company include the
accounts of the Corporation, the Partnership and its Canadian subsidiary. All
significant intercompany transactions and balances have been eliminated in the
combination.
CASH EQUIVALENTS: The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
INVENTORIES: Inventories are stated at the lower of cost (first-in,
first-out method) or market.
DEPRECIATION AND AMORTIZATION: Depreciation and amortization are provided
using the straight-line method based on the estimated useful lives of individual
assets over the following periods:
<TABLE>
<CAPTION>
YEARS
---------
<S> <C>
Building and improvements...................................... 10 - 20
Equipment and tooling.......................................... 1 - 7
Cost in excess of net assets of business acquired.............. 40
Other intangibles.............................................. 5 - 17
</TABLE>
Fully depreciated tooling is eliminated from the accounting records
annually.
The Company reviews its intangibles quarterly to determine potential
impairment by comparing the carrying value of the intangibles with expected
future net cash flows provided by operating activities of the business. Should
the sum of the expected future net cash flows be less than the
F-8
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
carrying value, the Company would determine whether an impairment loss should be
recognized. An impairment loss would be measured by comparing the amount by
which the carrying value exceeds the fair value of the business. Fair value will
be determined based on appraised market value. To date, management has
determined that no impairment of intangibles exists.
PRODUCT WARRANTIES: The Company provides for estimated normal and extended
warranty costs at the time of sale to distributors and dealers and for other
costs associated with specific items at the time their existence and amounts are
determinable.
RECLASSIFICATION: For the years ended December 31, 1993 and 1992, the
Company has reclassified certain expenses to be consistent with the
classification adopted for the current year's statement of operations
presentation.
FOREIGN CURRENCY: The Canadian subsidiary maintains its books of record
using Canadian currency and uses United States currency as the functional
currency. Canadian assets and liabilities are translated at the foreign exchange
rates in effect at the balance sheet date. Revenues and expenses are translated
at the average foreign exchange rate in effect. Translation and exchange gains
and losses are reflected in earnings.
FOREIGN EXCHANGE CONTRACTS: The Company enters into foreign exchange
contracts to hedge certain of its purchase commitments denominated in foreign
currencies and transfers of funds from its Canadian subsidiary; market value
gains and losses are recognized at the time of purchase or transfer of funds,
respectively.
REVENUE RECOGNITION: Revenues are recognized at the time of delivery to the
dealer or distributor. The Company has not historically recorded an allowance
for product returns because such returns, whether in the normal course of
business or resulting from repossession under its customer financing program
(see Note 4), have not been material. However, management intends to record a
return allowance when it becomes probable such returns will be material. The
Company provides for estimated sales promotion expenses at the time of sale to
the dealer or distributor customer.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs are charged
to operations as incurred and totaled $13,465,000, $11,145,000 and $7,396,000
for 1994, 1993 and 1992, respectively. These costs are included as a component
of cost of sales on the accompanying statements of operations.
NET INCOME PER SHARE: Net income per share is calculated based on the
weighted average number of common and common equivalent shares outstanding
during 1994 as if the conversion transaction discussed above occurred at the
beginning of the year. Common equivalent shares represent the number of shares
issuable upon conversion of the rights outstanding. Net income per share is not
applicable for 1993 or 1992 because the Company was a partnership in those
years.
CASH DISTRIBUTIONS FROM OPERATIONS: Prior to the Conversion, cash
distributions from operations were determined at the discretion of the General
Partner and were allocated 79.2 percent to the limited partners and 20.8 percent
to the General Partner.
F-9
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash on deposit with United States financial institutions.............. $ 10 $ 522
Cash on deposit with a Canadian financial institution
(in US dollars)....................................................... 12,553 3,469
Investment in institutional and government fund........................ 20,352 29,807
Commercial paper....................................................... 29,966 --
--------- ---------
$ 62,881 $ 33,798
--------- ---------
--------- ---------
</TABLE>
The Company maintains cash in deposit accounts which frequently exceed
United States and Canadian insured limits. Management places deposits with
financial institutions only after evaluating the institution's financial
strength.
The Company invests in an institutional and government fund, consisting of a
portfolio of money market instruments with an average weighted maturity of not
more than 90 days, including those of the United States government, banker's
acceptances, time deposits, certificate of deposits and certain high grade
commercial paper, nonconvertible corporate debt and loan participation interest.
The Company also invests in commercial paper, consisting of corporate debt
securities with maturities of not more than 90 days. At December 31, 1994, the
investment in corporate debt securities is diversified among five high credit
quality issuers in various industries. The commercial paper is classified as
available for sale and as such, is stated at fair value, which at December 31,
1994, approximated amortized cost. During 1994, the Company purchased
$109,966,000 of commercial paper and realized proceeds of $80,000,000 from sales
of commercial paper.
NOTE 3. INVENTORIES
The major components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Raw materials.......................................................... $ 32,717 $ 21,571
Service parts.......................................................... 29,067 23,379
Finished goods......................................................... 26,930 7,107
--------- ---------
$ 88,714 $ 52,057
--------- ---------
--------- ---------
</TABLE>
NOTE 4. FINANCING
BANK FINANCING: The Company has an unsecured bank line of credit
arrangement to meet seasonal short-term financing needs with a maximum available
of $40,000,000. Interest is charged at the prime interest rate, C.D.-based or
LIBOR-based rates, and the agreement expires on May 1, 1995. The Company is
currently in negotiations to obtain a $125,000,000 unsecured bank line of credit
arrangement to replace its current line of credit arrangement.
CUSTOMER FINANCING PROGRAM: Unrelated finance companies provide floor plan
financing to distributors and dealers on the purchase of the Company's products.
The amount financed by distributors and dealers under these arrangements at
December 31, 1994, was approximately $108,000,000. The Company has agreed to
repurchase products repossessed by the finance companies to an annual maximum of
15 percent of the average amounts outstanding during the prior calendar year.
The financial exposure under these arrangements is limited to the difference
between the amount paid to
F-10
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. FINANCING (CONTINUED)
the finance companies and the amount received on the resale of the repossessed
product. No material losses have been incurred under these agreements during the
periods presented. As a part of its marketing program, the Company will from
time to time pay a specified portion of the floor plan interest expense payable
by its distributors and dealers.
Cash payment for interest amounted to $12,121,000, $8,348,000 and $6,764,000
in 1994, 1993 and 1992, respectively.
NOTE 5. INCOME TAX MATTERS AND CHANGE IN TAX STATUS
The Partnership was not a taxpaying entity for United States federal and
state income tax purposes and its taxable income was passed through to the BAC
holders and to the General Partner. The Canadian subsidiary is a corporation
which is subject to Canadian federal and provincial income taxes, at a current
combined effective rate of 44 percent.
As a result of the Conversion, the Corporation, as a taxable entity,
recorded a net deferred tax asset of $65,000,000 with a corresponding credit to
income tax expense, for the following temporary differences between financial
reporting and income tax bases (in thousands):
<TABLE>
<S> <C>
Current assets:
Inventories..................................................... $ 5,100
Accrued expenses................................................ 13,300
Compensation payable in common stock............................ 1,600
---------
Total current................................................. 20,000
---------
Noncurrent assets:
Cost in excess of net assets of business acquired (a)........... 39,500
Property and equipment.......................................... 1,700
Compensation payable in common stock............................ 3,800
---------
Total noncurrent.............................................. 45,000
---------
Less valuation allowance.......................................... --
---------
Total......................................................... $ 65,000
---------
---------
<FN>
- ------------------------
(a) The Corporation received a step-up in the tax basis of the assets of the
Partnership, which resulted in a deferred tax asset. There was no step-up
for financial statement purposes.
</TABLE>
The Company made cash payments for income taxes of $4,119,000, $3,227,000
and $1,483,000 in 1994, 1993 and 1992, respectively.
NOTE 6. EMPLOYEE BENEFIT PLANS
The Company has various employee benefit plans for management and employees.
A summary of these plans follows:
BONUS AND PROFIT SHARING PLANS: A bonus and profit sharing plan has been
established with amounts determined annually based upon a predetermined formula.
In addition, the Company has an employee retirement savings plan.
COMPENSATION PAYABLE IN COMMON STOCK: The Company has an employee benefit
plan which provides for the issuance of rights which convert to shares of common
stock as an incentive for management and employees. The rights require no cash
payments by the recipients. Of such rights,
F-11
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. EMPLOYEE BENEFIT PLANS (CONTINUED)
900,000 have been reserved for issuance to nonmanagement employees (the Employee
Plan) and 1,500,000 have been reserved for issuance to middle management and
senior management (the Management Plan). Rights will not be granted after
December 31, 1999, and expire January 1, 2003.
Rights under the Employee Plan are vested when granted. Rights under the
Management Plan are earned but contain vesting provisions up to three years and
terminate if employment ceases prior to the issuance of the related common
stock.
As of December 31, 1994, 215,500 rights under the Management Plan and 97,000
rights under the Employee Plan, respectively, are outstanding as summarized
below:
<TABLE>
<CAPTION>
OUTSTANDING
AT END
GRANTED CONVERTED FORFEITED OF YEAR
--------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
1992....................................... 105,000 (1,205,784) -- 580,022
1993....................................... 171,594 (433,356) -- 318,260
1994....................................... 220,597 (226,357) -- 312,500
</TABLE>
The Company records the rights at fair market value on the date of grant and
accrues the related compensation expense throughout the year. However, prior to
1993, deferred compensation was recognized for portions of rights granted under
the Management Plan, since certain conversion criteria had not been achieved at
that date.
Cash and noncash compensation expense recorded under these employee benefit
plans was $37,512,000, $22,538,000 and $15,969,000 for 1994, 1993 and 1992,
respectively. Accrued compensation includes approximately $28,243,000 and
$16,236,000 for certain of these plans at December 31, 1994 and 1993,
respectively.
NOTE 7. FOREIGN OPERATIONS
United States operations include export sales (excluding sales in Canada) of
$36,049,000, $27,179,000 and $21,091,000 for 1994, 1993 and 1992, respectively.
The following data relates to Canadian operations (in thousands of United
States dollars):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
----------- ----------- ---------
<S> <C> <C> <C>
Sales................................................... $ 129,689 $ 106,664 $ 99,286
Operating income........................................ 12,116 6,887 6,541
Identifiable assets..................................... 19,620 15,248 16,639
</TABLE>
NOTE 8. COMMITMENTS AND CONTINGENCIES
DIVIDENDS: On January 26, 1995, the Company declared a regular dividend of
$0.15 per share to holders of record on February 6, 1995, payable on February
15, 1995, and a special dividend of $1.92 per share to holders of record on
March 17, 1995, payable on April 1, 1995. Management has recommended to the
Company's Board of Directors that it establish an initial cash dividend rate of
$0.15 per share per quarter and pay two additional special cash distributions,
each of $1.92 per share, payable during the third and fourth quarters of 1995.
Management expects to incur indebtedness of up to $70,000,000 in connection with
the payment of the special cash distributions.
CANADIAN INCOME TAX EXAMINATION: In 1990, the Canadian income tax
authorities proposed certain adjustments, principally relating to the original
purchase price allocation to the Canadian subsidiary and transfer pricing
matters, for additional income taxes payable by the Company's Canadian
subsidiary for 1987 and 1988. The resolution of these proposed adjustments may
also affect
F-12
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
the Company's Canadian income tax expense for years subsequent to 1988. The
Company was informed of the Canadian income tax authorities' intent to initiate
an audit of the tax years 1989 through 1991. Management continues to vigorously
contest certain of the proposed adjustments. Management does not believe that
the outcome of this matter will have a materially adverse impact on the
financial position or continuing operations of the Company. Income taxes payable
reflected on the accompanying December 31, 1994 and 1993, balance sheets include
$14,265,000 and $6,824,000, respectively, related to certain open tax years in
Canada and the United States.
PRODUCT LIABILITY: The Company is subject to product liability claims in
the normal course of business and has elected not to insure for product
liability losses. The estimated costs resulting from any losses are charged to
operating expenses when it is probable a loss has been incurred and the amount
of the loss is determinable. At December 31, 1994 and 1993, the Company has
accrued $4,957,000 and $3,513,000, respectively, in connection with product
liability claims.
LITIGATION: The Company is a defendant in lawsuits and subject to claims
arising in the normal course of business. While it is not feasible to determine
the outcome of any of these cases, it is the opinion of management that their
outcomes will not have a material adverse effect on the financial position or
operations of the Company.
WORKERS' COMPENSATION AND HEALTH BENEFITS: The Company is self-insured for
workers' compensation losses and employee health benefits. The costs resulting
from any losses are charged to expense when it is probable a loss has been
incurred and the amount of the loss is determinable.
MAJOR SUPPLIER: During 1994, 1993 and 1992, purchases totaling 26 percent
of the Company's cost of sales were from a single supplier. The Company has
agreed with the supplier to share the impact of fluctuations in the exchange
rate between the U.S. dollar and the Japanese yen.
DERIVATIVE FINANCIAL INSTRUMENTS: The Company enters into foreign exchange
contracts to hedge certain of its purchase commitments denominated in foreign
currencies and transfers of funds from its Canadian subsidiary. The purpose of
the Company's foreign exchange contracts is to protect it from the risk that the
eventual dollar cash flows resulting from the purchase commitments and transfers
of funds from its Canadian subsidiary will be adversely affected by changes in
exchange rates. At December 31, 1994, the Company had no open foreign exchange
contracts.
LETTERS OF CREDIT: At December 31, 1994, the Company has open letters of
credit totaling approximately $15,500,000. The amounts outstanding are reduced
as inventory purchases pertaining to the contracts are received.
LEASES: The Company leases warehouse and office space from a partnership
controlled by certain directors under an operating lease agreement expiring in
1997. The lease requires payments of $458,000 annually plus other costs. In
addition, the Company leases other buildings and equipment from unrelated
parties under noncancelable operating leases. Total rent expense under all lease
agreements was $1,570,000, $1,643,000 and $1,564,000 for 1994, 1993 and 1992,
respectively. Future minimum payments, exclusive of other costs, required under
noncancelable operating leases at December 31, 1994, total $1,797,000
cumulatively through 1998.
NOTE 9. SUBSEQUENT EVENT
Subsequent to year end, the Company entered into a shareholder agreement
with Fuji Heavy Industries Ltd. to form Robin Manufacturing, USA (Robin). Under
the agreement, the Company will initially invest $800,000 for a 40 percent
ownership position in Robin. Robin will build engines in the United States for
recreational and industrial products.
F-13
<PAGE>
POLARIS INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. PRO FORMA INFORMATION
Pro forma information is presented to assist in comparing the continuing
results of operations of the Company for 1994, 1993 and 1992 exclusive of the
Conversion costs and as if the Company was a taxable corporation for these
years. The pro forma provision for income taxes has been calculated at a rate of
38 percent, which reflects a combined federal and state statutory rate, net of
related research and development credits and foreign sales corporation benefits.
The weighted average number of BACs and BAC equivalents has been retroactively
adjusted to reflect the issuance of an equal number of shares of common stock to
the Partnership's Limited Partners in exchange for the number of BACs
outstanding and the issuance of 2,100,243 shares of common stock to the
affiliates of the General Partner in exchange for the general partnership
interests.
NOTE 11. QUARTERLY FINANCIAL DATA
(Unaudited) (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA NET INCOME
GROSS NET NET INCOME PER SHARE
SALES PROFIT INCOME (NOTE 10) (NOTE 10)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1994:
First Quarter.................................. $ 145,471 $ 27,858 $ 8,566 $ 6,144 $ .33
Second Quarter................................. 180,884 34,252 10,542 7,348 .40
Third Quarter.................................. 258,370 63,673 31,503 21,611 1.18
Fourth Quarter................................. 241,561 57,500 78,339 19,600 1.06
----------- ----------- ----------- -----------
Totals......................................... $ 826,286 $ 183,283 $ 128,950 $ 54,703 $ 2.97
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----
1993:
First Quarter.................................. $ 107,115 $ 23,264 $ 6,138 $ 4,703 $ .26
Second Quarter................................. 111,235 26,996 6,542 4,702 .26
Third Quarter.................................. 166,803 43,044 18,762 12,907 .70
Fourth Quarter................................. 142,858 36,983 14,371 10,715 .59
----------- ----------- ----------- -----------
Totals......................................... $ 528,011 $ 130,287 $ 45,813 $ 33,027 $ 1.81
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----
1992:
First Quarter.................................. $ 70,227 $ 15,613 $ 2,133 $ 1,642 $ .09
Second Quarter................................. 85,467 22,293 6,181 4,441 .25
Third Quarter.................................. 121,548 36,343 15,850 10,815 .60
Fourth Quarter................................. 106,576 30,677 10,537 7,704 .43
----------- ----------- ----------- -----------
Totals......................................... $ 383,818 $ 104,926 $ 34,701 $ 24,602 $ 1.37
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----
</TABLE>
F-14
<PAGE>
INDEPENDENT AUDITOR'S REPORT
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders
Polaris Industries Inc.
Minneapolis, Minnesota
Our audit of the financial statements of POLARIS INDUSTRIES INC. (formerly
Polaris Industries Partners L.P.) included schedule II contained herein, for the
years ended December 31, 1994, 1993 and 1992.
In our opinion, the schedule presents fairly the information required to be
set forth therein in conformity with generally accepted accounting principles.
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
February 2, 1995
FS-1
<PAGE>
POLARIS INDUSTRIES INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END OF
OF PERIOD EXPENSE DEDUCTIONS PERIOD
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1992:
Allowance for doubtful accounts.............................. $ 398 $ 176 $ (295)(a) $ 279
Warranty reserve............................................. 4,738 7,230 (6,263)(b) 5,705
Product liability claims reserve............................. 2,156 500 (198)(c) 2,458
Workers' compensation claims reserve......................... 180 471 (349)(c) 302
For the Year Ended December 31, 1993:
Allowance for doubtful accounts.............................. 279 482 (196)(a) 565
Warranty reserve............................................. 5,705 14,220 (8,513)(b) 11,412
Product liability claims reserve............................. 2,458 1,250 (195)(c) 3,513
Workers' compensation claims reserve......................... 302 351 (390)(c) 263
For the Year Ended December 31, 1994:
Allowance for doubtful accounts.............................. 565 294 (26)(a) 833
Warranty reserve............................................. 11,412 28,142 (15,716)(b) 23,838
Product liability claims reserve............................. 3,513 1,500 (56)(c) 4,957
Workers' compensation claims reserve......................... 263 608 (393)(c) 478
Health benefits reserve...................................... -- 1,141 (321)(c) 820
<FN>
- ------------------------
(a) Uncollected receivables written off, net of recoveries.
(b) Warranty credits issued, net of recoveries.
(c) Claims paid.
</TABLE>
FS-2
<PAGE>
POLARIS INDUSTRIES INC.
EXHIBIT INDEX TO ANNUAL REPORT ON
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ -----------------------------------------------------------------------------------------------------
<C> <S>
3.(a) Articles of Incorporation of Polaris Industries Inc. (the "Company"), as amended, incorporated by
reference to Exhibit 3(a) to the Company's Registration Statement on Form S-4 (No. 33-55769) (the
"Form S-4").
(b) Bylaws of the Company, incorporated by reference to Exhibit 3(b) to the Form S-4.
4. Specimen Stock Certificate of the Company, incorporated by reference to Exhibit 4 to the Form S-4.
10.(a) Agreement for Deferred Compensation and Disability Income and Amendment No. 1 thereto with W. Hall
Wendel, Jr.
(b) Profit Sharing Plan, incorporated by reference to Exhibit 10(f) to the Form S-1.
(c) Retirement Savings Plan, incorporated by reference to Exhibit 10(g) to the Form S-1.
(d) 1987 Management Ownership Plan, incorporated by reference to Exhibit 10(h) to the Form S-1.
(e) 1987 Employee Ownership Plan, incorporated by reference to Exhibit 10(i) to the Form S-1.
(f) Management Bonus Plan, incorporated by reference to Exhibit 10(j) to the Form S-1.
(g) Plymouth, Minnesota, Executive Office Lease, incorporated by reference to Exhibit 10(m) to the Form
S-1.
(h) Transamerica Commercial Finance Corporation, formerly Borg Warner Acceptance Corporation, Repurchase
Agreement, incorporated by reference to Exhibit 10(p) to the Form S-1.
(i) First Bank National Association, formerly First National Bank of Minneapolis, Credit Agreement (the
"Credit Agreement"), incorporated by reference to Exhibit 19 to the Partnership's Quarterly Report on
Form 10-Q, dated as of November 12, 1987.
(j) Fourth Amendment to the Credit Agreement.
(k) Shareholder Agreement with Fuji Heavy Industries Ltd.
(l) Registration Rights Agreement between and among the Company, Victor K. Atkins, EIP I Inc., EIP
Holdings Inc. and LB I Group Inc.
11. Statement re: Computation of per share earnings.
21. Subsidiaries of Registrant.
23. Consent of McGladrey & Pullen, LLP.
24. Power of Attorney.
27. Financial Data Schedule.
</TABLE>
E-1
<PAGE>
AGREEMENT FOR DEFERRED COMPENSATION
AND DISABILITY INCOME
DATE: SEPTEMBER 14, 1982
------------------
PARTIES:
Polaris Industries, Inc., a
Minnesota corporation
1225 North County Road 18
Minneapolis, Minnesota 55427 ("Employer")
Hall Wendel ("Employee")
-------------------------------
RECITALS:
A. Employer desires to have the benefit of Employee's continued
loyalty, services, judgment and skills in the future conduct of Employer's
business.
B. Employee desires and intends to continue to devote his best
efforts, skills and experience to his full time employment in the business of
the Employer.
C. The parties consider it to be in their mutual best interests to
provide for certain deferred compensation, disability and death benefit payments
to Employee upon the terms and conditions contained herein.
AGREEMENTS:
ARTICLE 1.
DEFERRED COMPENSATION
1.1) After voluntary or involuntary termination of the employment of
Employee (excluding termination by death), Employer shall pay to Employee
additional compensation, the amount of which shall be determined as follows:
(a) In the event of an involuntary termination of the employment
of Employee for any reason other than dishonesty or gross misconduct
against Employer in the performance of Employee's duties, Employee's
additional compensation shall be equal to $100,000 multiplied by the
number of full years of continuous service by him with Employer since
the date of this Agreement, up to a maximum amount of $500,000.
(b) In the event of a voluntary termination of the employment of
Employee, Employee's additional compensation shall be equal to
$33,333.33 multiplied by
- 1 -
<PAGE>
the number of full years of continuous service by him with Employer
since the date of this Agreement, up to a maximum amount of $500,000.
(c) For purposes of this Agreement, Employee shall be considered
employed by Employer during the period during which he is receiving
disability payments pursuant to Article 2 of this Agreement.
1.2) The amount payable to Employee pursuant to Section 1.1 shall be
paid in 120 equal monthly installments, commencing on the first day of the
second calendar month following either the effective date of Employee's
retirement or Employee's 65th birthday, whichever is later.
1.3) If Employee dies before receiving all payments of deferred
compensation due him under Section 1.1, any remaining installments shall be paid
to either the beneficiary designated by Employee in writing to Employer as
provided in Section 1.7, or the legal representatives of Employee's estate.
1.4) In the event of the death of Employee prior to commencement of
payments under Section 1.1 (provided that Employee is employed by Employer or is
receiving disability payments pursuant to Article 2 of this Agreement at the
time of his death), Employer shall pay to either the beneficiary designated in
writing by Employee to Employer as provided in Section 1.7, or to the legal
representatives of Employee's estate $500,000, representing additional
compensation to Employee.
1.5) The amount payable to Employee's beneficiary or legal
representative pursuant to Section 1.4 hereof shall be paid in 120 equal monthly
installments, commencing on the first day of the second calendar month following
notification of Employer of the appointment of the legal representative of
Employee's estate. Employer may, in its discretion, pay such amount in larger or
more frequent installments (including lump sum payment), with no discount
applicable for such prepayment.
1.6) Payments made under this Article are a continuation of
compensation to Employee, as additional consideration for his services as an
employee of Employer. Such payments shall be treated as ordinary income when
received on any applicable state and federal income tax returns.
1.7) Employee may, by written instrument delivered to Employer during
his lifetime, designate primary and contingent beneficiaries to receive any
installments which may be payable hereunder following Employee's death, and may
designate the proportions in which such beneficiaries are to receive such
payments. Employee may change such designation from time to time, and the last
written designation filed with Employer prior to Employee's death will control.
If no designated beneficiary survives Employee, or if all designated
beneficiaries who
- 2-
<PAGE>
survive Employee die before all payments are made, remaining payments shall be
made to the legal representatives of Employee's estate.
ARTICLE 2.
DISABILITY PAYMENTS
2.1) If, during the term of his employment, Employee is totally
disabled, Employer will pay to Employee a monthly disability payment equal to
$4,166.67. Such payments shall continue during the period of Employee's total
disability until Employee reaches age 65. Such payments shall not be offset by
any disability benefits from whatever source received including, without
limitation, Social Security disability benefits, which Employee may receive
during that period.
2.2) "Total disability" shall mean that, as a result of physical or
mental injury or sickness, Employee is unable to perform his regular and
customary duties as an employee of Employer and is not engaged in any other
gainful occupation. Total disability shall be determined by the Board of
Directors of Employer or an examining physician acceptable to Employer.
Employer, at its own expense, shall have the right and opportunity to examine
Employee when, and as often as, it may reasonably require during the period of
disability.
ARTICLE 3.
GENERAL PROVISIONS
3.1) This Agreement may be amended in any and all respects at any
time by written agreement of both parties hereto.
3.2) This Agreement may be terminated at any time by written
agreement of both parties hereto.
3.3) This Agreement is binding upon and inures to the benefit of
Employer, its successors and assigns, and Employee, his heirs, legal
representatives and assigns.
3.4) No person shall have any power to transfer, assign, anticipate,
mortgage or otherwise encumber or dispose of in advance any of the payments or
entitlements to payments provided herein; nor shall any of such payments be
subject to seizure for payment of any debts, judgments, alimony or separate
maintenance, or be reached or transferred by operation of law in the event of
bankruptcy, insolvency or otherwise.
3.5) Nothing herein contained shall in any way affect or interfere
with Employee's rights or privileges under any other retirement, pension, profit
sharing, bonus, insurance,
- 3 -
<PAGE>
hospitalization or other employee benefit plan, now in effect or hereafter
adopted, in which Employee is entitled to share or participate as an employee of
Employer. Notwithstanding the foregoing, it is understood that Employer may
purchase a disability income policy covering Employee for the specific purpose
of funding in whole or in part the payments described in Article 2 or a life
insurance policy or policies covering Employee for the specific purpose of
funding in whole or in part the payments described in Article 1; and any such
policy or policies so designated shall not constitute separate and additional
benefits to which Employee would be entitled.
3.6) This Agreement shall not be construed as giving to Employee a
right to be retained in the service of Employer, or any right or claim to any
benefit or allowance after termination of employment by Employer, unless the
right to such benefit has accrued prior to such termination as provided herein.
3.7) This Agreement supersedes all prior agreements and
understandings between the parties relating to the payment of deferred
compensation and disability income.
3.8) This Agreement shall be subject to and construed in accordance
with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
POLARIS INDUSTRIES, INC.
By /s/ Robert Moe
------------------------------------
Its Executive Vice President
EMPLOYER
/s/ Hall Wendel
----------------------------------------
Hall Wendel
EMPLOYEE
- 4 -
<PAGE>
AMENDMENT NO. 1 TO AGREEMENT FOR DEFERRED
COMPENSATION AND DISABILITY INCOME
THIS AGREEMENT, made this 2nd day of May, 1985, between Polaris Industries,
Inc., a Minnesota corporation (herein called "Employer"), and W. Hall Wendel,
Jr. (herein called "Employee");
W I T N E S S E T H
WHEREAS, Employer and Employee entered into an Agreement for Deferred
Compensation and Disability Income dated September 14, 1982, providing for
certain deferred compensation, disability and death benefit payments to
Employee; and
WHEREAS, the parties desire to amend said Agreement in the manner provided
below;
NOW, THEREFORE, it is agreed between the parties as follows:
1. Paragraph (b) of Section 1.1 of Article 1 of the Agreement is hereby
amended in its entirety to read as follows:
"(b) In the event of a voluntary termination of the employment of
Employee, Employee's additional compensation shall be equal to
$50,000 multiplied by the number of full years of continuous service by him
with Employer since the date of this Agreement, up to a maximum amount of
$500,000."
2. Except as amended herein, the Agreement for Deferred Compensation and
Disability Income between Employer and Employee dated September 14, 1982 shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
the day and year first above written.
POLARIS INDUSTRIES, INC.
By /s/ Robert Moe
------------------------------------
EMPLOYER
/s/ Hall Wendel
---------------------------------------
W. Hall Wendel, Jr.
EMPLOYEE
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT is made and entered into as of the 21st day of
December, 1994 by and between POLARIS INDUSTRIES L.P., a Delaware limited
partnership (the "Original Borrower"), POLARIS INDUSTRIES PARTNERS L.P., a
Delaware limited partnership (the "Successor Borrower") and FIRST BANK NATIONAL
ASSOCIATION, a national banking association (the "Bank").
WHEREAS, the Original Borrower and the Bank have previously entered into a
Credit Agreement dated as of March 31, 1992, as amended by that certain First
Amendment to Credit Agreement dated as of November 16, 1992, that certain Second
Amendment to Credit Agreement dated as of March 31, 1993, and that certain Third
Amendment to Credit Agreement dated as of March 31, 1994, each between the
Original Borrower and the Bank (as so amended, the "Credit Agreement"); and
WHEREAS, the Original Borrower and the Successor Borrower wish to induce
the Bank to amend certain provisions of the Credit Agreement so as to permit the
merger of the Original Borrower into the Successor Borrower, which shall be the
surviving partnership in such merger, and the Bank is willing to do so if and
only if the Original Borrower and the Successor Borrower each executes this
Fourth Amendment.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Original Borrower, the Successor Borrower and the Bank hereby
agree as follows:
1. CAPITALIZED TERMS. All capitalized terms used herein without
definition shall have the meaning given in the Credit Agreement.
2. AMENDMENT TO CREDIT AGREEMENT.
(a) The definitions of "First Rights" and "Termination Date" in Section
1.1 of the Credit Agreement are amended to read in their entirety as follows:
"FIRST RIGHTS": (i) Prior to the Merger Effective Date, options to
receive partnership capital interests in the Successor Borrower, as
described and reported in the most recent financial statements of the
Successor Borrower; and
(ii) On or after the Merger Effective Date, options to receive shares of
common stock in Polaris Industries Inc., as described and reported in the
most recent financial statements of Polaris Industries Inc.
<PAGE>
"TERMINATION DATE": The earliest of (a) April 30, 1995, (b) the date
on which the Commitment is terminated pursuant to SECTION 10.2 hereof or
(c) the date on which the Commitment is reduced to zero pursuant to SECTION
4.3 hereof.
(b) New definitions of "Merger," "Merger Agreement," "Merger Effective
Date," "Original Borrower" and "Successor Borrower" are added to Section 1.1 of
the Credit Agreement, to read in their entirety as follows:
"MERGER": The merger of the Original Borrower into the Successor
Borrower, with the Successor Borrower as the surviving partnership,
pursuant to and as described in the Merger Agreement.
"MERGER AGREEMENT": That certain Agreement and Plan of Conversion
dated as of September 29, 1994, by and among Polaris Industries Inc. the
Successor Borrower, the Original Borrower, EIP Associates L.P., Polaris
Industries Associates L.P., EIP Capital Corporation, Polaris Industries
Capital Corporation, and certain partners and stockholders in the foregoing
entities, as it exists as of December 21, 1994, without regard for any
subsequent amendment.
"MERGER EFFECTIVE DATE": The date (on or after the date and time as of
which the Merger becomes effective) when the Successor Borrower delivers to
the Bank: (i) a copy of the certificate of merger with respect to the
Merger, certified by the Delaware Secretary of State; (ii) evidence
satisfactory to the Bank that no Default or Event of Default exists or
would be caused by the Merger and that all representations and warranties
contained in Article VII of this Agreement and Section 3 of that certain
Fourth Amendment to Credit Agreement dated as of December 21, 1994 are true
and correct on the Merger Effective Date; and (iii) an opinion of Kaplan,
Strangis and Kaplan, P.A., in form and substance satisfactory to the Bank,
that the Merger has become "effective," as such term is used in Sections
17-211(e) and 17-211(h) of the Delaware Revised Uniform Limited Partnership
Act.
"ORIGINAL BORROWER": Polaris Industries L.P., a Delaware limited
partnership.
"SUCCESSOR BORROWER": Polaris Industries Partners L.P., a Delaware
limited partnership.
(c) Section 8.3(a) of the Credit Agreement is amended to read in its
entirety as follows:
- 2 -
<PAGE>
(a) (i) With respect to any financial statements delivered prior to the
Merger Effective Date, as soon as possible, and in any event within ninety
(90) days after the close of Borrower's fiscal year, the audited
consolidated financial statements of the Successor Borrower, including a
balance sheet as at the end of such year, a statement of income and
partners' capital and a cash flow statement for such year, all prepared in
accordance with generally accepted accounting principles; and
(ii) With respect to any financial statements delivered on or after the
Merger Effective Date, as soon as possible, and in any event within ninety
(90) days after the close of Borrower's fiscal year, the audited
consolidated financial statements of Polaris Industries Inc., including a
balance sheet as at the end of such year, a statement of income and
stockholders' equity and a cash flow statement for such year, in each case
all prepared in accordance with generally accepted accounting principles.
(d) Section 8.8 of the Credit Agreement is amended to read in its
entirety as follows:
Section 8.8 MAINTENANCE OF PARTNERSHIP EXISTENCE, ETC. Borrower will
take such action as may be necessary to maintain and preserve its
partnership existence, except that the Original Borrower may merge into the
Successor Borrower through the Merger, if and only if the Merger Effective
Date occurs prior to January 31, 1995.
(e) Section 9.1(a) of the Credit Agreement is amended to read in its
entirety as follows:
(a) Consolidate with or merge into any other Person (except that the
Original Borrower may merge into the Successor Borrower through the Merger,
if and only if the Merger Effective Date occurs prior to January 31, 1995);
or
(f) Section 9.4 (a) and (b) of the Credit Agreement are amended to read
in their entirety as follows:
(a) Restricted Payments made prior to the Merger Effective Date for the
purpose of purchasing or redeeming BACs; and
(b) Other Restricted Payments not to exceed $15,000,000 in any fiscal
quarter, which shall be made not more frequently than once per quarter or
earlier than 30 days after the end of each fiscal quarter of the Borrower;
(g) A new Section 11.9 is added to the Credit Agreement, to read in its
entirety as follows:
- 3 -
<PAGE>
Section 11.9
(a) ASSUMPTION AND ASSIGNMENT. Effective as of the Merger Effective Date,
the Original Borrower hereby assigns and transfers to the Successor Borrower all
of the Original Borrower's right, title and interest in and to, and its
privileges, duties and obligations under, each of this Agreement, the Note, each
Letter of Credit Agreement and each other Loan Document (collectively, the "Bank
Agreements"). The Successor Borrower as of the Merger Effective Date hereby
accepts the foregoing assignment from the Original Borrower, agrees to be bound
by each of the Bank Agreements, agrees to perform all of the obligations and
duties to be performed by, and to observe all of the conditions to be observed
by, the Original Borrower under the Bank Agreements, and agrees to pay to the
Bank when due all obligations of the Borrower under the Bank Agreements. The
foregoing assignment and assumption is not intended to, and shall not be deemed
to, limit the effect of Delaware Revised Uniform Limited Partnership Act Section
17-211 or Section 6.2 of Merger Agreement. The Successor Borrower acknowledges
that, under said statute and section of the Merger Agreement, and as a
consequence of the Merger of the Original Borrower into the Successor Borrower,
all debts, liabilities and duties of the Original Borrower (including but not
limited to all debts, liabilities and duties of the Original Borrower under the
Bank Agreements) will become debts, liabilities and duties of the Successor
Borrower on the "Operating Partnership Effective Time" (as defined in the Merger
Agreement) just as if such debts, liabilities and duties had been incurred or
contracted by the Successor Partnership.
(b) NOTICES. The address for notices to the Borrower contained in any
Bank Agreement is hereby deleted and the following addresses inserted in its
place:
Polaris Industries Partners L.P.
1225 Highway 169 North
Minneapolis, Minnesota 55441
Attention: Michael W. Malone
(c) WAIVERS. The Bank hereby agrees that it will not assert the merger of
the Original Borrower into the Successor Borrower, in and of itself, as a
default or an event of default under any of the Bank Agreements; provided,
however, that the Bank reserves all rights and remedies available to it under
any of the Bank Agreements should the Successor Borrower, as the surviving
Partnership, fail to satisfy any financial test or other covenant contained in
any of the Bank Agreements.
- 4 -
<PAGE>
(d) REFERENCES TO THE BORROWER. Until and unless the Merger
Effective Date occurs, all references to the Borrower or any similar term
in any Bank Agreement shall be deemed to be references to the Original
Borrower. From and after the Merger Effective Date, all references to the
Borrower or any similar term in any Bank Agreement shall be deemed to be
references to the Successor Borrower.
3. REPRESENTATIONS BY SUCCESSOR BORROWER. In order to induce the Bank to
enter into this Fourth Amendment, the Successor Borrower represents and warrants
as follows:
(a) ORGANIZATION. The Successor Borrower is a limited partnership
duly organized, validly existing and in good standing under the limited
partnership laws of the State of Delaware and has all requisite partnership
power and authority to own, lease and operate its and the Original
Borrower's properties and to carry on its and the Original Borrower's
business as now being conducted, except for the failure to be so organized,
existing and in good standing or to have such power and authority would not
have a material adverse effect on the Successor Borrower.
(b) AUTHORITY. The Successor Borrower has the requisite partnership
power and authority to execute and deliver this Fourth Amendment and to
consummate the Merger and the transactions contemplated by this Fourth
Amendment. The execution, delivery and performance of this Fourth
Amendment by the Successor Partnership and the consummation by the
Successor Partnership of the Merger and the transactions contemplated
hereby have been duly authorized by all necessary partnership action on the
part of the Successor Partnership and no other partnership action on the
part of the Successor Partnership is necessary to authorize this Fourth
Amendment or to consummate the transactions contemplated by this Fourth
Amendment. This Fourth Amendment has been duly executed and delivered by
the Successor Borrower.
(c) PENDING LITIGATION AND BURDENSOME PROVISIONS. There are not, in
any court or before any arbitrator of any kind or before or by any
government or nongovernmental body, any actions, suits or proceedings
pending or threatened (nor to the knowledge of the Successor Borrower, is
there any basis therefore) against or any other way relating adversely to
or affecting the Successor Borrower or the business or any property of the
Successor Borrower, except actions, suits or proceedings that, if adversely
determined would not, singly or in the aggregate have a materially adverse
effect on the Successor Borrower, or the ability of the Successor Borrower
to perform its obligations under the Credit Agreement, as amended by this
Fourth Amendment. The Successor Borrower is not a party to nor bound by
any contract or applicable law
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<PAGE>
that could forseeably have a materially adverse effect on the Successor
Borrower.
(d) FINANCIAL STATEMENTS. The Successor Borrower has furnished the
Bank with the audited consolidated financial statements of the Successor
Borrower for the fiscal year ended December 31, 1993 and unaudited
consolidated financial statements of the Successor Borrower for the fiscal
quarter ended September 30, 1994. These financial statements are true and
correct and were prepared in accordance with generally accepted accounting
principles consistently maintained throughout the periods involved, and
present fairly the financial condition of the Successor Borrower as of the
dates thereof. Since September 30, 1994 there has been no, and neither the
Merger nor any other transaction consummated pursuant to the Merger
Agreement will cause any, materially adverse change in the business,
assets, liabilities (except that the Successor Borrower will become liable
for all liabilities of the Original Borrower as a result of the Merger),
financial condition, results of operations or business prospects of the
Successor Borrower, and no event has occurred or failed to occur, which has
had or may have, either alone or in conjunction with any other event or
failure, a materially adverse effect on the Successor Borrower or the
ability of the Successor Borrower to perform its obligations under the
Credit Agreement, as amended by this Fourth Amendment. The Successor
Borrower has good and marketable title to all assets reflected in the
latest balance sheet referred to above, and following the Merger will have
good and marketable title to all assets reflected in the most recent
financial statements provided to the Bank by the Original Borrower, except
for assets disposed of in the ordinary course of business. The Successor
Borrower does not have any indebtedness for borrowed money outstanding, and
following the Merger will not have any indebtedness for borrowed money
outstanding, except: (i) indebtedness disclosed in the most recent
financial statement referred to above; (ii) indebtedness disclosed in the
most recent financial statement of the Original Borrower provided to the
Bank; (iii) short-term trade debt incurred by the Original Borrower or the
Successor Borrower in the ordinary course of business; and (iv) increases,
if any, in the amounts outstanding under the Credit Agreement. There
exists no default under the provisions of any instrument evidencing such
indebtedness for borrowed money or of any agreement relating thereto that
could have a material adverse effect on the Successor Borrower.
4. EFFECTIVENESS OF AMENDMENTS. The amendments contained in this Fourth
Amendment shall not become effective until, and shall become effective when,
each of the following conditions precedent have been fulfilled:
(a) The Bank shall have received this Fourth Amendment, duly
executed by the Original Borrower and the Successor Borrower;
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<PAGE>
(b) The Bank shall have received a certificate of authority with respect
to each of the Original Borrower and the Successor Borrower, in form and
substance satisfactory to the Bank;
(c) The Bank shall have received certificates of good standing from the
Secretaries of State of Delaware and Minnesota with respect to the Successor
Borrower, dated as of a date not more than ten days prior to the date hereof;
(d) The Bank shall have received a copy of the Merger Agreement,
certified as true, correct and complete by the Original Borrower and the
Successor Borrower;
(e) The Bank shall have received an opinion of Kaplan, Strangis and
Kaplan, P.A., in form and substance satisfactory to the Bank, to the effect that
the Successor Borrower is validly organized and existing under the laws of the
State of Delaware and qualified to do business in the State of Minnesota, and
has the partnership power and authority under those laws to carry on its
businesses and to own its properties; that all partnership action by the
Successor Partnership necessary to authorize the execution, delivery and
performance of this Fourth Amendment has been duly taken; that this Fourth
Amendment has been validly executed by the Successor Borrower and is fully
enforceable against the Successor Borrower in accordance with its terms (subject
to limitations as to enforceability which might result from bankruptcy,
reorganization, arrangement, insolvency or other general similar laws affecting
creditors' rights generally); and that the agreements on the part of the
Successor Borrower contained in this Fourth Amendment and the performance by the
Successor Borrower of its obligations hereunder and under the Credit Agreement
do not or will not violate any provision of any presently applicable law, or of
the Successor Borrower's partnership agreement or any agreement, indenture, note
or other instrument presently binding on it, to the extent such agreements,
indentures, notes or other instruments are known to such counsel;
(f) The Bank shall have received such other documents, instruments,
approvals and, if requested by the Bank, certified duplicates of executed copies
thereof, and opinions that the Bank may reasonably request; and
(g) The Bank shall have received reimbursement from the Borrower for all
reasonable out-of-pocket expenses (including reasonable attorneys' fees and
legal expenses of Dorsey & Whitney, special counsel for the Bank) paid or
incurred by the Bank prior to the date of this Fourth Amendment in connection
with the preparation, review, execution, delivery, amendment,
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<PAGE>
modification and administration of the Credit Agreement and this Fourth
Amendment.
5. REPRESENTATIONS: NO DEFAULT: RESERVATION OF RIGHTS. Each of the
Original Borrower and the Successor Borrower hereby represents that on and as of
the date hereof and after giving effect to this Fourth Amendment, (x) all of the
representations and warranties contained in the Credit Agreement are true,
correct and complete in all material respects as of the date hereof as though
made on and as of such date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they are true
and correct as of such earlier date, and (y) there will exist no Default or
Event of Default on such date.
6. AFFIRMATION. The Bank, the Original Borrower and the Successor
Borrower each acknowledge and affirm that the Credit Agreement, as hereby
amended, is hereby ratified and confirmed in all respects and all terms,
conditions and provisions of the Credit Agreement, except as amended by this
Fourth Amendment, shall remain in full force and effect. All references to the
Credit Agreement in any Loan Document or other document delivered to the Bank by
the Borrower or entered into between the Bank and the Borrower shall be deemed
to be references to the Credit Agreement as amended by this Fourth Amendment and
by any subsequent amendment.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be executed as of the day and year first above written.
Original Borrower:
POLARIS INDUSTRIES L.P.
By Polaris Industries Associates L.P.
Its General Partner
By /s/ V. K. Atkins, Jr.
--------------------------
Victor K. Atkins, Jr.
Its General Partner
And by Polaris Industries Capital
Corporation
Its General Partner
By /s/ V. K. Atkins, Jr.
-------------------------------
Name V. K. Atkins, Jr.
-----------------------------
Title Chairman
----------------------------
Successor Borrower:
POLARIS INDUSTRIES PARTNERS L.P.
By EIP Associates L.P.
Its General Partner
By EIP Capital Corporation
Its General Partner
By /s/ V. K. Atkins, Jr.
-----------------------
Name: Victor K. Atkins, Jr.
Title: President
And By
/s/ V. K. Atkins, Jr.
----------------------------
Victor K. Atkins, Jr.
Its General Partner
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<PAGE>
Bank:
FIRST BANK NATIONAL ASSOCIATION
By /s/ William T. Bailey
-------------------------------
William T. Bailey
Vice President
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<PAGE>
SHAREHOLDER AGREEMENT
THIS AGREEMENT is made and entered into this 3rd day of February,
1995 between Fuji Heavy Industries, Ltd., a Japanese corporation with its
principal place of business at 7-2, 1-chome Nishishinjuku, Shinjuku-ku, Tokyo,
Japan (hereinafter referred to as "FHI") and Polaris Industries Inc., a
Minnesota corporation with its principal place of business at 1225 Highway 169
North, Minneapolis, Minnesota 55441, U.S.A. (hereinafter referred to as
"Polaris").
WHEREAS, FHI is engaged in the business of manufacturing and selling
various Robin brand gasoline and diesel engines (including OEM) and other Robin
brand products, and
WHEREAS, Polaris is engaged in the business of manufacturing and selling
the finished products incorporated with the aforesaid engines, and
WHEREAS, FHI and Polaris are desirous of establishing a new company for the
purposes of manufacturing certain products designed by FHI and selling such
products in the U.S.A under the terms and conditions set forth herein.
NOW, THEREFORE, both of the parties hereto agree as follows:
Article 1. ESTABLISHMENT. FHI shall initially establish a wholly
owned company of which capital is US$1,000 in the State of Delaware, U.S.A.
(hereinafter referred to as "NEWCO").
Article 2. NAME. The name of NEWCO shall be ROBIN MANUFACTURING
U.S.A. INC.
Article 3. PRINCIPAL OFFICE. The address of principal office of
NEWCO shall be 1201 Industrial Road, Hudson, Wisconsin 54016, U.S.A.
Article 4. CAPITAL.
1) The authorized capital of NEWCO shall be US$10,000 divided into
10,000 shares of US$1.00 each in par value.
2) FHI and Polaris shall subscribe for and pay for in full and in
cash the following equity shares respectively as soon as possible
after completion of this Agreement.
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(FHI: US $1,200,000 1,200 shares 60%)
(Polaris: US $800,000 800 Shares 40%)
(Total US $2,000,000 2,000 Shares 100%)
</TABLE>
Article 5. DISPOSAL OF SHARES.
1) No other party shall be allowed to purchase any shares of NEWCO
without the prior written consent of both parties.
2) If either party wishes to transfer or sell all or a part of the
shares of its holding, the remaining party shall have a right of first
refusal to purchase said shares prior to any such transfer.
3) If NEWCO desires to sell all or substantially all of its assets or
merge with any other corporation or entity, each of the parties hereto
shall have a right of first refusal to purchase such assets, effect such
merger or provide to NEWCO the economic equivalent thereof which economic
equivalent shall be of substantially the same value and utility and equally
realizable as that offered by such third party.
Article 6. BUSINESS PURPOSE. The principal business purpose of NEWCO
shall, unless and until otherwise subsequently agreed by the parties, be as
follows:
1) The manufacture and sale of the following products (hereinafter
referred to as "products") in North and South America (hereinafter
referred to as "Territory")
a) Robin brand gasoline and diesel engines and parts therefor.
b) Other Robin brand products (generator, pump and others)
2) The import and purchase of machinery, tools and materials and parts of
which Products are composed.
3) Other related business activities in Territory.
To the extent legally permissible, all of the Products shall be stamped "Made
in the U.S.A."
2
<PAGE>
In respect of Polaris, the trade practices, customs and policies of NEWCO shall
be substantially similar to the historical practices, customs and policies of
FHI in connection with the sale and manufacturing of the Products.
Article 7. BOARD OF DIRECTORS. NEWCO shall be administered and operated
by the Board of Directors consisting of five (5) directors, three (3) of whom
shall be nominated by FHI and the remaining two (2) shall be nominated by
Polaris. The Polaris board representative shall have access to the books,
records, and audited financial statements of NEWCO.
Article 8. OFFICERS. The officers of NEWCO shall be elected by the Board
of Directors of NEWCO.
Article 9. ROLES OF BOTH PARTIES.
1) FHI shall provide NEWCO with technical and engineering assistance in
the manufacturing of the Products and necessary training to NEWCO personnel
in accordance with the terms and conditions of the License Agreement to be
entered into between FHI and NEWCO separately.
2) Polaris shall provide NEWCO with information on local purchasing of the
component parts of the Products and advice on manufacturing.
Article 10. NOTICE. Any notice to be given shall be addressed in
writing to FHI and Polaris at their respective offices to the attention of the
responsible person as follows:
Fuji Heavy Industries Ltd. Polaris Industries Inc.
7-2 1-chome, Nishishinjuku 1225 Highway 169 North
Shinjuku-ku, Tokyo 160 Minneapolis, MN 55441
Mr. Yasuhito Yamaki Mr. Kenneth Larson
Director and General Manager President and COO
Tel. 3-3347-2400 Tel. 612-542-0507
Fax. 3-3347-2625 Fax. 612-542-0599
Article 11. CONFIDENTIALITY. Each of the parties shall not disclose to
any third parties any business secrets related to the execution of this
Agreement.
Article 12. ASSIGNMENT. Neither this agreement nor any right or
obligation hereunder shall be assignable in whole or in part by either party
without the prior written consent of the other party.
Article 13. ARBITRATION. All disputes, controversies, or differences
which may arise between the parties, in connection with this Agreement, and
which can not be amicably settled by the
3
<PAGE>
parties, shall be finally settled by arbitration in accordance with the Rules of
International Chamber of Commerce. The arbitration shall be conducted in
Minneapolis if it is initiated by FHI or in Tokyo if it is initiated by Polaris.
The award shall be final and binding upon both parties.
Article 14. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware.
Article 15. ENTIRE AGREEMENT. This Agreement constitutes the entire and
only agreement between the parties with respect to the subject matter of this
Agreement and supersedes any other commitments, agreements or understanding that
the parties may have had with respect to the subject matter or this Agreement.
Article 16. AMENDMENTS. Any amendments to this Agreement must be in
writing and signed by both parties.
Article 17. RELEASE. Public and private announcements concerning this
Agreement and the transactions contemplated hereby shall only be made upon
written consent of both Buyer and Seller and in a mutually agreeable manner.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives on the day and year first above
written.
FUJI HEAVY INDUSTRIES LTD. POLARIS INDUSTRIES INC.
By: /s/ Isamu Kawai By: /s/ W. Hall Wendel Jr.
------------------------- ---------------------------
Isamu Kawai W. Hall Wendel Jr.
Its: President Its: Chairman and CEO
----------------------- -------------------------
Witness: Witness:
-------------------- ----------------------
Yasuhito Yamaki
Director and General Manager
4
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of December 22, 1994, by and between Polaris Industries Inc., a
Minnesota corporation (the "Company"), and Victor K. Atkins, Jr. ("Atkins") and
EIP Holdings Inc., a Delaware corporation, EIP I Inc., a Delaware corporation
and LB I Group Inc., a Delaware Corporation (collectively, the "Lehman
Entities"), (Atkins and the Lehman Entities collectively, the Shareholders").
RECITALS
A. The Company is issuing shares of Common Stock, $.Ol par value, of
the Company to the Shareholders (collectively, the "Shares") in connection with
the conversion of Polaris Industries Partners L.P. into corporate form.
B. The Shareholders are executing affiliate letters in connection
with the receipt of their Shares.
C. The Company desires to grant to each Shareholder certain
registration rights with respect to the Shares held by such Shareholder or any
transferees from time to time.
D. The parties hereto desire to set forth the terms and conditions
of the Company's covenants and agreements in respect of the registration of the
Shares with the Securities and Exchange Commission and all applicable state
securities agencies.
E. In consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
AGREEMENT
1. DEFINITIONS.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ADVICE: See the last paragraph of Section 5 hereof.
COMMON STOCK: Shares of the Company's common stock, $.Ol par value, as
the same may be constituted from time to time.
COMPANY NOTICE: See Section 4(a) hereof.
<PAGE>
DEMAND REGISTRATION: See Section 3(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, as in effect from time to time.
HOLDER: The Shareholders or any transferees of the Shareholders with
respect to the Shares other than transferees who do not receive Registrable
Securities.
PERSON: An individual, partnership, corporation, joint venture, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
PIGGYBACK NOTICE: See Section 4(a) hereof.
PIGGYBACK REGISTRATION STATEMENT: See Section 4(a) hereof.
PROSPECTUS: The prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments and all material incorporated by
reference in such Prospectus.
REGISTRATION EXPENSES: See Section 6 hereof.
REGISTRABLE SECURITIES: (i) The Shares and (ii) any securities issued
or issuable with respect to the Shares by way of a stock dividend or stock split
or other distribution or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. A Share ceases
to be a Registrable Security when (i) it has been effectively registered under
the Securities Act and disposed of in accordance with the Registration Statement
covering it, (ii) it has been distributed pursuant to Rule 145(d) (or any
similar provisions then in force) under the Securities Act with the result that
the transferor is not deemed to be engaged in a distribution, (iii) it has
otherwise been transferred and no further restriction on transfer remains or
(iv) it no longer is outstanding.
REGISTRATION STATEMENT: Any registration statement of the Company
which covers Registrable Securities pursuant to the provisions of this
Agreement, including (i) the Prospectus, (ii) amendments and supplements to such
Registration Statement, (iii) post-effective amendments, (iv) all exhibits and
all material incorporated by reference in such Registration Statement, (v) any
registration statement pursuant to a Demand Registration and (vi) any Piggyback
Registration Statement.
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<PAGE>
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations thereunder, as in effect from time to time.
SEC: The Securities and Exchange Commission.
SHARES: See Recital A.
SHAREHOLDERS: As defined in the preamble.
UNDERWRITTEN OFFERING: The offering and sale of securities of the
Company covered by any Registration Statement pursuant to a firm commitment
underwriting to an underwriter at a fixed price for reoffering or pursuant to
agency or best efforts arrangements with an underwriter.
Unless the context otherwise requires: (i) "or" is not exclusive; and (ii) words
in the singular include the plural and words in the plural include the singular.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
The securities entitled to the benefits of this Agreement are the
Registrable Securities but, with respect to any particular Registrable Security,
only so long as such security continues to be a Registrable Security.
3. DEMAND REGISTRATION.
(a) REQUESTS FOR REGISTRATION. At any time after the date
hereof, any Holder or Holders may make a written request to the Company for
registration with the SEC under and in accordance with the provisions of the
Securities Act of all or part of his Registrable Securities (a "Demand
Registration"). All requests made pursuant to this Section 3(a) shall specify
the number of Registrable Securities to be registered and the intended methods
of disposition thereof. Promptly after receipt of any such request the Company
will give written notice of such requested registration to all other Holders of
Registrable Securities and thereupon will, as expeditiously as possible, use its
best efforts to effect the registration under the Securities Act of (i) the
Registrable Securities which the Company has been so requested to register in
the Demand Registration, and (ii) all other Registrable Shares requested to be
registered pursuant to the first sentence. Upon the receipt of such notice from
the Company, each Holder shall be entitled for a period of 15 days from the date
of receipt of such notice to deliver a written request to the Company specifying
the number of his Registrable Securities to be included in such Demand
Registration.
(b) NUMBER OF, AND LIMITATIONS ON, REGISTRATIONS.
The Holders will be entitled to request an aggregate of four
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<PAGE>
Demand Registrations, provided that Atkins and/or his transferees and the Lehman
Entities and/or their respective transferees in any event each shall be entitled
to submit the initial written request for a Demand Registration in respect of
two Demand Registrations. The Company will not be obligated to register any
Registrable Securities pursuant to such a Demand Registration (i) unless there
is requested to be included in such registration at least 300,000 Shares
(subject to such adjustments as may be necessary by reason of the occurrence of
an event contemplated by clause (ii) of the first sentence of the definition of
Registrable Securities) or (ii) if a prior Demand Registration was declared
effective within a period commencing 6 months prior to the date of the written
request for such Demand Registration and such prior Demand Registration was
maintained effective for a period of not less than 120 days, or such shorter
period during which all Registrable Securities covered by such prior Demand
Registration were sold or withdrawn.
(c) EFFECTIVE REGISTRATION - EXPENSES. In any registration
initiated as a Demand Registration pursuant to this Section 3, each Holder and
the Company will pay its share of all Registration Expenses, pro rata, based on
the relation that the number of Registrable Securities registered by each bears
to the total number of shares of Common Stock registered in such offering,
whether or not the Registration Statement has become effective; provided,
however, that in the event that any Registrable Securities are excluded from a
Piggyback Registration Statement pursuant to Section 4(a), the Registration
Expenses of the next Demand Registration shall be borne exclusively by the
Company.
(d) SELECTION OF UNDERWRITERS. If any of the Registrable
Securities covered by a Demand Registration are to be sold in an Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders.
(e) REDUCTION. If a Demand Registration pursuant to this
Section 3 involves an underwritten offering and the managing underwriter advises
the Company in writing that, in its opinion, the number of securities requested
to be included in such registration (including securities of the Company which
are not Registrable Securities) exceeds the number which can be sold in such
offering, the Company will include in such registration only the Registrable
Securities requested to be included in such registration.
4. PIGGYBACK REGISTRATION RIGHTS.
(a) REQUESTS FOR PIGGYBACK REGISTRATION. The Company covenants
and agrees with each Holder that in the event the Company proposes to file at
any time and from time to time a
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<PAGE>
registration statement on any form for the general registration of securities
under the Securities Act with respect to the offering of any class of security
(other than in connection with an offering solely to the "employees" (as such
term is defined in the General Instructions to Form S-8 under the Securities
Act) of the Company or its subsidiaries pursuant to a registration statement on
Form S-8 under the Securities Act or an offering pursuant to a registration
Statement on Form S-4 under the Securities Act, or any successor forms thereto),
whether or not for sale for its own account (a "Piggyback Registration
Statement"), then the Company shall in each such case promptly give written
notice (a "Company Notice") to each Holder of such proposed filing, and such
notice shall offer to each Holder the opportunity to include in such Piggyback
Registration Statement such number of Registrable Securities as each may
request. Upon the written request of any such Holder (a "Piggyback Notice")
made within fifteen (15) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be sold by such
Holder), the Company will use its best efforts to effect the registration under
the Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holders thereof. Notwithstanding the foregoing,
the Company shall not be obligated to register the Registrable Securities of any
Holder (i) unless a Piggyback Notice shall have been received by the Company
within fifteen (15) days of receipt of the Company Notice by such Holder, or
(ii) if the Company shall, within ten (10) calendar days after receipt of a
Piggyback Notice, have delivered to any Holder whose Registrable Securities
shall have been the subject of a Piggyback Notice an opinion of counsel
reasonably satisfactory to said Holder to the effect that the proposed transfer
can be made without registration in accordance with Rule 145(d) under the
Securities Act or any other exemption from the registration provisions thereof
(other than Rule 144A).
The Company shall use its best efforts to cause the underwriter
of a proposed offering, if any, to permit the Holders holding Registrable
Securities requested to be included in the Piggyback Registration Statement to
include such Registrable Securities in the proposed offering on terms and
conditions at least as favorable to the Holders holding such Registrable
Securities as those offered with respect to the other securities of the Company
included therein. Notwithstanding the foregoing, if the managing underwriter
shall advise the Company in writing that, in its opinion, the distribution of
the Registrable Securities requested to be included in the Piggyback
Registration Statement concurrently with the securities being registered by the
Company would materially adversely affect the price, timing or distribution of
such securities by the Company, then the Company will include in such
registration (i) first, 100% of the securities the Company proposes to sell and
(ii) second, to the extent of the number of Registrable
- 5 -
<PAGE>
Securities requested to be included in such registration, which, in the opinion
of such managing underwriter, can be sold without having the adverse effect
referred to above, the number of Registrable Securities which the Holders have
requested to be included in such registration, such amount to be allocated pro
rata among all requesting Holders on the basis of the relative number of shares
of Registrable Securities then held by each such Holder (provided that any
Shares thereby allocated to any such Holder that exceed such Holder's request
will be reallocated among the remaining requesting Holders in like manner).
(b) ADDITIONAL OBLIGATIONS OF THE COMPANY. In connection with
the registration of Registrable Securities in accordance with Section 4(a)
above, the Company agrees to pay all Registration Expenses in connection with
the registration of the Registrable Securities under the Securities Act.
5. REGISTRATION PROCEDURES.
Whenever either Holder has requested that any Registrable Securities
be registered pursuant to this Agreement, the Company will promptly take all
such actions as may be necessary or desirable to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible:
(a) with respect to a request to file a Registration Statement
covering Registrable Securities made pursuant to Section 3 hereof, use its best
efforts to prepare and file with the SEC, not later than 90 days after receipt
of such request (which 90-day period may be extended by the Company for up to an
additional 90 days if at the time of such request the Company is engaged in
negotiations looking toward its participation in a material merger, acquisition
or other form of business combination or, if by reason of such transaction, the
Company is not in a position to timely prepare and file the Registration
Statement) a Registration Statement on a form for which the Company then
qualifies which is satisfactory to the Company and the Holders (unless the
offering is made on an underwritten basis, including on a best efforts
underwriting basis, in which event the managing underwriter or underwriters
shall determine the form to be used) and which form shall be available for the
sale of the Registrable Securities in accordance with the intended method or
methods of distribution thereof, and use its best efforts to cause such
Registration Statement to become effective; the Company shall not file any
Registration Statement pursuant to Section 3 hereof or any amendment thereto or
any Prospectus or any supplement thereto (including such documents incorporated
by reference) to which the Holders or the underwriters, if any, shall reasonably
object in
- 6 -
<PAGE>
light of the requirements of the Securities Act or any other applicable laws or
regulations;
(b) before filing a Registration Statement or Prospectus or any
amendments or supplements thereto (excluding documents to be incorporated by
reference therein), the Company will within five days of filing, furnish to the
Holders and the underwriters, if any, copies of all such documents in
substantially the form proposed to be filed (including documents incorporated
therein by reference), to enable the Holders and the underwriters, if any, to
review such documents prior to the filing thereof, and the Company shall make
such reasonable changes thereto (including changes to, or the filing of
amendments reflecting such changes to, documents incorporated by reference) as
may be reasonably requested by the Holders and the managing underwriter or
underwriters, if any;
(c) subject to the five-day review period required by paragraph
(b) above, prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement continuously effective for a period of not less than 120
days or such longer period as is required for the intended method of
distribution, or such shorter period which will terminate when all Registrable
Securities covered by such Registration Statement have been sold or withdrawn;
cause the Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Securities
Act; and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in such Registration Statement or supplement to the
Prospectus;
(d) notify the Holders and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such advice in writing,
(1) when the Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to the Registration Statement or any post-
effective amendment, when the same has become effective, (2) of any request by
the SEC for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (3) of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by paragraph (o)
below cease to be true and correct, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (6) of the
- 7 -
<PAGE>
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the Registration
Statement, the Prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading;
(e) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(f) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into the Registration Statement or
the Prospectus (after initial filing of the Registration Statement) provide
copies of such document to counsel to the Holders and to the managing
underwriters;
(g) furnish to the Holders and each managing underwriter,
without charge, at least one signed copy of the Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits (including
those incorporated by reference) and a reasonable number of conformed copies of
all such documents;
(h) deliver to the Holders and the underwriters, if any, as many
copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons may reasonably request; the
Company consents to the use of the Prospectus or any amendment or supplement
thereto by the Holders and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(i) prior to the date on which the Registration Statement is
declared effective, use its best efforts to register or qualify or cooperate
with the Holders and the underwriters, if any, and their respective counsel in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
as any seller or underwriter reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided that the Company will not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action which would subject it to general service of process in any such
jurisdiction where it is not then so subject;
- 8 -
<PAGE>
(j) cooperate with the Holders and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends; and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the underwriters;
(k) use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities within the United States as may be
necessary to enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities;
(l) upon the occurrence of any event contemplated by paragraph
(d)(6) above, prepare a supplement or post-effective amendment to the
Registration Statement or the Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(m) use its best efforts to cause all Registrable Securities
covered by the Registration Statement to be listed on each securities exchange
on which similar securities issued by the Company are then listed if requested
by the Holders or the managing underwriters, if any;
(n) provide a transfer agent and registrar for all Registrable
Securities;
(o) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith as the
Holders or the managing underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration (1) make such
representations and warranties to the Holders and the underwriters, if any, in
form, substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings and confirm the accuracy of the same if and when
requested, and matters relating to the compliance of the Registration Statement
and the Prospectus with the Securities Act; (2) obtain opinions of counsel to
the Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriters)
addressed to the Holders and the underwriters, if
- 9 -
<PAGE>
any, covering the matters customary in underwritten primary offerings and such
other matters as may be reasonably requested by the Holders and underwriters, if
any; (3) obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the Holders and the
underwriters, if any, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters by underwriters in
connection with primary underwritten offerings; (4) if an underwriting agreement
is entered into, the same shall set forth in full the indemnification and
contribution provisions and procedures of Sections 7 and 8 hereof with respect
to all parties to be indemnified pursuant to said Section; and (5) the Company
shall deliver such documents and certificates as may be requested by the Holders
and the managing underwriters, if any, to evidence compliance with clause (1)
above and with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company. The above shall be done at each
closing under such underwriting or similar agreement or as and to the extent
required thereunder;
(p) make available for inspection during normal business hours
by the Holders, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement; PROVIDED, that any records,
information or documents that are designated by the Company in writing as
confidential shall be kept confidential by such Persons;
(q) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its security
holders, earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of any 12-month period (1)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm or best efforts underwriting offering, and (2)
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement, which statements shall
cover said 12-month periods.
The Company may require the Holders to furnish to the Company such
information and documents regarding the distribution of such securities and the
seller as the Company may from time to time reasonably request in writing.
- 10 -
<PAGE>
The Holders each agree by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(d)(6) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(l) hereof, or until it is advised in writing (the "Advice") by the Company
that the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
Prospectus, and, if so directed by the Company, each Holder will, or will
request the underwriters to, deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice. If the Company shall give such notice, the time periods
mentioned in Section 5(c) hereof shall be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 5(d)(6) to and including the date when the Holders shall have received
the copies of the supplemented or amended prospectus contemplated by Section
5(l) hereof or the Advice.
6. REGISTRATION EXPENSES.
Except as otherwise provided herein, "Registration Expenses" include
all expenses incident to the Company's performance of or compliance with this
Agreement, including without limitation all registration and filing fees,
including with respect to filings required to be made with the National
Association of Securities Dealers, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters or holders of
a majority of the Registrable Securities being sold may designate), printing
expenses, messenger, telephone and delivery expenses, and fees and disbursements
of counsel for the Company, the Holders and of all independent certified public
accountants (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which similar securities issued by the Company are
then listed, rating agency fees, securities acts liability insurance if the
Holders so require, and the reasonable fees and expenses of any special experts
retained by the Holders or by the Company at the request of the managing
underwriters in connection with such registration. The Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or
- 11 -
<PAGE>
accounting duties) and the expense of any annual audit, which are not
"Registration Expenses" for purposes of this Agreement. In no event shall the
Company be liable for the payment of any discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar industry professionals
relating to the distribution of the Registrable Securities or for the fees and
expenses of more than one law firm for all Holders.
7. INDEMNIFICATION.
(a) INDEMNIFICATION BY COMPANY. The Company will indemnify and
hold harmless, to the full extent permitted by law, each Holder, its officers
and directors, their agents and each Person who controls each such Holder
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities (or actions in respect thereto) and expenses to which any such
Person may be subject, under the Securities Act or otherwise, and reimburse all
such Persons for any legal or other expenses incurred with investigating or
defending against any such losses, claims, damages or liabilities, insofar as
such losses, claims, damages or liabilities arise out of or are based upon any
untrue or alleged untrue statement of a material fact contained in a
Registration Statement, Prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same arise out of or are based upon an untrue statement of a material fact
or omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, which statement or omission is made
therein in reliance upon and in conformity with information furnished in writing
to the Company by such Holder, expressly for use therein. The Company will also
indemnify underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of each Holder of Registrable Securities.
(b) INDEMNIFICATION BY HOLDERS. Each Holder will, severally and
not jointly, indemnify and hold harmless, to the full extent permitted by law,
the Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities (or actions in respect thereto) and expenses to which any such
Person may be subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
or alleged untrue statement of a material fact contained in a Registration
Statement or Prospectus or preliminary prospectus or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not
- 12 -
<PAGE>
misleading, to the extent, but only if and to the extent, that such untrue or
alleged untrue statement or omission or alleged omission is made therein in
reliance upon and in conformity with the information furnished in writing by
such Holder specifically for inclusion therein. In no event shall the liability
of a Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation. The Company shall be entitled
to receive indemnities from underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution, to
the same extent as provided above with respect to information so furnished in
writing by such Persons.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled
to indemnification hereunder will (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and (ii)
unless in such indemnified party's reasonable judgment a conflict of interest
may exist between such indemnified and indemnifying parties with respect to such
claim, permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party and in that case the
indemnified party shall have the right to participate in the conduct of such
defense provided that it will pay for the fees of its own counsel. Whether or
not such defense is assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its consent
(but such consent will not be unreasonably withheld). No indemnifying party
will consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving of the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim, in which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
8. CONTRIBUTION.
(a) If the indemnification provided for in Section 7 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such
- 13 -
<PAGE>
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
that resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7, any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding;
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding any other provision hereof, in no event shall the contribution
obligation of any Holder be greater in amount than the excess of (i) the dollar
amount of the proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such contribution obligation over (ii) the dollar
amount of any damages that such Holder has otherwise been required to pay by
reason of the untrue or alleged untrue statement or omission or alleged omission
giving rise to such obligation. No person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person or entity who was not guilty
of such fraudulent misrepresentation; and
(c) If indemnification is available under Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 7 without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 8.
9. PUBLIC INFORMATION.
For a period of three years after the date of this Agreement, the
Company shall cause "adequate current public information" (as such term is used
in Rule 144 promulgated under
- 14 -
<PAGE>
the Securities Act) to be maintained and shall timely file all reports required
pursuant to the Exchange Act.
10. MISCELLANEOUS.
(a) REMEDIES. Without limiting the rights of any Holder to
pursue all other legal and equitable remedies available for any breach of the
provisions of this Agreement, including recovery of damages, each will be
entitled to specific performance of their rights under this Agreement. The
Company expressly agrees that monetary damages would not be adequate
compensation for any loss incurred by any Holder by reason of a breach by the
Company of the provisions of this Agreement and that such Holder would sustain
irreparable harm, and therefore the Company further agrees that any such Holder
shall be entitled to specific performance to prevent any such breach or any
continuing breach hereof and the Company waives the defense in any action for
specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not on or
after the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company has
not previously entered into any agreement with respect to its securities
granting any registration rights to any Person.
(c) NOTICES. All notices, requests, demands and other
communications provided for by this Agreement shall be in writing (including
telecopier or similar writing) and shall be deemed to have been given at the
time when mailed in any general or branch office of the United States Postal
Service, enclosed in a registered or certified postpaid envelope, or sent by
Federal Express or other similar overnight courier service, addressed to the
address of the parties stated below or to such changed address as such party
may have fixed by notice or, if given by telecopier, when such telecopy is
transmitted and the appropriate answerback is received.
(i) If to the Company:
Polaris Industries Inc.
1225 North Highway 169
Minneapolis, Minnesota 55441
Attention: John H. Grunewald
Executive Vice President,
Finance and Administration
(ii) If to Atkins:
Victor K. Atkins, Jr.
- 15 -
<PAGE>
33 Flying Point Road
Southhampton, New York 11968
(iii) If to the Lehman Entities:
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Attention: Ron Hiram
(d) SUCCESSORS AND ASSIGNS. This Agreement is solely for the
benefit of the parties and their respective successors and assigns, including
any Holder. Nothing herein shall be construed to provide any rights to any
other entity or individual.
(e) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
(f) HEADINGS. Section headings are for convenience only and do
not control or affect the meaning or interpretation of any terms or provisions
of this Agreement.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York governing
contracts to be made and performed therein without giving effect to principles
of conflicts of law, and, with respect to any dispute arising out of this
Agreement, each party hereby consents to the exclusive jurisdiction of the
courts sitting in such State.
(h) SEVERABILITY. Should any part, term, condition or
provision hereof or the application thereof be declared illegal, invalid or
otherwise unenforceable or in conflict with any other law by a court of
competent jurisdiction, the validity of the remaining parts, terms, conditions
or provisions of this Agreement shall not be affected thereby, and the illegal,
invalid or unenforceable portions of this Agreement shall be and hereby are
redrafted to conform with applicable law, while leaving the remaining portions
of this Agreement intact, except to the extent necessary to conform to the
redrafted portions hereof.
(i) ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding between the parties and supersedes all proposals,
commitments, writings, negotiations, discussions, agreements and understandings,
oral or written, of every kind and nature between them concerning the subject
matter hereof. This Agreement may not be amended or otherwise modified except
in a writing signed by both parties hereto. No discharge
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<PAGE>
of the terms hereof shall be deemed valid unless by full performance by the
parties or by a writing signed by the parties. A waiver by any party of any
breach or violation of any this Agreement shall not be deemed or construed as a
waiver of any other breach or violation hereof.
(j) ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
- 17 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
POLARIS INDUSTRIES INC.
By: /s/ W. Hall Wendel, Jr.
------------------------------
Name:
Title:
/s/ V. K. Atkins, Jr.
-----------------------------------
Victor K. Atkins, Jr.
EIP HOLDINGS INC.
By: /s/
------------------------------
Name:
Title:
EIP I INC.
By: /s/
------------------------------
Name:
Title:
LB I GROUP INC.
By: /s/
------------------------------
Name:
Title:
- 18 -
<PAGE>
POLARIS INDUSTRIES INC. EXHIBIT 11
- --------------------------------------------------------------------------------
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS - CONTINUED
(NOT COVERED BY AUDITOR'S REPORT)
- --------------------------------------------------------------------------------
Polaris Industries Inc. (the Company) was formed for the purpose of effecting
the conversion of Polaris Industries Partners L.P. (the Partnership) from a
publicly traded limited partnership to a publicly traded corporation on December
22, 1994 (the Conversion). The Company issued 16,010,441 shares of common stock
to the Partnership's Limited Partners in exchange for their limited partner
interests, 2,100,243 shares of common stock to the affiliates of EIP Associates
L.P. (the General Partner) in exchange for the entire general partnership
interests and rights and ultimately 312,500 shares of common stock to the
holders of 312,500 First Rights.
Net income per share for the fourth quarter of 1994 and for the year ended
December 31, 1994, is calculated based on the weighted average number of common
and common equivalent shares outstanding as if the Conversion transaction
discussed above occurred at the beginning of the period. Net income per share
is not applicable for 1992, 1993, and the first, second and third quarters of
1994 because the Company was a partnership in those periods. See Note 1 of
Notes to the Financial Statements.
Pro forma information is presented to assist in comparing the continuing results
of operations of the Company for 1994, 1993 and 1992 exclusive of the Conversion
costs and as if the Company was a taxable corporation for these periods. The
weighted average number of units of Beneficial Assignment of Class A Limited
Partnership Interests (BACs) and BAC equivalents has been retroactively adjusted
to reflect the issuance of an equal number of shares of common stock to the
Partnership's Limited Partners in exchange for the number of BACs outstanding
and the issuance of 2,100,243 shares of common stock to the affiliates of the
General Partner in exchange for the general partnership interests. See Note 10
of Notes to the Financial Statements.
NET INCOME PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarter Year
Ended Ended
December 31, December 31,
1994 1994
------------ -------------
<S> <C> <C>
Net Income for the Period $ 78,339 $ 128,950
------------ -------------
------------ -------------
Weighted Average Number of Outstanding:
Common shares 18,111 18,111
Rights 312 312
------------ -------------
Total common and common equivalent shares 18,423 18,423
------------ -------------
------------ -------------
Net Income Per Share $ 4.25 $ 7.00
------------ -------------
------------ -------------
</TABLE>
<PAGE>
POLARIS INDUSTRIES INC. EXHIBIT 11 - CONTINUED
- --------------------------------------------------------------------------------
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS - CONTINUED
(NOT COVERED BY AUDITOR'S REPORT)
- --------------------------------------------------------------------------------
PRO FORMA NET INCOME PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------
March 31, June 30, September 30, December 31, Total
1994 1994 1994 1994 1994
----------- ----------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Pro Forma Net Income for the Period $ 6,144 $ 7,348 $ 21,611 $ 19,600 $ 54,703
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
Weighted Average Number of Outstanding:
Common shares 18,065 18,111 18,111 18,111 18,111
Rights 342 296 304 312 312
----------- ----------- -------------- ------------ -------------
Total common and common
equivalent shares 18,407 18,407 18,415 18,423 18,423
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
Pro Forma Net Income Per Share $ .33 $ .40 $ 1.18 $ 1.06 $ 2.97
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
<CAPTION>
Quarter Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31, Total
1993 1993 1993 1993 1993
---------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Pro Forma Net Income for the Period $ 4,703 $ 4,702 $ 12,907 $ 10,715 $ 33,027
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
Weighted Average Number of Outstanding:
Common shares 16,999 16,999 16,999 17,017 17,017
Rights 1,227 1,227 1,226 1,198 1,198
----------- ----------- -------------- ------------ -------------
Total common and common
equivalent shares 18,226 18,226 18,225 18,215 18,215
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
Pro Forma Net Income Per Share $ .26 $ .26 $ .70 $ .59 $ 1.81
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
<CAPTION>
Quarter Ended
------------------------------------------------------
March 31, June 30, September 30, December 31, Total
1992 1992 1992 1992 1992
----------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Pro Forma Net Income for the Period $ 1,642 $ 4,441 $ 10,815 $ 7,704 $ 24,602
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
Weighted Average Number of Outstanding:
Common shares 16,200 16,200 16,200 16,402 16,402
Rights 1,488 1,912 1,912 1,672 1,566
----------- ----------- -------------- ------------ -------------
Total common and common
equivalent shares 17,688 18,112 18,112 18,074 17,968
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
Pro Forma Net Income Per Share $ .09 $ .25 $ .60 $ .43 $ 1.37
----------- ----------- -------------- ------------ -------------
----------- ----------- -------------- ------------ -------------
</TABLE>
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
SHARES % OF
COMPANY ORGANIZATION OUTSTANDING OWNERSHIP
- ------------------------------------------------------------------------
<S> <C> <C> <C>
EIP Capital Corporation Delaware 70 100%
Corporation
- ------------------------------------------------------------------------
EIP Associates L.P. Delaware Limited N/A 100% (1)
Partnership
- ------------------------------------------------------------------------
Polaris Industries Delaware Limited N/A 100% (2)
Partners L.P. Partnership
- ------------------------------------------------------------------------
Polaris Real Estate Delaware 1,000 100% (3)
Corporation of Iowa, Inc. Corporation
- ------------------------------------------------------------------------
Polaris Real Estate Delaware 1,000 100% (4)
Corporation Corporation
- ------------------------------------------------------------------------
Polaris Industries Barbados 1,000 100%
Export Ltd. Corporation
- ------------------------------------------------------------------------
Polaris Industries, Manitoba 101 100% (6)
Inc.(5) Corporation
- ------------------------------------------------------------------------
<FN>
(1) The Company and EIP Capital Corporation are the only partners in EIP
Associates L.P.
(2) The Company, EIP Capital Corporation and EIP Associates L.P. are the
only partners in Polaris Industries Partners L.P.
(3), (4), and (6) Owned 100% by Polaris Industries Partners L.P.
(5) Articles of Amendment are being prepared to effect a name change.
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of our report, dated February 2, 1995, with respect to
the financial statements of Polaris Industries Inc. and the schedule included
in the annual report on Form 10-K for the year ended December 31, 1994.
/s/ McGladrey & Pullen, LLP
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
March 23, 1995
<PAGE>
POWER OF ATTORNEY
(FORM 10K)
KNOW ALL MEN BY THESE PRESENTS, that POLARIS INDUSTRIES INC., a Minnesota
corporation (the "Company"), and each of the undersigned directors of the
Company, hereby constitutes and appoints W. Hall Wendel, Jr. and John H.
Grunewald and each of them (with full power to each of them to act alone)
its/his/her true and lawful attorney-in-fact and agent, for it/him/her and on
it/his/her behalf and in its/his/her name, place and stead, in any and all
capacities to sign, execute, affix its/his/her seal thereto and file the Annual
Report on Form 10-K for the year ended December 31, 1994 under the Securities
Exchange Act of 1933, as amended, with any amendment or amendments thereto, with
all exhibits and any and all documents required to be filed with respect thereto
with any regulatory authority.
There is hereby granted to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in respect of the foregoing as fully as it/he/she or
itself/himself/herself might or could do if personally present, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in any number of counterparts, each
of which shall be an original, but all of which taken together shall constitute
one and the same instrument and any of the undersigned directors may execute
this Power of Attorney by signing any such counterpart.
POLARIS INDUSTRIES INC. has caused this Power of Attorney to be executed in
its name by its Chief Executive Officer on the 26th day of January 1995.
POLARIS INDUSTRIES INC.
By /s/ W. Hall Wendel, Jr.
------------------------------
W. Hall Wendel, Jr., Chief
Executive Officer
<PAGE>
The undersigned, directors of POLARIS INDUSTRIES INC., have hereunto set
their hands as of the 26th day of January 1995.
/s/ W. Hall Wendel, Jr. /s/ Stephen G. Shank
- ------------------------------ -----------------------------
W. Hall Wendel, Jr. Stephen G. Shank
/s/ Beverly F. Dolan /s/ Gregory R. Palen
- ------------------------------ -----------------------------
Beverly F. Dolan Gregory R. Palen
/s/ Robert S. Moe /s/ Andris A. Baltins
- ------------------------------ -----------------------------
Robert S. Moe Andris A. Baltins
/s/ Kenneth D. Larson
- ------------------------------
Kenneth D. Larson
D I R E C T 0 R S
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of Polaris Industries Inc. as of December 31, 1994, and the
related statements of operations, shareholders' equity and cash flows for
the year ended December 31, 1994, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 62,881
<SECURITIES> 0
<RECEIVABLES> 29,700
<ALLOWANCES> 0
<INVENTORY> 88,714
<CURRENT-ASSETS> 206,489
<PP&E> 92,029
<DEPRECIATION> 38,368
<TOTAL-ASSETS> 331,166
<CURRENT-LIABILITIES> 161,457
<BONDS> 0
<COMMON> 181
0
0
<OTHER-SE> 169,528
<TOTAL-LIABILITY-AND-EQUITY> 331,166
<SALES> 826,286
<TOTAL-REVENUES> 826,286
<CGS> 643,003
<TOTAL-COSTS> 643,003
<OTHER-EXPENSES> 107,621
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 75,662
<INCOME-TAX> (53,034)
<INCOME-CONTINUING> 128,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,950
<EPS-PRIMARY> 7.00
<EPS-DILUTED> 7.00
</TABLE>
