Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion pertains to the results of operations and financial position of the Company and should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included elsewhere in this report. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Overview

2023 was a record year for sales, which totaled $8.9 billion, a four percent increase from 2022. The year-over-year increase in sales was driven primarily by product mix and increased shipments.

Gross profit totaled $2.0 billion in both 2023 and 2022. Expressed as a percentage of sales, gross profit decreased in 2023 as compared to 2022, primarily due to unfavorable foreign currency exchange rate movement and higher finance interest, both partially offset by higher net pricing.

Full year net income from continuing operations attributable to Polaris Inc. of $502.8 million decreased 17 percent from 2022, with diluted earnings per share from continuing operations decreasing from $10.04 to $8.71 per share. In addition to the reasons discussed above, these decreases were primarily the result of increased operating expenses and higher interest expense. We reported Adjusted EBITDA of $1,020.9 million in 2023 compared to $1,075.9 million in 2022. For information on how we define and calculate Adjusted EBITDA, and a reconciliation from net income from continuing operations to Adjusted EBITDA, see “Non-GAAP Financial Measures”.

On February 1, 2024, we announced that our Board of Directors declared a quarterly cash dividend of $0.66 per share for the first quarter of 2024, a two percent increase from the prior quarterly cash dividend, representing the 29th consecutive year of increased dividends to shareholders.

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Consolidated Results of Operations

The consolidated results of operations were as follows:

For the Years Ended December 31,

Percentage of sales 21.9 % 22.8 % -88 basis points 23.5 % -72 basis points

Operating expenses:

Percentage of sales 15.0 % 14.0 % +98 basis points 14.7% -68 basis points

Non-operating expense:

Other (income) expense, net $ (44.5) $ (28.6) 56 % $ 2.3 NM

Loss on sale of businesses $ — $ — — $ 36.8 NM

Percentage of sales 5.6 % 7.0 % -140 basis points 6.7 % +35 basis points

Adjusted EBITDA Margin 11.4 % 12.5 % -110 basis points 12.9 % -33 basis points

Weighted average diluted shares outstanding 57.7 60.1 (4) % 62.7 (4) %

NM = not meaningful

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Sales:

The year-over-year increase in sales was driven primarily by product mix and increased shipments.

The components of the consolidated sales change were as follows:

Percent change in total Company sales compared to the prior year

Volume 2 % 1 %

Product mix and price 2 16

Currency — (2)

The year-over-year volume increase was driven by increased ORV and snowmobile shipments. Product mix and price drove an increase in sales as a result of a higher sales mix of premium ORV models, which was partially offset by higher finance interest.

Sales by geographic region were as follows:

For the Years Ended December 31,

Sales in the United States for 2023 increased five percent during the year, primarily driven by product mix and increased shipments, partially offset by higher finance interest.

Sales in Canada decreased four percent during 2023, primarily due to unfavorable foreign currency exchange rate movement. Currency rate movements had an unfavorable impact of three percentage points on sales in 2023.

Sales in other countries, primarily in Europe, increased five percent during 2023, primarily driven by product mix. Currency rate movements had a favorable impact of two percentage points on sales in 2023.

Cost of sales:

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

For the Years Ended December 31,

Percentage of sales 78.1 % 77.2 % +88 basis points 76.5 % +72 basis points

The year-over-year increase in cost of sales was primarily due to higher labor, warranty, and depreciation and amortization expenses. Higher sales volumes and product mix also contributed to the increase.

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Gross profit:

Gross profit for 2023, as a percentage of sales, decreased primarily due to unfavorable foreign currency exchange rate movement and higher finance interest, both partially offset by higher net pricing.

Operating expenses:

Operating expenses for 2023, in absolute dollars and as a percentage of sales, increased compared to 2022, primarily due to higher general and administrative and selling and marketing expenses.

Income from financial services:

The following table reflects our income from financial services:

For the Years Ended December 31,

Income from Polaris Acceptance joint venture $ 41.5 $ 15.1 175 % $ 7.7 96 %

Total income from financial services $ 80.4 $ 48.4 66 % $ 53.8 (10) %

Percentage of sales 0.9 % 0.6 % +34 basis points 0.7 % -16 basis points

Income from financial services increased 66 percent in 2023, primarily due to higher wholesale financing income from Polaris Acceptance driven by higher dealer inventory levels.

Interest expense:

Interest expense increased for 2023 due to higher interest rates.

Other (income) expense, net:

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

Provision for income taxes:

The decrease in the effective income tax rate for 2023 was primarily due to an increase in research and development credits, a non-cash increase of deferred tax assets, and the favorable impact of lower pretax income generated in 2023, partially offset by a decreased deduction for Foreign Derived Intangible Income (“FDII”).

Adjusted EBITDA:

Adjusted EBITDA, in absolute dollars and as a percentage of sales, decreased in 2023 due to increased operating expenses, higher finance interest and unfavorable foreign currency exchange rate movement, partially offset by higher net pricing.

Weighted average diluted shares outstanding:

Weighted average diluted shares outstanding decreased throughout 2023 primarily due to share repurchases.

Segment Results of Operations

The summary that follows provides a discussion of the results of operations of each of our three reportable segments, Off Road, On Road, and Marine. Each of these segments is comprised of various product offerings that serve multiple end markets. We evaluate performance based on sales and gross profit. The Corporate amounts include revenues and costs of businesses that were divested in 2021, as well as costs that are not allocated to segments, including certain unallocated manufacturing costs. Businesses that are presented as discontinued operations are excluded from the tables below.

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

For the Years Ended December 31,

Corporate — — % — — % NM 72.6 1 % NM

For the Years Ended December 31,

NM = not meaningful

Off Road:

Off Road sales, inclusive of PG&A sales, increased nine percent in 2023 driven by increased shipments and product mix, partially offset by higher finance interest. Sales to customers outside of North America increased one percent in 2023 driven by increased snowmobile shipments. The average per unit sales price for the Off Road segment increased approximately two percent, driven by higher pricing.

Additional information on our end markets for 2023:

•Polaris North America ATV unit retail sales up low-single digits percent

•Polaris North America side-by-side unit retail sales up mid-single digits percent

•Total Polaris North America ORV unit retail sales up mid-single digits percent

•Estimated North America industry ORV unit retail sales up low-single digits percent

•Total Polaris North America ORV dealer inventories up approximately 55 percent

•Polaris North America snowmobile unit retail sales for the 2023-2024 season-to-date period through December 31, 2023 up low-teens percent

•Estimated North America industry snowmobile unit retail sales for the 2023-2024 season-to-date period through December 31, 2023 up low-double digits percent

•Total Polaris North America snowmobile dealer inventories up approximately 120 percent

Gross profit, as a percentage of sales, decreased in 2023 primarily due to unfavorable product mix, higher finance interest, and foreign currency exchange rate movement, partially offset by lower input costs.

On Road:

On Road sales, inclusive of PG&A sales, increased two percent in 2023 driven by product mix. On Road sales to customers outside of North America increased nine percent in 2023, driven by product mix. The average per unit sales price for the On Road segment increased five percent, driven by product mix.

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Additional information on our end markets for 2023:

•Indian Motorcycle North America unit retail sales up mid-single digits percent

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

•Polaris North America motorcycle dealer inventories up approximately 20 percent

Gross profit, as a percentage of sales, increased in 2023 due to favorable product mix and lower input costs, partially offset by increased warranty costs and higher finance interest.

Marine:

Marine sales decreased 23 percent, primarily due to decreased shipments, partially offset by higher net pricing.

Additional information on our end markets for 2023:

•Polaris U.S pontoon unit retail sales down mid-single digits percent

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

•Polaris U.S. deck boat unit retail sales down mid-teens percent

•Estimate U.S. industry deck boat unit retail sales down mid-twenties percent

Gross profit, as a percentage of sales, decreased due to a decrease in sales volumes resulting in decreased leverage of manufacturing costs, partially offset by higher net pricing.

Non-GAAP Financial Measures

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

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income from continuing operations, excluding interest expense, income tax expense, depreciation and amortization, and certain other non-cash, non-recurring, or non-operating items impacting net income from continuing operations from time to time. For example, costs associated with our multi-phase supply chain transformation initiative and certain corporate restructuring activities, such as acquisitions and divestitures, are included as non-GAAP adjustments. We use the non-GAAP financial measure of Adjusted EBITDA Margin, which is defined as Adjusted EBITDA divided by net sales. We believe that Adjusted EBITDA and Adjusted EBITDA Margin help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude from Adjusted EBITDA and Adjusted EBITDA Margin.

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

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

The following table presents a reconciliation of net income from continuing operations, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the periods presented:

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For the Years Ended December 31,

Distributions from other affiliates and impairment charges (2) (1.4) (0.7) 7.7

Acquisition-related costs (3) 1.3 — —

Restructuring and realignment expenses (4) 8.2 6.2 13.1

Class action litigation expenses (5) 8.5 4.5 9.4

Loss on sale of businesses (6) — — 36.8

(1) Represents amortization expense for acquisition-related intangible assets

(3) Represents adjustments for integration and acquisition-related expenses

(5) Represents adjustments for certain class action litigation-related expenses

Liquidity and Capital Resources

Our primary sources of liquidity have been cash provided by operating and financing activities, including funds as needed from our credit facility and issuances of long-term debt. Our primary uses of funds have been for new product development, capital investments, cash dividends to shareholders, repurchases and retirement of common stock and acquisitions. The seasonality of production and shipments cause working capital requirements to fluctuate during the year and from year to year.

We believe that existing cash balances and cash flows to be generated from operating activities, borrowing capacity under our credit facility and from future issuances or borrowings of long-term debt, will be sufficient to fund operations, new product development, cash dividends to shareholders, repurchases and retirement of common stock, and capital requirements for at least the next 12 months and for the foreseeable future thereafter.

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Cash Flows

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

($ in millions) For the Years Ended December 31,

Total cash provided by (used for):

Operating Activities:

The increase in net cash provided by operating activities of continuing operations in 2023 was primarily the result of reduced working capital in the current year compared to working capital additions in the prior year, partially offset by lower net income from continuing operations.

Investing Activities:

The primary sources and uses of cash were for the purchase of property, equipment and tooling for continued capacity and capability at our manufacturing, distribution and product development facilities, capital deployed for acquisitions and proceeds received from the disposal of businesses, and distributions from and contributions to Polaris Acceptance. Net cash used for investing activities of continuing operations increased in 2023 due to an increase in property, equipment and tooling purchases, as well as cash utilized for an acquisition in the current period compared to proceeds received for the disposal of certain businesses in the prior year.

Financing Activities:

The increase in net cash used for financing activities was attributable to decreased net borrowings under debt arrangements. Net repayments totaled $158.2 million in 2023 compared to $257.7 million of net borrowings in 2022. This increase was partially offset by lower share repurchases and increased proceeds from stock issuances under employee plans.

Financing Arrangements:

We are party to an unsecured Master Note Purchase Agreement, as amended and supplemented, under which we have issued senior notes. As of December 31, 2023, outstanding borrowings under the Master Note Purchase Agreement totaled $350.0 million.

We are also party to an unsecured credit facility, which includes a $1.0 billion variable interest rate Revolving Loan Facility that matures in June 2026, under which we have unsecured borrowings. As of December 31, 2023, there were borrowings of $228.2 million outstanding under the Revolving Loan Facility. Our credit facility also includes a Term Loan Facility, on which $780.0 million was outstanding as of December 31, 2023. We are required to make principal payments under the Term Loan Facility totaling $45 million over the next 12 months. Interest is charged at rates based on adjusted Term SOFR for the credit facility. As of December 31, 2023, we had $764.3 million of availability on the Revolving Loan Facility.

In December 2021, we amended the credit facility to provide an unsecured incremental 364-day term loan (the “Incremental Term Loan”) in the amount of $500 million, which was fully drawn on closing. In December 2022, we further amended the unsecured credit facility to extend the maturity date of the Incremental Term Loan to December 15, 2023. The Incremental Term Loan was fully repaid in December 2023 using net proceeds from the Company’s sale of senior notes in a public offering completed in November 2023.

In November 2023, we amended the credit facility to terminate all guarantees provided by our subsidiaries under the credit facility, remove the requirement for our subsidiaries to provide guarantees of the obligations under the credit facility, and remove certain of our subsidiaries as co-borrowers.

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The agreements governing the credit facility and the Master Note Purchase Agreement contain covenants that require us to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. The agreements require us to maintain an interest coverage ratio of not less than 3.00 to 1.00 and a leverage ratio of not more than 3.50 to 1.00 on a rolling four quarter basis.

In November 2023, we issued $500 million aggregate principal amount of 6.950% Senior Notes pursuant to a public offering. We received approximately $492 million pursuant to the notes after deducting the underwriting discount and other fees and expenses. Net proceeds from the notes, along with cash on hand, were used to repay borrowings due in December 2023 under the Incremental Term Loan. The notes bear interest at a rate of 6.950% per year, with interest payable semi-annually in arrears in March and September of each year. The notes mature in March of 2029. The indenture governing the senior notes is subject to customary covenants and make-whole provisions upon early termination.

On July 2, 2018, pursuant to the Agreement and Plan of Merger dated May 29, 2018, we completed the acquisition of Boat Holdings, LLC, a privately held Delaware limited liability company, headquartered in Elkhart, Indiana which manufactures boats (“Boat Holdings”). As a component of the Boat Holdings merger agreement, we have committed to make a series of deferred payments to the former owners through July 2030. The original discounted payable was for $76.7 million, of which $49.4 million was outstanding as of December 31, 2023.

As of December 31, 2023, and December 31, 2022, we were in compliance with all debt covenants. Our debt to total capital ratio was 57 percent and 65 percent as of December 31, 2023 and December 31, 2022, respectively. Additionally, as of December 31, 2023, we had letters of credit outstanding of $42.6 million, primarily related to purchase obligations for raw materials.

Share Repurchases:

As of December 31, 2023, our Board of Directors has authorized us to repurchase up to an additional $1,185.1 million of our common stock. We repurchased a total of 1.6 million shares of our common stock for $178.6 million during 2023, which had a favorable impact on diluted net income from continuing operations per share of 13 cents.

Wholesale Customer Financing Arrangements:

We have arrangements with certain finance companies to provide secured floor plan financing for our dealers. These arrangements provide liquidity by financing dealer purchases of our products without the use of our working capital. A majority of the worldwide sales of snowmobiles, ORVs, motorcycles, boats and related PG&A are financed under similar arrangements whereby we receive payment within a few days of shipment of the product. As of December 31, 2023 and 2022, the outstanding amount financed worldwide by dealers under these arrangements was approximately $2,629.9 million and $1,893.9 million, respectively. We participate in the cost of dealer financing up to certain limits.

Under these arrangements, we have agreed to repurchase products repossessed by these finance companies. As of December 31, 2023, the potential aggregate repurchase obligations were approximately $496.3 million. Our financial exposure under these repurchase agreements is limited to the difference between the amounts unpaid by the dealer with respect to the repossessed product plus costs of repossession and the amount received on the resale of the repossessed product. No material losses have been incurred under these agreements during the periods presented.

Retail Customer Financing Arrangements:

We have agreements with third-party financing companies to provide financing options to end consumers of our products. We have no material contingent liabilities for residual value or credit collection risk under these agreements. During 2023, consumers financed 27 percent of our vehicles sold in the United States through these arrangements. The volume of installment credit contracts written in calendar year 2023 with these institutions was $1,403.1 million, a 28 percent increase from 2022.

Critical Accounting Policies and Critical Accounting Estimates

We have adopted various accounting policies to prepare the consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different

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estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur may have a material impact on our financial condition or results of operations. The significant accounting policies that management believes are the most critical to aid in fully understanding and evaluating our reported financial results include the following: revenue recognition, sales promotions and incentives, product warranties, product liability, and goodwill and other intangible assets.

Revenue recognition. With respect to wholegood vehicles, boats, and PG&A, revenue is recognized when we transfer control of the product to our customer (primarily dealers and distributors). With respect to services provided by us, revenue is recognized upon completion of the service or over the term of the service agreement in proportion to the costs expected to be incurred in satisfying the obligations over the term of the service period. Revenue is measured based on the amount of consideration that we expect to be entitled to in exchange for the goods or services transferred. Sales, value add, and other taxes collected from a customer concurrent with revenue-producing activities are excluded from revenue. When the right of return exists, we adjust the consideration for the estimated effect of returns. We estimate expected returns based on historical sales levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of customer, and a projection of this experience into the future. We have agreed to repurchase products repossessed by the finance companies up to certain limits. Our financial exposure is limited to the difference between the amount paid to the finance companies and the amount received on the resale of the repossessed product.

Sales promotions and incentives. We accrue for estimated sales promotion and incentive expenses, which are recognized as a component of sales in measuring the amount of consideration we expect to receive in exchange for transferring goods or providing services. Examples of sales promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and sales associate incentives. Sales promotion and incentive expenses are estimated based on current programs, planned programs, and historical rates for each product line. We record these amounts as a liability in the consolidated balance sheet until they are ultimately paid. As of December 31, 2023 and 2022, accrued sales promotions and incentives were $230.9 million and $127.0 million, respectively. Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if the customer usage rate varies from historical trends. Adjustments to sales promotion and incentive accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date.

Product warranties. We typically provide a limited warranty for our vehicles and boats for a period of six months to ten years, depending on the product. We provide longer warranties in certain geographical markets as determined by local regulations and customary practice and may also provide longer warranties related to certain promotional programs. Our standard warranties require us, generally through our dealer network, to repair or replace defective products during such warranty periods. The warranty reserve is established at the time of sale to the dealer or distributor based on management’s best estimate using historical rates and trends. We record these amounts as a liability in the consolidated balance sheet until they are ultimately paid. As of December 31, 2023 and 2022, the accrued warranty liability was $181.1 million and $172.9 million, respectively. Adjustments to the warranty reserve are made based on actual claims experience in order to properly estimate the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The warranty reserve includes the estimated costs related to recalls, which are accrued when probable and estimable. Factors that could have an impact on the warranty accrual include the following: changes in manufacturing quality, shifts in product mix, changes in warranty coverage periods, impacts on product usage (including weather), product recalls and changes in sales volume. Amounts estimated to be due and payable could differ materially from what will ultimately transpire in the future and have a material adverse effect on our financial condition and results of operations.

Product liability. We are subject to product liability claims in the normal course of business. In 2012, we began purchasing excess insurance coverage for product liability claims. We self-insure product liability claims before the policy date and up to the purchased insurance coverage after the policy date. The estimated costs resulting from any losses are charged to operating expenses when it is probable a loss has been incurred and the amount of the loss is reasonably estimable. There is significant judgment and estimation required in evaluating the possible outcomes and potential losses of product liability matters. We utilize claims experience, historical trends and actuarial analysis, along with an analysis of current claims, to assist in determining the appropriate loss reserve levels. As of December 31, 2023 and 2022, we had accruals of $136.7 million and $107.5 million, respectively, for the probable payment of pending claims related to product liability litigation associated with our products. Adverse determination of material product liability claims made against us could have a material adverse effect on our financial condition and results of operations.

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Goodwill. Goodwill is tested at least annually for impairment and is tested for impairment more frequently when events or changes in circumstances indicate that the asset might be impaired. We complete our annual goodwill impairment test as of the first day of the fourth quarter.

We may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount. A qualitative assessment requires that we consider events or circumstances including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting unit’s net assets, and changes in our stock price. If, after assessing the totality of events and circumstances, it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or if we elect to bypass the qualitative test and proceed to a quantitative test, then the quantitative goodwill impairment test is performed. A quantitative test includes comparing the fair value of each reporting unit to the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, an impairment is recognized in an amount equal to the difference, limited to the total amount of goodwill allocated to that reporting unit.

Under the quantitative goodwill impairment test, the fair value of each reporting unit is determined using a discounted cash flow analysis and market approach. Determining the fair value of the reporting units requires the use of significant judgment, including discount rates, assumptions in our long-term business plan about future revenues and expenses, capital expenditures, and changes in working capital, which are dependent on internal forecasts, estimation of long-term growth for each reporting unit, and determination of the discount rate. These plans take into consideration numerous factors including historical experience, anticipated future economic conditions, changes in raw material prices and growth expectations for the industries and end markets in which we participate. These assumptions are determined over a five-year long-term planning period. The five-year growth rates for revenues and EBITDA vary for each reporting unit being evaluated. Revenues and EBITDA beyond five years are projected to grow at a terminal growth rate consistent with industry expectations. Actual results may significantly differ from those used in our valuations. The forecasted future cash flows are discounted using a discount rate developed for each reporting unit. The discount rates were developed using market observable inputs, as well as our assessment of risks inherent in the future cash flows of each respective reporting unit.

In estimating fair value using the market approach, we identify a group of comparable publicly traded companies for each reporting unit that are similar in terms of size and product offering. These groups of comparable companies are used to develop multiples based on total market-based invested capital as a multiple of EBITDA. We determine our estimated values by applying these comparable EBITDA multiples to the operating results of our reporting units. The ultimate fair value of each reporting unit is determined considering the results of both valuation methods. Inputs used to estimate these fair values include significant unobservable inputs that reflect our assumptions about the inputs that market participants would use and, therefore, the fair value assessments are classified within Level 3 of the fair value hierarchy.

In the fourth quarter of 2023, we completed the annual impairment test. It was determined that goodwill was not impaired as each reporting unit’s fair value exceeded its carrying value. We completed a qualitative assessment for the Off Road and On Road reporting units and elected to perform a quantitative goodwill test for the Marine reporting unit. The difference between the fair value and carrying value of the Marine reporting unit was in excess of 10%.

Other intangible assets. Our primary identifiable intangible assets include: dealer/customer relationships and brand/trade names. Identifiable intangible assets with finite lives are amortized and those identifiable intangible assets with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets with indefinite lives are tested for impairment annually or more frequently when events or changes in circumstances indicate that the asset might be impaired. We complete our annual impairment test for identifiable intangible assets with indefinite lives as of the first day of the fourth quarter.

Our identifiable intangible assets with indefinite lives include brand/trade names. The impairment test consists of a comparison of the fair value of the brand/trade name to its carrying value. The fair value is determined using the relief-from-royalty method. This method assumes the brand/trade name has value to the extent that the owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenue for the related brand/trade names, the appropriate royalty rate and the discount rate. Forecasted revenues are derived from our annual budget and long-term business plan and royalty rates are based on brand profitability. The discount rates are

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developed using the market observable inputs used in the development of the reporting unit discount rates, as well as our assessment of risks inherent in the future cash flows of each respective brand/trade name.

In the fourth quarter of 2023, we completed the annual impairment test. It was determined that our indefinite-lived intangible assets were not impaired.

New Accounting Pronouncements

See Item 8 of Part II, “Financial Statements and Supplementary Data—Note 1—Organization and Significant Accounting Policies—New accounting pronouncements.”

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Inflation, Foreign Exchange Rates, and Interest Rates

Inflation:

We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials, including steel, aluminum, copper, petroleum-based resins, certain rare earth metals and diesel fuel. In addition, we are a purchaser of components and parts containing various commodities, including steel, aluminum, rubber and others, which are integrated into our end products. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We generally buy these commodities and components based upon market prices that are established with the vendor as part of the purchase process. We enter into commodity hedging contracts in order to manage fluctuating market prices of certain commodities such as steel and diesel fuel. The total impact of commodities had a favorable impact on our gross profit margins for 2023 when compared to 2022. Based on our current outlook for commodity prices, the total impact of commodities is expected to have a favorable impact on our gross profit margins for 2024 when compared to 2023.

Foreign Exchange Rates:

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

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

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

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

Foreign exchange risk can be quantified by performing a sensitivity analysis assuming a hypothetical change in the value of the U.S. dollar compared to other currencies in which we transact. We are most exposed to the Euro and Canadian dollar. All other things being equal, at current annual volumes, a hypothetical 10 percent fluctuation of the U.S. dollar compared to the Euro impacts annual operating income by approximately $21 million and a hypothetical 10 percent fluctuation of the U.S. dollar compared to the Canadian Dollar impacts annual operating income by approximately $47 million.

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

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Foreign Currency Foreign currency hedging contracts

Australian Dollar Long $ 25.6 $0.66 to 1 AUD

Canadian Dollar Long $ 196.7 $0.74 to 1 CAD

Mexican Peso Short $ 28.0 20 Peso to $1

In 2023, after consideration of the existing foreign currency hedging contracts, foreign currencies had a negative impact on net income compared to 2022. We expect currencies to have a negative impact on net income in 2024 compared to 2023.

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

Interest Rates:

We are a party to an unsecured credit facility with various lenders consisting of a $1.0 billion revolving loan facility and a $1.2 billion term loan facility. Interest accrues on the revolving loan and term loans at variable rates based on adjusted Term SOFR plus the applicable add-on percentage as defined. As of December 31, 2023, there was $228.2 million outstanding on the revolving loan and $780.0 million outstanding on the term loan. We enter into interest rate swaps in order to maintain a balanced risk of fixed and variable interest rates associated with our debt. Based on the unhedged variable-rate debt included in our debt portfolio as of December 31, 2023, a 100 basis point increase or decrease in interest rates would increase or decrease interest expense by approximately $6 million.

Borrowings pursuant to our private senior notes and public senior notes bear interest at fixed rates. We are subject to changes in the fair value of fixed-rate borrowings as a result of potential changes in prevailing interest rates. Changes in the fair value of fixed-rate borrowings have no impact on the amount of interest incurred, cash flows or our financial position.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Page

Management’s Report on Internal Control over Financial Reporting 39

Consolidated Balance Sheets as of December 31, 2023 and 2022 43

Notes to Consolidated Financial Statements 48

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Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting of the Company. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of the system of internal control over financial reporting as of December 31, 2023. In making this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—2013 Integrated Framework. Based on management’s evaluation and those criteria, management concluded that the Company’s system of internal control over financial reporting was effective as of December 31, 2023.

Management’s internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report appearing on the following page, in which they expressed an unqualified opinion thereon.

/S/ MICHAEL T. SPEETZEN

Michael T. Speetzen

Chief Executive Officer

/S/ ROBERT P. MACK

Robert P. Mack

Chief Financial Officer

February 16, 2024

Further discussion of our internal controls and procedures is included in Item 9A of this report, under the caption “Controls and Procedures.”

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Polaris Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Polaris Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Polaris Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15(a), and our report dated February 16, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ Ernst & Young LLP

Minneapolis, Minnesota

February 16, 2024

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Polaris Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Polaris Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 16, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Product Liability

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/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Minneapolis, Minnesota

February 16, 2024

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POLARIS INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

Assets

Current assets:

Cash and cash equivalents $ 367.8 $ 324.5

Income taxes receivable 9.0 20.3

Investment in finance affiliate 141.1 93.1

Goodwill and other intangible assets, net 906.4 910.6

Liabilities and Equity

Current liabilities:

Current financing obligations $ 54.0 $ 553.6

Other current liabilities 43.1 30.6

Deferred compensation $ 10.3 $ 12.6

Shareholders’ equity:

Accumulated other comprehensive loss, net (57.5) (87.5)

Noncontrolling interest 2.4 2.5

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

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POLARIS INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

For the Years Ended December 31,

Operating expenses:

Non-operating expense:

Other (income) expense, net (44.5) (28.6) 2.3

Loss on sale of businesses — — 36.8

Income from continuing operations before income taxes 620.4 761.4 628.7

Loss from discontinued operations, net of tax — (13.2) (2.3)

Loss from sale of discontinued operations, net of tax — (142.6) —

Net loss (income) attributable to noncontrolling interest 0.1 (0.5) (0.4)

Net income attributable to Polaris Inc. $ 502.8 $ 447.1 $ 493.9

Amounts attributable to Polaris Inc. common shareholders:

Net income from continuing operations $ 502.7 $ 603.4 $ 496.6

Less net loss (income) attributable to noncontrolling interest 0.1 (0.5) (0.4)

Net income attributable to Polaris Inc. $ 502.8 $ 447.1 $ 493.9

Net income (loss) per share attributable to Polaris Inc. common shareholders:

Basic

Discontinued operations $ — $ (2.63) $ (0.04)

Diluted

Discontinued operations $ — $ (2.60) $ (0.04)

Weighted average shares outstanding:

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

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POLARIS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

For the Years Ended December 31,

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 32.2 (25.3) (30.4)

Unrealized (loss) gain on derivative instruments (8.8) 14.9 11.1

Retirement plan and other activity 6.6 0.3 0.3

Comprehensive income attributable to Polaris Inc. $ 532.8 $ 437.0 $ 474.9

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

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POLARIS INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In millions, except per share data)

Employee stock compensation 0.5 — 62.7 — — — 62.7

Deferred compensation — — 1.3 (0.2) — — 1.1

Proceeds from stock issuances under employee plans 1.8 — 156.1 — — — 156.1

Cash dividends paid (1) — — — (153.4) — — (153.4)

Repurchase and retirement of common shares (3.8) — (60.2) (401.4) — — (461.6)

Contributions — — — — — 1.3 1.3

Other comprehensive loss — — — — (19.0) — (19.0)

Employee stock compensation 0.6 — 60.0 — — — 60.0

Deferred compensation — — (2.5) 1.1 — — (1.4)

Proceeds from stock issuances under employee plans 0.4 — 34.1 — — — 34.1

Cash dividends paid (1) — — — (150.0) — — (150.0)

Repurchase and retirement of common shares (4.4) — (83.3) (421.7) — — (505.0)

Other comprehensive loss — — — — (10.1) — (10.1)

Employee stock compensation 0.6 — 57.4 — — — 57.4

Deferred compensation — — 1.6 0.7 — — 2.3

Proceeds from stock issuances under employee plans 0.5 — 52.8 — — — 52.8

Cash dividends paid (1) — — — (147.3) — — (147.3)

Repurchase and retirement of common shares (1.6) — (32.1) (146.5) — — (178.6)

Other comprehensive income — — — — 30.0 — 30.0

(1) Polaris Inc. declared and paid cash dividends of $2.60, $2.56, and $2.52 per share for the years ended December 31, 2023, 2022, and 2021, respectively.

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

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POLARIS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

For the Years Ended December 31,

Operating Activities:

Loss from discontinued operations, net of tax — 13.2 2.3

Loss from sale of discontinued operations, net of tax — 142.6 —

Noncash income from financial services (41.5) (15.1) (7.7)

Loss on sale of businesses, net — — 34.8

Changes in operating assets and liabilities:

Income taxes payable/receivable 18.6 18.4 (3.8)

Prepaid expenses and other, net (20.1) (7.6) (13.0)

Investing Activities:

Investments in finance affiliate (43.5) (59.3) (42.2)

Distributions from finance affiliate 37.0 30.6 60.0

Investments in other affiliates (20.2) (26.2) (23.4)

Acquisitions and disposals of businesses, net of cash acquired (22.7) 42.2 —

Net cash used for investing activities of discontinued operations — (5.3) (15.5)

Net cash used for investing activities (462.0) (324.6) (303.9)

Financing Activities:

Repurchase and retirement of common shares (178.6) (505.0) (461.6)

Proceeds from stock issuances under employee plans 52.8 34.1 156.1

Net cash used for financing activities (431.3) (363.2) (107.6)

Impact of currency exchange rates on cash balances 10.7 (10.2) (10.6)

Supplemental Cash Flow Information:

Interest paid on debt borrowings $ 120.6 $ 71.2 $ 44.8

Current assets held for sale — — 6.9

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

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POLARIS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.Organization and Significant Accounting Policies

Polaris Inc. (“Polaris” or the “Company”), a Delaware corporation, and its subsidiaries are engaged in the design, engineering, manufacturing and marketing of powersports vehicles, which include: off-road vehicles (“ORV”), including all-terrain vehicles (“ATV”) and side-by-side vehicles; military and commercial ORVs; snowmobiles; motorcycles; moto-roadsters; quadricycles; boats; and related Parts, Garments and Accessories (“PG&A”), which includes aftermarket accessories and apparel. Polaris products are sold worldwide online and through a network of independent dealers and distributors. The primary markets for the Company’s products are the United States, Canada, Western Europe, Australia and Mexico.

Basis of presentation. The accompanying consolidated financial statements include the accounts of Polaris and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Income from financial services is reported as a component of operating income to better reflect income from ongoing operations, of which financial services has a significant impact.

The Company evaluates consolidation of entities under Accounting Standards Codification (ASC) Topic 810. This Topic requires management to evaluate whether an entity or interest is a variable interest entity and whether the company is the primary beneficiary. The Company used the guidelines to analyze the Company’s relationships and concluded that there were no variable interest entities requiring consolidation by the Company.

In August 2023, the Company acquired the Walker Evans Racing brand and the operating assets of Walker Evans Enterprises (collectively, “Walker Evans”). Walker Evans was historically a supplier to the Company, providing shocks for the Company’s ORVs and snowmobiles. The Company has included the financial results of Walker Evans in its Off Road segment since the date of acquisition. Additional purchase accounting disclosures have been omitted due to the immateriality of this acquisition in relation to the Company’s consolidated financial condition and results of operations.

Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

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

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

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

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

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

Assets

Non-qualified deferred compensation assets Level 1 $ 46.7 $ 39.8

Foreign exchange contracts, net Level 2 4.6 8.4

Interest rate contracts, net Level 2 0.9 5.9

Liabilities

Non-qualified deferred compensation liabilities Level 1 $ (46.7) $ (39.8)

Commodity contracts, net Level 2 (1.3) —

Fair value of other financial instruments. The carrying values of the Company’s short-term financial instruments, including cash and cash equivalents, trade receivables, accounts payable and current financing obligations, approximate their fair values due to their short-term nature. As of December 31, 2023 and December 31, 2022, the fair value of the Company’s current and long-term financing obligations was approximately $1,954.3 million and $2,070.3 million, respectively, and was determined using Level 2 inputs by discounting projected cash flows based on quoted market rates at which similar amounts of debt could currently be borrowed. The carrying value of current and long-term financing obligations was $1,908.4 million and $2,057.8 million as of December 31, 2023 and December 31, 2022, respectively.

The Company measures certain assets and liabilities at fair value on a nonrecurring basis. The Company will impair or write off an investment and recognize a loss when events or circumstances indicate there is impairment in the investment that is other-than-temporary. The amount of loss is determined by measuring the investment at fair value. Refer to Note 12 for additional information.

Cash equivalents. The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. Such investments consist principally of money market mutual funds.

Restricted cash. The Company classifies amounts of cash that are restricted in terms of their use and withdrawal separately within other long-term assets in the consolidated balance sheets. The Company’s restricted cash is comprised primarily of cash held in trust accounts not available for general use due to contractual restrictions.

Allowance for doubtful accounts. The Company’s exposure to credit losses on accounts receivable is limited due to its agreements with certain finance companies. For receivables not serviced through these finance companies, the Company establishes a reserve for doubtful accounts based on historical credit loss experience, the age of receivables, credit quality of our customers, current and expected economic conditions, and other factors that may affect our ability to collect from customers.

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

Investment in finance affiliate. The caption investment in finance affiliate in the consolidated balance sheets represents the Company’s 50 percent equity interest in Polaris Acceptance, which is accounted for under the equity method. The Company’s allocable share of the income of Polaris Acceptance has been included as a component of income from financial services in the consolidated statements of income. Refer to Note 11 for additional information.

Investment in other affiliates. The Company’s investments in other affiliates are included within other long-term assets in the consolidated balance sheets, and represent the Company’s strategic investments in nonmarketable securities of other companies. For each investment, the Company assesses the level of influence in determining whether to account for the investment under the cost method or equity method. The Company will write down or write off an investment and recognize a loss if and when events or circumstances indicate there is impairment in the investment that is other-than-temporary. Refer to Note 12 for additional information.

Property and equipment. Property and equipment is stated at historical cost. Depreciation is determined using the straight-line method over the estimated useful life of the respective assets, ranging from 10-40 years for buildings and

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improvements and 1-7 years for equipment and tooling. Depreciation of assets recorded under finance leases is included within depreciation expense. Fully-depreciated tooling is eliminated from the accounting records annually. The Company recorded $241.2 million, $214.0 million, and $193.4 million of depreciation expense for the years ended December 31, 2023, 2022 and 2021, respectively. A majority of the Company’s property and equipment is located in North America.

Goodwill and other intangible assets. Goodwill is tested at least annually for impairment and is tested for impairment more frequently when events or changes in circumstances indicate that the asset might be impaired. The Company completes its annual goodwill impairment test as of the first day of the fourth quarter.

The Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount. A qualitative assessment requires that the Company considers events or circumstances including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or key personnel, changes in strategy, changes in customers, changes in the composition or carrying amount of a reporting unit’s net assets, and changes in the Company’s stock price. If, after assessing the totality of events and circumstances, it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or if the Company elects to bypass the qualitative test and proceed to a quantitative test, then the quantitative goodwill impairment test is performed. A quantitative test includes comparing the fair value of each reporting unit to the carrying amount of the reporting unit, including goodwill. If the estimated fair value is less than the carrying amount of the reporting unit, an impairment is recognized in an amount equal to the difference, limited to the total amount of goodwill allocated to that reporting unit.

For its annual test in 2023, the Company completed a qualitative assessment for the Off Road and On Road reporting units and elected to perform a quantitative goodwill test for the Marine reporting unit.

The Company’s primary identifiable intangible assets include: dealer/customer relationships and brand/trade names. Identifiable intangible assets with finite lives are amortized and those identifiable intangible assets with indefinite lives are not amortized. Identifiable intangible assets that are subject to amortization are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Identifiable intangible assets with indefinite lives are tested for impairment annually or more frequently when events or changes in circumstances indicate that the asset might be impaired. The Company’s identifiable intangible assets with indefinite lives include brand/trade names. The impairment test consists of a comparison of the fair value of the brand/trade name with its carrying value. The Company completes its annual impairment test as of the first day of the fourth quarter each year for identifiable intangible assets with indefinite lives.

Refer to Note 8 for additional information on goodwill and other intangible assets.

Revenue recognition. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or service to a customer. Revenue is measured based on the amount of consideration that the Company expects to be entitled to in exchange for the goods or services transferred. Sales, value add, and other taxes that are collected from a customer concurrent with revenue-producing activities are excluded from revenue. Revenue from goods and services transferred to customers at a point-in-time accounts for the majority of the Company’s revenue. Revenue from products or services transferred over time is discussed in the contract liabilities section of Note 3.

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

When the right of return exists, the Company adjusts the consideration for the estimated effect of returns. The Company estimates expected returns based on historical sales levels, the timing and magnitude of historical sales return levels as a

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percent of sales, type of product, type of customer, and a projection of this experience into the future. The Company adjusts its estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed.

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

The Company sells separately-priced service contracts (“ESCs”) that extend mechanical coverages beyond the base limited warranty as well as prepaid maintenance agreements to vehicle owners. Each of these separately priced service contracts range from 12 months to 84 months. The Company typically receives payment at the inception of the contract and recognizes revenue over the term of the agreement in proportion to the costs expected to be incurred in satisfying the obligations under the contract.

Sales promotions and incentives. The Company accrues for estimated sales promotion and incentive expenses, which are recognized as a component of sales in measuring the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Examples of sales promotion and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and sales associate incentives. Sales promotion and incentive expenses are estimated based on current programs, planned programs, and historical rates for each product line. The Company records these amounts as a liability in the consolidated balance sheet until they are ultimately paid. Adjustments to sales promotions and incentives accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date.

Dealer holdback programs. Dealer holdback represents a portion of the invoiced sales price that is expected to be subsequently returned to the dealer or distributor as a sales incentive upon the ultimate retail sale of the product. Holdback amounts reduce the ultimate net price of the products purchased by the Company’s dealers or distributors and, therefore, reduce the amount of sales the Company recognizes. The portion of the invoiced sales price estimated as the holdback is recognized as a “dealer holdback” liability within accrued expenses on the Company’s consolidated balance sheet until paid or forfeited. The minimal holdback adjustments in the estimated holdback liability due to forfeitures are recognized in net sales. Payments are made to dealers or distributors at various times during the year subject to previously established criteria.

Shipping and handling costs. The Company records shipping and handling costs as a component of cost of sales when control has transferred to the customer.

Research and development expenses. The Company records research and development expenses in the period in which they are incurred as a component of operating expenses.

Advertising expenses. The Company records advertising expenses as a component of selling and marketing expenses in the period in which they are incurred. In the years ended December 31, 2023, 2022 and 2021, the Company incurred $94.1 million, $87.6 million and $90.8 million of advertising expenses, respectively.

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

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

For the Years Ended December 31,

Reductions to reserve related to divestitures — — (2.1)

Leases. The Company leases certain manufacturing facilities, warehouses, distribution centers, office space, land, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company does not separate non-lease components from the lease components to which they relate, and instead accounts for each separate lease and non-lease component associated with that lease component as a single lease component for all underlying asset classes. As most of the Company's leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. Such options are included in the lease term when it is reasonably certain that the option will be exercised. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option where there is a reasonable certainty of exercise. Certain lease agreements include rental payments that are variable based on usage or are adjusted periodically for inflation. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Share-based employee compensation. The Company accounts for share-based compensation awards, including stock options and other equity-based compensation issued to employees, on a fair value basis. Determining the appropriate fair-value model and calculating the fair value of share-based awards at the date of grant requires judgment. The Company utilizes the Black-Scholes option pricing model to estimate the fair value of employee stock options, and the Monte Carlo model to estimate the fair value of employee performance restricted stock units that include a market condition. These pricing models also require the use of input assumptions, including expected volatility, expected life, expected dividend yield, and expected risk-free rate of return. The Company utilizes historical volatility as the Company believes this is reflective of market conditions. The expected life of the awards is based on historical exercise patterns. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of awards. The dividend yield assumption is based on the Company’s history of dividend payouts.

The amount of compensation cost for share-based awards recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company analyzes historical data to estimate pre-vesting forfeitures and records share compensation expense for those awards expected to vest. If forfeiture adjustments are made, they would affect gross profit and operating expenses.

All stock options have time-based vesting conditions. The Company estimates the likelihood and the rate of achievement for performance share-based awards, specifically long-term compensation grants of performance-based restricted stock unit awards. Changes in the estimated rate of achievement can have a significant effect on reported share-based compensation expenses as the effect of a change in the estimated achievement level is recognized in the period that the likelihood factor changes. If adjustments in the estimated rate of achievement are made, they would be reflected in gross profit and operating expenses. Fluctuations in the Company’s stock price can have an effect on reported share-based compensation expenses for liability-based awards. The impact from fluctuations in the Company’s stock price is recognized in the period of the change, and is reflected in gross profit and operating expenses. Refer to Note 5 for additional information.

Derivative instruments and hedging activities. Changes in the fair values of derivative instruments are recognized in earnings unless the derivative qualifies as a hedge. To qualify as a hedge, the Company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. The Company does not use any financial contracts for trading purposes.

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The Company enters into foreign exchange contracts to manage currency exposures from certain of its purchase commitments denominated in foreign currencies and transfers of funds from its foreign subsidiaries. These contracts meet the criteria for cash flow hedges. Gains and losses on the Company’s foreign exchange contracts at settlement are recorded in non-operating other (income) expense, net in the consolidated statements of income. The contracts are recorded in prepaid expenses and other or other current liabilities in the consolidated balance sheets. Unrealized gains and losses are recorded as a component of accumulated other comprehensive loss, net.

The Company enters into interest rate swaps in order to maintain a balanced risk of fixed and variable interest rates associated with the Company’s debt. These contracts meet the criteria to be accounted for as cash flow hedges. Gains and losses on the Company’s interest rate swaps at settlement are recorded in interest expense in the consolidated statements of income. The contracts are recorded in prepaid expenses and other or other current liabilities in the consolidated balance sheets. Unrealized gains and losses are recorded as a component of accumulated other comprehensive loss, net.

The Company enters into commodity hedging contracts in order to manage fluctuating market prices of certain purchased commodities and raw materials that are integrated into the Company’s end products. Gains and losses on the Company’s commodity hedging contracts at settlement are recorded in cost of sales in the consolidated statements of income. The contracts are recorded in prepaid expenses and other or other current liabilities in the consolidated balance sheets. Unrealized gains and losses are recorded as a component of accumulated other comprehensive loss, net.

Refer to Note 15 for additional information regarding derivative instruments and hedging activities.

Foreign currency translation. The functional currency for the Company’s foreign subsidiaries is typically their respective local currencies. The assets and liabilities in the Company’s foreign entities are translated at the foreign exchange rate in effect at the balance sheet date. Translation gains and losses are reflected as a component of accumulated other comprehensive loss, net in the shareholders’ equity section of the consolidated balance sheets. Revenues and expenses in all of the Company’s foreign entities are translated at the average foreign exchange rate in effect for each month of the quarter. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in other (income) expense, net in the consolidated statements of income.

New accounting pronouncements.

Reportable Segment Disclosures. In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updated (ASU) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. ASU 2023-07 is intended to enhance financial reporting by requiring incremental disclosures for significant segment expenses on an annual and interim basis by public entities required to report segment information in accordance with ASC Topic 280. The amendments in ASU 2023-07 are to be applied retrospectively to all periods presented in the financial statements and early adoption is permitted. This standard is applicable to the Company for the 2024 annual period and quarterly periods thereafter. The Company is currently evaluating the impact this standard will have on its financial statement disclosures.

Income Tax Disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income taxes disclosures, primarily through changes to disclosures around the effective tax rate reconciliation and income taxes paid information. The amendments in ASU 2023-09 are to be applied prospectively and early adoption is permitted. This standard is applicable to the Company beginning with the 2025 annual period. The Company is currently evaluating the impact this standard will have on its financial statement disclosures.

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

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Note 2. Supplemental Balance Sheet Information

Inventories

Raw materials and purchased components $ 779.3 $ 843.5

Service parts, garments and accessories 346.9 371.1

Property and equipment

Land, buildings and improvements $ 653.4 $ 539.1

Accrued expenses

Sales promotions and incentives 230.9 127.0

Other current liabilities

Current operating lease liabilities $ 29.5 $ 24.1

Income taxes payable 13.6 6.5

Total other current liabilities $ 43.1 $ 30.6

Other long-term liabilities

Long-term operating lease liabilities $ 115.1 $ 87.0

Long-term income taxes payable 12.1 11.7

Deferred tax liabilities 2.7 4.6

Total other long-term liabilities $ 297.0 $ 271.0

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Note 3. Revenue Recognition

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

For the Year Ended December 31, 2023

Off Road On Road Marine Corporate Total

Revenue by product type

Revenue by geography

For the Year Ended December 31, 2022

Off Road On Road Marine Corporate Total

Revenue by product type

Revenue by geography

For the Year Ended December 31, 2021

Off Road On Road Marine Corporate Total

Revenue by product type

Revenue by geography

Contract Liabilities. Contract liabilities relate to deferred revenue recognized for cash consideration received at contract inception in advance of the Company's performance under the respective contract and generally relate to the sale of separately priced ESCs. The Company finances its self-insured risks related to ESCs. The premiums for ESCs are

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primarily recognized in income in proportion to the costs expected to be incurred over the contract period. Warranty costs are recognized as incurred.

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

For the Years Ended December 31,

Revenue recognized on existing contracts (49.9) (46.3) (35.8)

The Company expects to recognize approximately $35.3 million of the unearned amount over the 12 months following December 31, 2023, compared to $35.5 million as of December 31, 2022. These amounts were recorded in accrued expenses in the consolidated balance sheets. The amount recorded in other long-term liabilities totaled $75.0 million and $75.6 million as of December 31, 2023 and 2022, respectively.

Note 4. Divestitures and Discontinued Operations

2021 Divestitures. In an effort to more strategically allocate the Company’s resources, the Company sold its Global Electric Motorcar (“GEM”) and Taylor-Dunn businesses on December 31, 2021. The sale resulted in a loss of $36.8 million. As a result of this divestiture, the Company eliminated its Global Adjacent Markets segment on January 1, 2022. All segment results were reclassified for comparability. The 2021 financial results of these businesses are reflected in Corporate.

2022 Divestitures. On July 1, 2022, the Company completed the sale of its Transamerican Auto Parts (“TAP”) business, an aftermarket parts business, for a sales price, net of post-closing purchase price adjustments, of $42.2 million. The results of TAP have been presented as discontinued operations. For the year ended December 31, 2022, a loss on sale of $187.6 million was recorded which resulted in a $45.0 million income tax benefit. TAP was historically included within the Company’s Aftermarket segment; however, as a result of the divestiture, the Company began management of its portfolio of businesses under a new basis as of June 30, 2022. The Aftermarket segment was eliminated and the results of the Company’s remaining aftermarket businesses historically included within the Aftermarket segment were reclassified to the Off Road and On Road segments. All historical segment results were reclassified for comparability.

Results of discontinued operations were as follows (in millions):

Loss from discontinued operations before income taxes (14.5) (3.0)

Income tax benefit (1.3) (0.7)

Loss from discontinued operations, net of tax (13.2) (2.3)

Loss from sale of discontinued operations 187.6 —

Provision for income taxes (45.0) —

Loss from sale of discontinued operations, net of tax 142.6 —

Net loss from discontinued operations $ (155.8) $ (2.3)

Note 5. Share-Based Compensation

Share-based plans. The Company grants long-term equity-based incentives and awards for the benefit of its employees and directors under the shareholder approved Polaris Inc. 2007 Omnibus Incentive Plan (as amended and restated as of

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April 30, 2020) (the “Omnibus Plan”). A maximum of 27,775,000 shares of common stock are available for issuance under the Omnibus Plan, together with additional shares canceled or forfeited under the prior plans.

Stock option awards granted to date under the Omnibus Plan generally vest one to three years from the award date and expire after ten years. In addition, since 2007, the Company has granted a total of 258,000 deferred stock units to its non-employee directors under the Omnibus Plan (with grants of 16,000, 17,000 and 10,000 units in 2023, 2022 and 2021, respectively), which will be converted into common stock when the directors’ board service ends or upon a change in control. Restricted units and performance-based restricted units (collectively, “restricted stock”) awarded under the Omnibus Plan generally vest one to three years from the award date. The final number of shares issued under performance-based awards are dependent on achievement of certain performance measures.

Under the Polaris Inc. Deferred Compensation Plan for Directors (“Director Plan”) and the Omnibus Plan, members of the Board of Directors who are not Polaris officers or employees may annually elect to receive common stock equivalents in lieu of director fees, which will be converted into common stock when board service ends. Alternatively, these common stock equivalents may be diversified into other investments until board service ends, pursuant to the terms of the Director Plan. Shares authorized under the Director Plan were exhausted in 2017, and of the 500,000 shares of common stock authorized, 73,000 common stock equivalents have been earned and 427,000 shares have been issued to retired directors as of December 31, 2023. Since 2017, the Company has granted a total of 79,000 common stock equivalents to its non-employee directors under the Omnibus Plan (with grants of 12,000, 11,000 and 8,000 units in 2023, 2022 and 2021, respectively). As of December 31, 2023 and 2022, the Company’s liability under the plans for the common stock equivalents totaled $9.6 million and $9.2 million, respectively.

The Company maintains a long-term incentive program under which awards are issued for certain employees. Long-term incentive program awards are granted in restricted stock units and stock options and are accounted for as equity awards.

Share-based compensation expense. The amount of compensation cost for share-based awards recognized during a period is based on the portion of the awards that are ultimately expected to vest.

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

For the Years Ended December 31,

Total share-based compensation before tax 42.2 50.6 50.7

These share-based compensation expenses are reflected in cost of sales and operating expenses in the consolidated statements of income. As of December 31, 2023, there was $51.5 million of total unrecognized share-based compensation expense related to unvested share-based equity awards. Unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of 1.3 years. Included in unrecognized share-based compensation expense is approximately $5.4 million related to stock options and $46.1 million for restricted stock.

In addition to the above share-based compensation expenses, the Company sponsors a qualified non-leveraged employee stock ownership plan (ESOP). Shares allocated to eligible participants’ accounts vest at various percentage rates based on years of service and require no cash payments from the recipient. See Note 6 for additional information.

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General stock option and restricted stock information. The following summarizes stock option activity and the weighted-average exercise price for the Omnibus Plan for the year ended December 31, 2023:

Omnibus Plan (Active)

Options Outstanding Weighted-Average Exercise Price

The weighted-average remaining contractual life of options outstanding and of options outstanding and exercisable as of December 31, 2023 was 4.9 years and 3.9 years, respectively. Substantially all unvested outstanding options are expected to vest.

The following assumptions were used to estimate the weighted-average fair value of options granted of $43.39, $37.41 and $36.77 during the years ended December 31, 2023, 2022 and 2021, respectively:

For the Years Ended December 31,

Weighted-average volatility 45% 43% 43%

Expected dividend yield 2.2% 2.2% 2.1%

Expected term (in years) 5.4 4.9 4.7

Weighted-average risk-free interest rate 3.5% 1.7% 0.5%

The total intrinsic value of options exercised during the year ended December 31, 2023 was $13.5 million. The total intrinsic value of options outstanding and of options outstanding and exercisable as of December 31, 2023 was $28.5 million and $28.3 million, respectively. Intrinsic values are based on the Company’s closing stock price on the last trading day of the applicable year for in-the-money options.

The grant date fair value for performance awards with a total shareholder return (TSR) market condition were estimated using a Monte Carlo simulation model utilizing the following weighted-average assumptions:

For the Years Ended December 31,

Weighted-average volatility 50% 48% 49%

Expected dividend yield 2.2% 2.2% 2.1%

Expected term (in years) 3.0 3.0 3.0

Weighted-average risk-free interest rate 3.9% 1.5% 0.2%

The Company used its historical stock price as the basis for the Company’s volatility assumption. The assumed risk-free interest rates were based on U.S. Treasury rates in effect at the time of grant. The expected term was based on the vesting period. The weighted-average fair value used to record compensation expense for TSR performance share awards granted during 2023, 2022 and 2021 was $138.98, $146.08 and $165.54 per award, respectively.

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The following table summarizes restricted stock activity for the year ended December 31, 2023:

Shares Outstanding Weighted-Average Grant Price

The shares granted above include 66,551 performance restricted stock unit awards. These performance grants are the number of shares that would be earned at the target level of performance. The number of shares of Polaris common stock that could actually be delivered at the end of the three-year performance period for performance restricted stock units may be anywhere from 0% to 200% of target for each performance share, depending on the performance of the Company during such performance period.

The total intrinsic value of restricted stock expected to vest as of December 31, 2023 was $75.5 million. Intrinsic values are based on the Company’s closing stock price on the last trading day of the year. The weighted-average fair values at the grant dates of grants awarded under the Omnibus Plan for the years ended December 31, 2023, 2022 and 2021 were $110.39, $119.42 and $122.08, respectively.

Note 6. Employee Savings Plans

Employee Stock Ownership Plan (ESOP). The Company sponsors a qualified non-leveraged ESOP under which a maximum of 7,700,000 shares of common stock can be awarded. The shares are allocated to eligible participants’ accounts based on total cash compensation earned during the calendar year. An employee’s ESOP account vests equally after two and three years of service and requires no cash payments from the recipient. Participants may instruct the Company to pay respective dividends directly to the participant in cash or reinvest the dividends into the participants’ ESOP accounts. Employees who meet eligibility requirements can participate in the ESOP. Participants that meet certain age and service requirements are allowed to transfer balances, subject to limitation, to the Polaris 401(k) Retirement Savings Plan and thus diversify their investments. Total expense related to the ESOP was $17.3 million, $14.6 million and $13.9 million in 2023, 2022 and 2021, respectively. As of December 31, 2023, there were 2,914,000 shares held in the plan.

Defined contribution plan. The Company sponsors a 401(k) defined contribution retirement plan covering substantially all U.S. employees. The Company matches 100 percent of employee contributions up to a maximum of five percent of eligible compensation. All contributions vest immediately. The cost of the defined contribution retirement plan was $31.9 million, $26.4 million and $24.9 million in 2023, 2022 and 2021, respectively.

Supplemental Executive Retirement Plan (SERP). The Company sponsors a SERP that provides executive officers of the Company an alternative to defer portions of their salary, cash incentive compensation, and Company matching contributions. The deferrals and contributions are held in a rabbi trust and are in funds to match the liabilities of the plan. The assets are recorded as trading assets. The assets of the rabbi trust are included in other long-term assets in the consolidated balance sheets and the SERP liability is included in other long-term liabilities in the consolidated balance sheets. The asset and liability balances were $46.7 million and $39.8 million as of December 31, 2023 and 2022, respectively.

Executive officers and directors of the Company have the opportunity to defer certain restricted stock units. These restricted stock units are redeemable in Polaris common stock or in cash. After a holding period, the executive officer has the option to diversify the vested award into other funds available under the SERP. If the award is diversified, it must be redeemed in cash. Awards probable of vesting, for which the executive has not yet made an election to defer, and awards that have been deferred but have not yet vested and are probable of vesting are reported as deferred compensation in the temporary equity section of the consolidated balance sheets, as these awards have redemption features that are not yet solely within the control of the Company. The awards recorded in temporary equity are recognized at fair value as though the reporting date is also the redemption date, with any difference from stock-based compensation recorded in

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retained earnings. As of December 31, 2023, 108,219 shares were recorded at a fair value of $10.3 million in temporary equity, which includes $10.9 million of compensation cost and a $0.6 million cumulative fair value adjustment recorded through retained earnings.

Note 7. Financing Agreements

The carrying value of financing obligations and the average related interest rates were as follows (in millions):

Incremental term loan — December 2023 $ — $ 500.0

Unamortized debt issuance costs and discounts (14.3) (5.9)

Less: Current financing obligations 54.0 553.6

Total long-term financing obligations $ 1,854.4 $ 1,504.2

The following summarizes activity under the Company’s credit arrangements (in millions):

Weighted-average interest rate as of December 31 5.67% 5.33% 1.77%

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

As of December 31, 2023, the Company had open letters of credit totaling $42.6 million. The amounts are primarily related to inventory purchases and are reduced as the purchases are received.

Private senior notes. In December 2010, the Company entered into an unsecured Master Note Purchase Agreement, which has been amended and supplemented, under which it has issued senior notes. In July 2018, the Company issued $350 million of unsecured senior notes that remain outstanding as of December 31, 2023 and are due in full in July 2028.

Unsecured credit facility. The Company maintains an unsecured credit facility which consists of a term loan facility (the “Term Loan Facility”) and a revolving loan facility (the “Revolving Loan Facility”). In July 2018, the Company amended its unsecured credit facility to increase its Term Loan Facility to $1,180 million, of which $780.0 million was outstanding as of December 31, 2023. The Company is required to make principal payments under the Term Loan Facility totaling $45 million over the next 12 months. In June 2021, the Company further amended its unsecured credit facility to increase its Revolving Loan Facility to $1.0 billion, of which $228.2 million was outstanding as of December 31, 2023, and extend the maturity date to June 2026. Interest is charged at rates based on adjusted Term SOFR.

In December 2021, the Company amended the credit facility to provide an unsecured incremental 364-day term loan (the “Incremental Term Loan”) in the amount of $500 million, which was fully drawn on closing. In December 2022, the Company further amended its unsecured credit facility to extend the maturity date of the Incremental Term Loan to December 2023. The Incremental Term Loan was fully repaid in December 2023 using net proceeds from the Company’s sale of senior notes in a public offering completed in November 2023.

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In November 2023, the Company amended the credit facility to terminate all guarantees provided by subsidiaries of the Company under the credit facility, remove the requirement for subsidiaries of the Company to provide guarantees of the obligations under the credit facility, and remove certain subsidiaries of the Company as co-borrowers.

The agreements governing the credit facility and the Master Note Purchase Agreement contain covenants that require the Company to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. The agreements require the Company to maintain an interest coverage ratio of not less than 3.00 to 1.00 and a leverage ratio of not more than 3.50 to 1.00 on a rolling four quarter basis. The Company was in compliance with all such covenants as of December 31, 2023.

Public senior notes. In November 2023, the Company issued $500 million aggregate principal amount of 6.95% Senior Notes pursuant to a public offering. The Company received approximately $492 million pursuant to the notes after deducting the underwriting discount and other fees and expenses. Net proceeds from the notes, along with cash on hand, were used to repay borrowings due in December 2023 under the Incremental Term Loan. The notes bear interest at a rate of 6.95% per year, with interest payable semi-annually in arrears in March and September of each year. The notes mature in March of 2029. The indenture governing the senior notes is subject to customary covenants and make-whole provisions upon early redemption.

Acquisition-related deferred payments. On July 2, 2018, pursuant to the Agreement and Plan of Merger dated May 29, 2018, the Company completed the acquisition of Boat Holdings, LLC, a privately held Delaware limited liability company, headquartered in Elkhart, Indiana that manufactures boats (“Boat Holdings”). As a component of the Boat Holdings merger agreement, the Company has committed to make a series of deferred payments to the former owners following the closing date of the merger through July 2030. The original discounted payable was for $76.7 million, of which $49.4 million was outstanding as of December 31, 2023. The outstanding balance is included in long-term financing obligations and current financing obligations in the consolidated balance sheets.

Note 8. Goodwill and Other Intangible Assets

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

Total goodwill and other intangible assets, net $ 906.4 $ 910.6

The changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2023 and 2022 were as follows (in millions):

Off Road On Road Marine Total

Currency translation effect on foreign goodwill balances (1.0) (4.1) — (5.1)

Goodwill acquired 5.8 — — 5.8

Currency translation effect on foreign goodwill balances 0.1 2.3 — 2.4

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

The changes in the net carrying amount of other intangible assets for the years ended December 31, 2023 and 2022 were as follows (in millions):

Gross Amount Accumulated Amortization Gross Amount Accumulated Amortization

Other intangible assets acquired 4.9 — — —

Other intangible assets disposed of (0.5) 0.5 (13.4) 13.4

Amortization expense — (17.7) — (18.8)

Currency translation effect on foreign balances 0.4 — (0.9) 0.2

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

Non-amortizable - brand/trade names 268.0 — 268.0

Total other intangible assets, net $ 609.2 $ (97.2) $ 512.0

Non-amortizable - brand/trade names 262.7 — 262.7

Total other intangible assets, net $ 604.4 $ (80.0) $ 524.4

Amortization expense for other intangible assets for the years ended December 31, 2023, 2022 and 2021 was $17.7 million, $18.8 million, and $22.9 million, respectively. Estimated future amortization expense for identifiable other intangible assets during the next five years is as follows (in millions):

The preceding expected amortization expense is an estimate and actual amounts could differ due to additional other intangible asset acquisitions, changes in foreign currency rates, or impairments of other intangible assets.

Note 9. Income Taxes

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PII · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

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PII · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

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