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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 1-11411
POLARIS INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1790959
(State or other jurisdiction (IRS employer
of incorporation or organization) identification no.)
1225 HIGHWAY 169 NORTH 55441
MINNEAPOLIS, MN (Zip Code)
(Address of principal executive offices)
(612) 542-0500
(Registrant's telephone number,
including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of Common Stock of the registrant as of March 11,
1999 (based upon the closing reported sale price of the Common Stock at that
date on the New York Stock Exchange) held by non-affiliates (22,769,383 shares)
was approximately $646,081,243.
APPLICABLE ONLY TO CORPORATE REGISTRANTS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of March 11, 1999, 25,287,614 shares of Common Stock of the registrant
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1998 furnished to the Securities and Exchange Commission (the
"1998 Annual Report") are incorporated by reference into Parts II and III of
this Form 10-K.
2. Portions of the Proxy Statement for the Annual Meeting of Shareholders
to be held May 20, 1999 filed with the Securities and Exchange Commission (the
"1999 Proxy Statement") are incorporated by reference into Part III of this Form
10-K.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Polaris Industries Inc. (the "Company"), a Minnesota corporation, was formed
in 1994 for the purpose of merging (the "Merger") a subsidiary of the Company
into Polaris Industries Partners L.P., a Delaware limited partnership (the
"Partnership") and merging Polaris Industries L.P., a Delaware limited
partnership, into the Partnership. The Merger took place on December 22, 1994.
Upon consummation of the Merger, each unit of Beneficial Assignment of Class A
Limited Partnership Interests of the Partnership was exchanged for one share of
common stock, $.01 par value of the Company. On December 31, 1996, the
Partnership was merged with and into Polaris Industries Inc., a Delaware
corporation (the "Operating Subsidiary"). The Company owns 100% of the Operating
Subsidiary. The term "Polaris" as used herein refers to the business and
operations of the Operating Subsidiary and its predecessors, Polaris Industries
Partners L.P. and Polaris Industries L.P.
Polaris designs, engineers and manufactures snowmobiles, all terrain
vehicles ("ATVs"), motorcycles and personal watercraft ("PWC") and markets them,
together with related replacement parts, garments and accessories ("PG&A")
through dealers and distributors principally located in the United States,
Canada and Europe. Sales of snowmobiles, ATVs, motorcycles and PWC in North
America and International sales (each of which includes PG&A for these markets)
accounted for the following approximate percentages of Polaris' sales for the
periods indicated.
YEAR ENDED
DECEMBER 31 SNOWMOBILES ATVS MOTORCYCLES PWC INTERNATIONAL
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1998................................. 32% 57% 1% 4% 6%
1997................................. 42% 45% N/A 7% 6%
1996................................. 43% 37% N/A 16% 4%
INDUSTRY BACKGROUND
SNOWMOBILES. In the early 1950s, a predecessor to Polaris produced a "gas
powered sled" which became the forerunner of the Polaris snowmobile. Snowmobiles
have been manufactured under the Polaris name since 1954.
Originally conceived as a utility vehicle for northern, rural environments,
the snowmobile gained popularity as a recreational vehicle. From the mid-1950s
through the late 1960s, over 100 producers entered the snowmobile market and
snowmobile sales reached a peak of approximately 495,000 units in 1971. The
Polaris product survived the industry decline in which snowmobile sales fell to
a low point of approximately 87,000 units in 1983 and the number of snowmobile
manufacturers serving the North American market declined to four: Yamaha,
Bombardier, Arctic Cat and Polaris. Polaris estimates that industry sales of
snowmobiles on a worldwide basis were approximately 256,000 units for the season
ended March 31, 1998.
ALL TERRAIN VEHICLES. ATVs are four-wheel vehicles with balloon style tires
designed for off road use and traversing rough terrain, swamps and marshland.
ATVs are used for recreation, in such sports as fishing and hunting, as well as
for utility purposes on farms, ranches and construction sites.
ATVs were introduced to the North American market in 1971 by Honda. Other
Japanese motorcycle manufacturers, Yamaha, Kawasaki and Suzuki, entered the
North American market in the late 1970s and early 1980s. By 1980, the number of
ATV units sold in North America annually had increased to approximately 140,000
units. Polaris entered the ATV market in 1985, Arctic Cat entered in 1995 and
Bombardier entered in 1998. In 1985, the number of three- and four-wheel ATVs
sold in North America peaked at approximately 650,000 units per year, then
dropped dramatically to a low of 148,000 in 1989.
1
Polaris estimates that the industry grew 19% with approximately 520,000 ATVs
sold worldwide during the calendar year 1998.
MOTORCYCLES. Heavyweight motorcycles are over the road vehicles utilized as
a mode of transportation as well as for recreational purposes. There are four
segments: cruisers, touring bikes, sport bikes, and standards.
Polaris entered the worldwide motorcycle market in 1998 with an initial
entry product in the cruiser segment. U.S. retail cruiser sales doubled from
1993 to 1998. Polaris estimates that approximately 152,000 cruiser motorcycles
were sold in the U.S. market in 1998. Other major cruiser motorcycle
manufacturers include Harley Davidson, Honda, Yamaha, Kawasaki and Suzuki.
PERSONAL WATERCRAFT. PWC are sit-down versions of water scooter vehicles,
and designed for use on lakes, rivers, oceans and bays. PWC are used primarily
for recreational purposes and are designed for one, two, three or four
passengers. Polaris entered the PWC market in 1992. After many years of rapid
growth, the number of PWC sold peaked at approximately 225,000 units in 1996.
Polaris estimates that worldwide industry retail sales for PWC were
approximately 160,000 units for the season ended September 30, 1998. Other major
PWC manufacturers are Bombardier, Yamaha, Kawasaki and Arctic Cat.
PRODUCTS
ALL TERRAIN VEHICLES. Polaris entered the ATV market in the spring of 1985
with both a three-wheel and a four-wheel product. Polaris currently produces
four-wheel ATVs, which provide more stability for the rider than the earlier
three-wheel versions. Polaris' line of ATVs consisting of fourteen models
includes general purpose, sport and four-wheel drive utility models, with 1999
suggested retail prices ranging from approximately $3,000 to $7,500.
In addition, Polaris has a six-wheel off-road utility vehicle and a
six-wheel drive off-road Polaris RANGER side by side utility and recreational
vehicle. Polaris also markets a full line of ATV accessories such as winches,
mowers, blades, cargo racks, utility trailers, sprayers, seeders, tires, oils,
lubricants and parts.
Polaris' ATVs feature the totally automatic Polaris variable transmission,
which requires no manual shifting, and a MacPherson strut front suspension,
which enhances control and stability. Polaris' ATVs include two cycle and four
cycle engines and both shaft and concentric chain drive. In 1998, Polaris
introduced a diesel powered ATV and in early 1999 Polaris introduced its first
manual transmission ATV.
Prior to 1989, the ATV industry experienced some reduced demand arising from
publicity surrounding safety-related and environmental concerns. However,
management believes that this market has stabilized since 1989 and has sustained
consistent growth.
For the year ended December 31, 1998, North American sales of ATVs and
related PG&A accounted for approximately 57% of Polaris' sales.
SNOWMOBILES. Polaris produces a full line of snowmobiles, consisting of
thirty-three models, ranging from utility and economy models to performance and
competition models, with 1999 suggested United States retail prices ranging from
approximately $3,000 to $8,500. Polaris snowmobiles are sold principally in the
United States, Canada and Europe. Polaris believes it is the worldwide market
share leader.
Polaris believes that the Polaris snowmobile has a long-standing reputation
for quality, dependability and performance. Polaris believes that it and its
predecessors were the first to develop several features for commercial use in
snowmobiles, including independent front suspension, variable transmission,
hydraulic disc brakes, liquid cooled engines and brakes and a three cylinder
engine. Polaris also markets a full line of snowmobile accessories, such as
luggage, covers, tow hitches, hand warmers, specialized instrumentation, reverse
gear, electric start, special traction products, cargo racks, oils, lubricants,
and parts.
2
For the year ended December 31, 1998, North American sales of snowmobiles
and related PG&A accounted for approximately 32% of Polaris' sales.
MOTORCYCLES. In 1998, Polaris began manufacturing an American-made V-twin
cruiser motorcycle, the "Victory V92C." Design and assembly of the engine is in
Polaris' Osceola, Wisconsin facility and final assembly is at Polaris' Spirit
Lake, Iowa facility. The two facilities provide sufficient capacity to handle
the first few years production of Victory motorcycles. The 1998 Victory V92C
motorcycle suggested retail price is $12,995.
For the year ended December 31, 1998, sales of Victory motorcycles and
related PG&A accounted for approximately 1% of Polaris' sales.
PERSONAL WATERCRAFT. In 1992, Polaris introduced the SL650 personal
watercraft, Polaris' first entry into this product category. Polaris' 1999 line
of PWC consists of six models across the touring, performance and racing
segments and includes the industry's first four passenger PWC. Management
believes that its models had the industry's first three-cylinder engines
developed specifically for PWC. The 1999 suggested retail prices for Polaris'
PWC range from approximately $5,900 to $9,500.
For the year ended December 31, 1998, North American sales of PWC and
related PG&A accounted for approximately 4% of Polaris' sales.
INTERNATIONAL. Polaris sales to customers outside of North America include
snowmobiles, ATVs, PWC, and related PG&A. Polaris currently markets its products
through 44 distributors in 116 countries. This is a growth opportunity for
Polaris in the future from a market share perspective for existing product lines
as well as the planned introduction of Victory motorcycles to the international
market within a few years.
For the year ended December 31, 1998, International sales accounted for 6%
of Polaris' sales.
PARTS, GARMENTS AND ACCESSORIES. Polaris produces or supplies a variety of
replacement parts and accessories for its snowmobiles, ATVs, motorcycles and
PWC. Polaris also markets a full line of recreational clothing, which includes
suits, helmets, gloves, boots, hats, sweaters and jackets for its snowmobile,
ATV, motorcycle and PWC lines. The clothing is designed to Polaris'
specifications, purchased from independent vendors and sold by Polaris through
its dealers and distributors under the Polaris brand name. Polaris also markets
replacement parts and accessories.
MANUFACTURING OPERATIONS
Polaris' products are assembled at its original manufacturing facility in
Roseau, Minnesota and since 1994 at its facility in Spirit Lake, Iowa. Since
snowmobiles, ATVs, motorcycles and PWC incorporate similar technology,
substantially the same equipment and personnel are employed in their production.
Polaris emphasizes vertical integration in its manufacturing process, which
includes machining, stamping, welding, clutch assembly and balancing, painting,
cutting and sewing, and manufacture of foam seats. Fuel tanks, hulls, tracks,
tires and instruments, and certain other component parts are purchased from
third party vendors. Polaris manufactures a number of other components for its
snowmobiles, ATVs, motorcycles, and PWC. Raw materials or standard parts are
readily available from multiple sources for the components manufactured by
Polaris. Polaris' work force is familiar with the use, operation and maintenance
of the product, since many employees' own snowmobiles, ATVs, motorcycles and
PWC. In 1991, Polaris acquired a manufacturing facility in Osceola, Wisconsin to
manufacture component parts previously produced by third party suppliers. In
1998, the Victory motorcycle began production at Polaris' Spirit Lake, Iowa
facility. The production includes welding, finish painting, and final assembly.
Certain operations, including engine assembly, seat manufacturing, and the
bending of frame tubes are conducted at the Osceola, Wisconsin facility.
3
In 1998, Polaris completed construction of a 58,000 square foot plastic
injection molding facility adjacent to the Roseau, Minnesota facility. This is a
vertical integration project for Polaris in the manufacture of snowmobile hoods
and certain large plastic molded parts on ATVs.
Pursuant to informal agreements between Polaris and Fuji Heavy Industries
Ltd. ("Fuji"), Fuji had been the exclusive manufacturer of the Polaris two-cycle
snowmobile engines since 1968. Fuji has manufactured engines for Polaris' ATV
products since their introduction in the spring of 1985 and also supplies
engines for Polaris' PWC products. Fuji develops such engines to the specific
requirements of Polaris. Polaris believes its relationship with Fuji to be
excellent. If, however, Fuji terminated its informal relationship, interruption
in the supply of engines would adversely affect Polaris' production pending the
continued development of substitute supply arrangements.
Since 1995, Polaris has been designing and producing its own engines for
selected models of PWC, snowmobiles and, most recently, Victory motorcycles.
Polaris purchased a 90,000 square foot building adjacent to the Osceola facility
to house the manufacturing of these Polaris designed and built domestic engines.
In addition, in 1995, Polaris entered into an agreement with Fuji to form Robin
Manufacturing, U.S.A. ("Robin"). Under the agreement, Polaris made an investment
for a 40% ownership position in Robin, which builds engines in the United States
for recreational and industrial products. Potential advantages to Polaris of
these additional sources of engines include reduced foreign exchange risk, lower
shipping costs and less dependence in the future on a single supplier for
engines.
Polaris anticipates no significant difficulties in obtaining substitute
supply arrangements for other raw materials or components for which it relies
upon limited sources of supply.
A contract carrier ships Polaris' products from its manufacturing
facilities.
PRODUCTION SCHEDULING
Polaris products are produced and delivered throughout the year. Delivery of
snowmobiles to consumers begins in autumn and continues during the winter
season. Orders for each year's production of snowmobiles are placed in the
spring. Orders for ATVs are placed twice a year, spring and fall, and orders for
PWC are placed in autumn after meetings with dealers and distributors. Units are
built to order each year. In addition, non-refundable deposits made by consumers
to dealers in the spring for snowmobiles assist in production planning. The
budgeted volume of units to be produced each year is substantially sold to
dealers and distributors prior to production. Retail sales activity at the
dealer level is monitored by Polaris for each of snowmobiles, ATVs, motorcycles
and PWC. In 1998, motorcycle production began based on orders placed after the
initial Victory dealer meeting held in January 1998. Currently, Polaris has
orders for all units being manufactured. In the future, orders for motorcycles
will be placed in the autumn after meeting with Victory dealers.
Manufacture of snowmobiles commences in the spring and continues through
late autumn or early winter. Polaris manufactures PWC during the fall, winter
and spring months. Since 1993, Polaris has had the ability to manufacture ATVs
year round. Motorcycle manufacturing began in July 1998 and will continue year
round.
SALES AND MARKETING
Polaris products are sold through a network of over 2,000 dealers in North
America and 44 distributors in 116 countries.
With the exception of Illinois, upper Michigan and eastern Wisconsin, where
Polaris sells its snowmobiles through an independent distributor, Polaris sells
its snowmobiles directly to dealers in the snowbelt regions of the United States
and Canada. Snowmobile sales in Europe and other offshore markets are handled
through independent distributors. See Note 1 of Notes to Consolidated Financial
Statements for discussion of international operations.
4
Many dealers and distributors of Polaris snowmobiles also distribute
Polaris' ATVs and PWC. At the end of 1998, approximately 700 dealerships were
located in areas of the United States where snowmobiles are not regularly sold.
Unlike its primary competitors, which market their ATV products principally
through their affiliated motorcycle dealers, Polaris also sells its ATVs and PWC
through lawn and garden, boat and marine, and farm implement dealers.
Victory motorcycles are distributed directly through authorized Victory
dealers. Polaris has a high quality dealer network in North America for its
other product lines from which most of the current 250 Victory dealers were
selected. Polaris expects to develop a Victory dealer network of approximately
500 to 600 dealers over the next three to four years.
Dealers and distributors sell Polaris' products under contractual
arrangements pursuant to which the dealer or distributor is authorized to market
specified products, required to carry certain replacement parts and perform
certain warranty and other services. Changes in dealers and distributors take
place from time to time. Polaris believes that a sufficient number of qualified
dealers and distributors exists in all areas to permit orderly transition
whenever necessary.
In 1996, Polaris entered into a partnership agreement with Transamerica
Distribution Finance ("TDF") to form Polaris Acceptance. Polaris Acceptance
provides floor plan financing to Polaris' dealers and distributors and beginning
in February 1999 provides other financial services to dealers, distributors and
retail customers such as retail financing and extended service contracts. Under
the partnership agreement, Polaris has a 50% equity interest in Polaris
Acceptance and guarantees 50% of the outstanding indebtedness of Polaris
Acceptance under a credit agreement between Polaris Acceptance and TDF. At
December 31, 1998, Polaris' contingent liability with respect to the guarantee
was approximately $139.0 million.
Polaris has arrangements with Polaris Acceptance, TDF, and Deutsche
Financial Services Canada Corporation, a Deutsche Bank Company, to provide floor
plan financing for its dealers and distributors. Substantially all of Polaris'
sales of snowmobiles, ATVs, PWC and motorcycles are financed under arrangements
in which Polaris is paid within a few days of shipment of its product. Polaris
participates in the cost of dealer and distributor financing and is required to
repurchase products from the finance companies under certain circumstances and
subject to certain limitations. Polaris has not historically recorded a sales
return allowance because it has not been required to repurchase a significant
number of units. However, there can be no assurance that this will continue to
be the case. If necessary, Polaris will record a sales return allowance at the
time of sale should management anticipate material repurchases of units financed
through the finance companies. See Notes 1 and 3 of Notes to Consolidated
Financial Statements.
Polaris has historically not directly financed the purchase of its products
by consumers. In February 1999, Polaris made consumer financing available
through its Polaris Acceptance joint venture. Polaris will not guarantee the
debt or be required to repurchase products related to the retail financing
programs but will share in the losses of the program through its 50% equity
interest in Polaris Acceptance.
Polaris' marketing activities are designed primarily to promote and
communicate directly with consumers and secondarily to assist the selling and
marketing efforts of its dealers and distributors. From time to time, Polaris
makes available discount or rebate programs or other incentives for its dealers
and distributors to remain price competitive in order to accelerate reduction of
retail inventories. Polaris advertises its products directly using print
advertising in the industry press and in user group publications, on billboards,
and, less extensively, on television and radio. Polaris also provides media
advertising and partially underwrites dealer and distributor media advertising
to a degree and on terms which vary by product and from year to year. Polaris
also co-sponsors a car on the NASCAR auto racing circuit. Each season, Polaris
produces a promotional film for each of its products, which is available to
dealers for use in the showroom or at special promotions. Polaris also provides
product brochures, leaflets, posters, dealer signs, and miscellaneous other
promotional items for use by dealers.
5
ENGINEERING, RESEARCH AND DEVELOPMENT, AND NEW PRODUCT INTRODUCTION
Polaris employs approximately 325 persons who are engaged in the development
and testing of existing products and research and development of new products
and improved production techniques. Polaris believes that Polaris and its
predecessors were the first to develop, for commercial use, independent front
end suspension for snowmobiles, long travel rear suspension for snowmobiles,
direct drive of the snowmobile track, the use of liquid cooling in snowmobile
engines and brakes, the use of hydraulic brakes in snowmobiles, the three
cylinder engine in snowmobiles and PWC, the adaptation of the MacPherson strut
front suspension, "on demand" four-wheel drive systems and the Concentric Drive
System for use in ATVs, the application of a forced air cooled variable power
transmission system to ATVs, and the diesel fuel powered ATV.
Polaris utilizes internal combustion engine testing facilities to design and
optimize engine configurations for its products. Polaris utilizes specialized
facilities for matching engine, exhaust system and clutch performance parameters
in its products to achieve desired fuel consumption, power output, noise level
and other objectives. Polaris' engineering department is equipped to make small
quantities of new product prototypes for testing by Polaris' testing teams and
for the planning of manufacturing procedures. In addition, Polaris maintains
numerous test facilities where each of the products is extensively tested under
actual use conditions.
Polaris expended for research and development approximately $28.4 million
for 1998, $26.7 million for 1997, and $28.3 million for 1996, which amounts were
included as a component of operating expenses in the period incurred.
COMPETITION
The snowmobile, ATV, motorcycle and PWC markets in the United States and
Canada are highly competitive. Competition in such markets is based upon a
number of factors, including price, quality, reliability, styling, product
features and warranties. At the dealer level, competition is based on a number
of factors including sales and marketing support programs (such as financing and
cooperative advertising). Certain of Polaris' competitors are more diversified
and have financial and marketing resources which are substantially greater than
those of Polaris.
Polaris products are competitively priced and management believes Polaris'
sales and marketing support programs for dealers are comparable to those
provided by its competitors. Polaris' products compete with many other
recreational products for the discretionary spending of consumers, and, to a
lesser extent, with other vehicles designed for utility applications.
PRODUCT SAFETY AND REGULATION
Snowmobiles, ATVs, motorcycles and PWC are motorized machines, which may be
operated at high speeds and in a careless or reckless manner. Accidents
involving property damage, personal injuries and deaths occur in the use of
snowmobiles, ATVs, motorcycles and PWC.
Laws and regulations have been promulgated or are under consideration in a
number of states relating to the use or manner of use of Polaris products. State
approved trails and recreational areas for snowmobile and ATV use have been
developed in response to environmental and safety concerns. Some states may pass
legislation and local ordinances or regulations have been and may from time to
time be considered which restrict the use of PWC to specified hours and
locations. Polaris is unable to predict the outcome of such actions or the
possible effect on its PWC business. Polaris has supported laws and regulations
pertaining to safety and noise abatement and believes that its products would be
no more adversely affected than those of its competitors by the adoption of any
pending laws or regulations. Polaris continues to monitor these activities
together with the industry associations and supports balanced and appropriate
programs that educate the customer on safe use of the product and protect the
environment.
6
In September 1986, the staff of the Consumer Products Safety Commission
("CPSC") ATV Task Force issued a report on regulatory options for ATVs with
recommendations for ATV marketing activities and warning labels. In February
1987, the CPSC formally requested that the Justice Department initiate an
enforcement action against the ATV industry seeking a voluntary recall of all
three-wheel ATVs and four-wheel ATVs sold with the intention that they be used
by children under 16, as well as a requirement that ATV purchasers receive
"hands-on" training.
Except for 1,700 three-wheel models initially produced, Polaris manufactures
only four-wheel ATVs and six-wheel off-road vehicle products. Polaris has always
placed warning labels on its ATVs stating that they are designed for use only by
persons of a specified minimum age, that operators should always wear approved
safety helmets and that riders should complete proper training prior to
operating an ATV.
On December 30, 1987, Polaris reached an agreement with the CPSC regarding
ATV safety, which was confirmed in a ten-year Consent Decree in April 1988. In
April 1998, the Consent Decree with the CPSC expired. Polaris has filed with the
CPSC a Voluntary Action Plan under which Polaris undertook to continue various
activities including age recommendations, dealer monitoring for ascertaining
dealer compliance with safety obligations including age recommendations and
training requirements, warning labels, point of purchase materials, hands on
training and an information education effort. Polaris conditions its ATV
warranties described below under "Warranty" on completion of the mandatory
"hands on" consumer training program. In December 1998, the CPSC issued a
resolution commending Polaris and certain other industry members for their ATV
Action Plans
The Company does not believe that the Polaris Voluntary Action Plan will
have a material adverse effect on Polaris. Nevertheless, there can be no
assurance that future recommendations or regulatory actions by the CPSC, the
Justice Department or individual states would not have an adverse effect on the
Company. Polaris will continue to attempt to assure that its dealers are in
compliance with their safety obligations. Polaris has notified its dealers that
it will terminate or not renew any dealer it determines has violated such safety
obligations. To date, it has terminated or not renewed at least eight dealers
for such reasons.
In May 1998, the National Transportation Safety Board ("NTSB") issued a
report regarding PWC safety and made various recommendations regarding PWC.
Prior to May 1998, Polaris was working and continues to work with the Coast
Guard to develop standards and to evaluate PWC safety matters, including the
NTSB recommendations. Polaris PWC have always complied with industry standards
relevant to PWCs.
California has adopted regulations setting maximum emission standards for
ATVs and the federal Environmental Protection Agency ("EPA") has indicated its
intent to establish emission standards for non-road engines, including ATVs and
snowmobiles. The EPA already has required PWC manufacturers to gradually reduce
their emission by 75% between 1999 and 2006. For the State of California, the
California Air Resources Board has accelerated this scheduled emission reduction
by requiring that manufacturers meet the EPA 2006 level in 2001 and required
that manufacturers meet further emission reductions by 2004 and 2008.
Conventional two-stroke cycle engines cannot meet these more restrictive
emission requirements.
In 1997, Polaris signed an agreement with Outboard Marine Corporation
("OMC") licensing the Ficht fuel injection technology. During 1998, Polaris
introduced the new Genesis PWC model utilizing the Ficht technology which
complies with the EPA 2006 emission requirements. This technology may be used in
other Polaris vehicles to meet emission standards in the future, particularly in
Polaris vehicles with two-cycle engines. Polaris is unable to predict the
ultimate impact of the adopted or proposed regulations on Polaris and its
operations.
Victory motorcycles are subject to federal and state emissions, vehicle
safety and other standards. Polaris believes that its motorcycles comply fully
with all such applicable standards and related regulations.
7
PRODUCT LIABILITY
Polaris' product liability insurance limits and coverages have been
adversely affected by the general decline in the availability of liability
insurance. As a result of the high cost of premiums, and in view of the
historically small amount of claims paid by Polaris, Polaris was self-insured
from June 1985 to June 1996. In June 1996 Polaris purchased excess insurance
coverage for catastrophic product liability claims for incidents occurring
subsequent to the policy date that exceed a self-insured retention.
Product liability claims are made against Polaris from time to time. Since
its inception in 1981 through December 31, 1998, Polaris has paid an aggregate
of approximately $4.2 million in product liability claims and accrued $7.4
million at December 31, 1998 for the defense and possible payment of pending
claims. Polaris believes such accruals are adequate. Polaris does not believe
that the outcome of any pending product liability litigation will have a
material adverse effect on the operations of Polaris. However, no assurance can
be given that its historical claims record, which did not include ATVs prior to
1985, PWC prior to 1992, or motorcycles prior to 1998, will not change or that
material product liability claims against Polaris will not be made in the
future. Adverse determination of material product liability claims made against
Polaris would have a material adverse effect on Polaris' financial condition.
See Note 8 of Notes to Consolidated Financial Statements.
WARRANTY
Polaris provides a limited warranty for ATVs for a period of six months and
for its snowmobiles, motorcycles and PWC for a period of one year. Although
Polaris employs quality control procedures, a product is sometimes distributed
which needs repair or replacement. Historically, product recalls have been
administered through Polaris' dealers and distributors and have not had a
material effect on Polaris' business.
EFFECTS OF WEATHER
Lack of snowfall in any year in any particular region of the United States
or Canada may adversely affect snowmobile retail sales in that region. Polaris
seeks to minimize this potential effect by stressing pre-season sales (see
"Production Scheduling") and shifting dealer inventories from one location to
another. However, there is no assurance that weather conditions would not have a
material effect on Polaris' sales of snowmobiles, ATVs, motorcycles or PWC.
EMPLOYMENT
Due to the seasonality of the Polaris business and certain changes in
production cycles, total employment levels vary throughout the year. Despite
such variations in employment levels, employee turnover has not been high.
During 1998, Polaris employed an average of approximately 3,050 persons.
Approximately 900 of its employees are salaried. Polaris considers its relations
with its personnel to be excellent. Polaris' employees have not been represented
by a union since July 1982.
YEAR 2000 COMPLIANCE
During 1998, Polaris has continued its company-wide program to prepare the
Company's computer systems for Year 2000 compliance. In order for a computer
system to by Year 2000 compliant, its time sensitive software must recognize a
date using "00" as the year 2000 rather than 1900. Polaris' project is divided
into two major areas: internal information systems and embedded manufacturing
systems/third-party suppliers.
Polaris has implemented a plan to make its critical internal information
systems Year 2000 compliant by the end of 1998 and to make its remaining
internal information systems Year 2000 compliant by mid-1999. As of December 31,
1998, approximately 90% of the programming requirements for the
8
Company's manufacturing systems were complete and 70% of the programming
requirements for the sales, distribution and finance systems had been completed.
Manufacturing mission critical applications are all currently in the test phase.
The remaining systems are being tested when the programming modifications are
completed, with testing expected to continue throughout 1999.
Polaris has completed inventories of equipment and machines with embedded
systems that are used at each of the facilities. Polaris is in the process of
assessing whether the critical equipment will be Year 2000 compliant through
simulations and testing of the equipment as well as Year 2000 compliance letters
from vendors. Polaris has identified its critical suppliers and sent them
questionnaires to address their Year 2000 plans and progress. Polaris has
received responses from approximately 75% of these suppliers and is in the
process of tabulating the results.
The cost of the Year 2000 initiatives (which are expensed as incurred) are
not expected to be material to Polaris' financial position. The total cost is
estimated to be approximately $1.5 million of which approximately $0.8 million
has been incurred to date.
Polaris has begun a comprehensive analysis of the operational issues and
costs that would most likely result from failure by the Company or third parties
to achieve Year 2000 compliance on a timely basis. Although Polaris has not yet
identified the most likely worst case scenario, the risk would be primarily
delivery timing to customers in January 2000. Polaris believes it will have
sufficient time to recover, although some delayed deliveries may result in
cancellations of customer orders.
Polaris is in the process of developing contingency plans to protect the
business from Year 2000 related interruptions and anticipates their completion
by the third quarter of 1999.
The costs of the project and the date when Polaris believes it will complete
the Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events. However, there can be
no guarantee these estimates will be achieved and actual results could differ
materially from those anticipated.
ITEM 2. PROPERTIES
Polaris owns its principal manufacturing facility in Roseau, Minnesota. The
facility consists of approximately 509,000 square feet of manufacturing space
located on approximately 100 acres. In 1991, Polaris acquired a fabricating
facility in order to bring more component parts manufacturing in-house. This
facility consists of a 190,000 square foot plant situated on 38 acres and is
located in Osceola, Wisconsin. In August 1994, Polaris signed a one-year lease
agreement for a 223,000 square foot assembly facility located on 24 acres of
land in Spirit Lake, Iowa. Polaris exercised its option to purchase the facility
during 1995. Polaris currently uses the facility to assemble all of its PWC
product line, certain ATV models and, beginning in 1998, its motorcycle product
line. In August 1995, Polaris purchased a 90,000 square foot building adjacent
to the Osceola facility to house the manufacturing of Polaris designed and built
domestic engines. In 1998, Polaris completed construction and began operating a
58,000 square foot plastic injection molding facility adjacent to the Roseau,
Minnesota facility. This is a vertical integration project for Polaris in the
manufacture of snowmobile hoods and certain large plastic molded parts on ATVs.
Polaris makes ongoing capital investments in its facilities. These investments
have increased production capacity for snowmobiles, ATVs, motorcycles and PWC.
The Company believes that Polaris' manufacturing facilities are adequate in size
and suitability for its present manufacturing needs.
In 1997, Polaris completed construction of a 250,000 square foot state of
the art parts, garments and accessories distribution center on 50 acres in
Vermillion, South Dakota.
Polaris owns all tooling and machinery (including heavy presses,
conventional and computer controlled welding facilities for steel and aluminum,
assembly lines, paint lines, and sewing lines) used in the manufacture of its
products. Although Polaris holds numerous patents and uses various registered
9
trademarks and names, it believes that the loss of any of them would not have a
material effect on its business.
Polaris leases 92,000 square feet of headquarters and warehouse space in
Minneapolis, Minnesota pursuant to a lease that will terminate in 2002. Polaris
also leases an additional 24,000 square feet of office space in Minneapolis,
Minnesota, 42,000 square feet of office and warehouse space in Winnipeg,
Manitoba, and 10,000 square feet of warehouse space in Spirit Lake, Iowa.
Polaris does not anticipate any difficulty in securing alternate facilities on
competitive terms, if necessary, upon the termination of any of its leases.
ITEM 3. LEGAL PROCEEDINGS
Injection Research Specialists ("IRS") commenced an action in 1990 against
Polaris and Fuji Heavy Industries, Ltd. ("Fuji"), one of Polaris' engine
suppliers, in Colorado Federal Court alleging various claims relating to
electronic fuel injection systems for snowmobiles. In October 1998, following
the entry of judgement against Polaris for $34.0 million (before pre-and
post-judgment interest) and affirmance thereof by the Federal Court of Appeals,
IRS, Polaris and Fuji entered into a confidential settlement agreement to settle
all outstanding claims between the parties. The resulting provision for
litigation loss of $61.4 million has been reflected as non-operating expense in
the accompanying consolidated statement of operations for the year ended
December 31, 1998. The related payment to IRS was made during the fourth quarter
in connection with entering into the confidential settlement agreement. Polaris
no longer uses any of the technology in dispute.
Polaris pro forma results adjusted to exclude the provision for litigation
loss are as follows:
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
1998 1997
---------- ----------
Income before taxes................................................... $ 109,771 $ 102,162
Provision for income taxes............................................ 39,147 36,779
---------- ----------
Net Income............................................................ $ 70,624 $ 65,383
Diluted Net Income Per Share.......................................... $ 2.72 $ 2.45
In addition to the aforementioned matter, Polaris is involved in a number of
legal proceedings, none of which is expected to have a material effect on the
financial condition or the business of Polaris.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
10
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names of the executive officers of the Company as of
March 3, 1999, their ages, titles, the year first appointed as an executive
officer of the Company and employment for the past five years:
NAME AGE TITLE
- -------------------------- --- ------------------------------------------------------
W. Hall Wendel, Jr. 56 Chairman and Chief Executive Officer
Thomas C. Tiller 37 President and Chief Operating Officer
Charles A. Baxter 51 Vice President--Engineering and General Manager
Engines
Jeffrey A. Bjorkman 39 Vice President--Manufacturing
John B. Corness 44 Vice President--Human Resources
Michael W. Malone 40 Vice President--Finance, Chief Financial Officer and
Secretary
Thomas H. Ruschhaupt 50 Vice President--Sales and Services
Ed Skomoroh 61 Vice President--Marketing
Executive officers of the Company are elected at the discretion of the Board
of Directors with no fixed term. There are no family relationships between or
among any of the executive officers or directors of the Company.
Mr. Wendel has served as Chairman and Chief Executive Officer since the
Company's formation in 1994. Mr. Wendel was the Chief Executive Officer of
Polaris Industries Capital Corporation ("PICC"), which was the managing general
partner of Polaris Industries Associates L.P., which was the operating general
partner of Polaris Industries L.P. from 1987 to December 1994. From 1981 to
1987, Mr. Wendel was Chief Executive Officer of a predecessor of Polaris, which
was formed to purchase the snowmobile assets of the Polaris E-Z-GO Division of
Textron Inc. Before that time, Mr. Wendel was President of the Polaris E-Z-GO
Division for two years and prior thereto, held marketing positions as Vice
President of Sales and Marketing and National Sales Manager since 1974.
Mr. Tiller was named President and Chief Operating Officer of the Company in
July 1998. Prior to joining Polaris, Mr. Tiller was employed by General Electric
Company in various management positions for fifteen years.
Mr. Baxter has been Vice President--Engineering of the Company since
December 1994 and held that position with PICC or its predecessor since 1981.
Prior thereto, since 1970, Mr. Baxter was employed as Director of Engineering of
the Polaris E-Z-GO Division of Textron.
Mr. Bjorkman has been Vice President--Manufacturing of the Company since
January 1995, and prior thereto held positions of Plant Manager and
Manufacturing Engineering Manager since July 1990. Prior to joining Polaris, Mr.
Bjorkman was employed by General Motors Corporation in various management
positions for nine years.
Mr. Corness has been Vice President--Human Resources of the Company since
January 1999. Prior to joining Polaris, Mr. Corness was employed by General
Electric Company in various human resource positions for nine years. Before that
time, Mr. Corness held various human resource positions with Maple Leaf Foods
and Transalta Utilities.
Mr. Malone has been Vice President--Finance, Chief Financial Officer and
Secretary of the Company since January 1997. Mr. Malone was Vice President and
Treasurer of the Company from December 1994 to January 1997 and was Chief
Financial Officer and Treasurer of PICC from January 1993 to December 1994.
Prior thereto and since 1986, he was Assistant Treasurer of PICC or its
predecessor. Mr. Malone joined Polaris in 1984 after four years with Arthur
Andersen LLP.
11
Mr. Ruschhaupt has been Vice President--Sales and Service of the Company
since March 1998. Prior to joining Polaris, Mr. Ruschhaupt was employed by
Goodyear Tire and Rubber Corporation in various management positions for twenty
years.
Mr. Skomoroh has been Vice President--Marketing of the Company since
February 1998. Mr. Skomoroh was Vice President--Sales and Marketing of the
Company from December 1994 and held that position with PICC since October 1988.
Prior thereto he was Vice President, Polaris Canada and President, Secretary and
Director of Polaris Industries Inc., an Ontario corporation and a wholly owned
subsidiary of Polaris Industries Partners L.P. Mr. Skomoroh joined Polaris in
1982 as General Manager, Canada, and was prior thereto the General Manager of
the Canadian operations of Arctic Enterprises, Inc.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information under the caption "Investor Information" included in the
Company's 1998 Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information under the caption "Selected Financial Data" included in the
Company's 1998 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"Management's Discussion and Analysis" included in the Company's 1998 Annual
Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information under the caption "Management's Discussion and
Analysis--Inflation and Exchange Rates" and Note 1 to the financial statements
of the Registrant, included in the Company's 1998 Annual Report, are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant, included in the
Company's 1998 Annual Report, are incorporated herein by reference:
Consolidated Balance Sheets December 31, 1998 and 1997.
Consolidated Statements of Operations Years Ended December 31, 1998, 1997, and
1996.
Consolidated Statements of Shareholders' Equity Years Ended December 31, 1998,
1997, and 1996.
Consolidated Statements of Cash Flows Years Ended December 31, 1998, 1997, and
1996.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant
The information under the caption "Election of Directors Information
Concerning Nominees and Directors" in the Company's 1999 Proxy Statement is
incorporated herein by reference.
(b) Executive Officers of the Registrant
Information concerning Executive Officers of the Company is included in this
Report after Item 4, under "Executive Officers of the Registrant."
(c) Compliance with Section 16(a) of the Exchange Act
The information under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's 1999 Proxy Statement is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation and Other
Information" and "Election of Directors--Directors' Remuneration" in the
Company's 1999 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Security Ownership of Certain Beneficial
Owners and Management" in the Company's 1999 Proxy Statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Relationships and Related
Transactions" in the Company's 1999 Proxy Statement is incorporated herein by
reference.
13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) Consolidated Financial Statements
Information concerning financial statements of Polaris Industries Inc.
included in the Company's 1998 Annual Report are incorporated by reference
to this Report under Item 8 "Financial Statements and Supplementary Data".
(2) Financial Statement Schedules
All supplemental financial statement schedules have been omitted because
they are not applicable or are not required or the information required to
be set forth therein is included in the Consolidated Financial Statements or
notes thereto.
(3) Exhibits
The Exhibits to this Report are listed in the Exhibit Index on page E-1.
A copy of any of these Exhibits will be furnished at a reasonable cost
to any person who was a shareholder of the Company as of March 22, 1999,
upon receipt from any such person of a written request for any such exhibit.
Such request should be sent to Polaris Industries Inc., 1225 Highway 169
North, Minneapolis, Minnesota 55441, Attention: Investor Relations.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended December 31, 1998.
(c) Exhibits
Included in Item 14(a)(3) above.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota on March 29, 1999.
POLARIS INDUSTRIES INC.
By: /s/ W. HALL WENDEL, JR.
-----------------------------------------
W. Hall Wendel, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------------ -------------------------- --------------
/s/ W. HALL WENDEL, JR. Chief Executive Officer
- ------------------------------------ and Director (Principal March 29, 1999
W. Hall Wendel, Jr. Executive Officer)
Vice President Finance,
/s/ MICHAEL W. MALONE Chief Financial Officer
- ------------------------------------ and Secretary (Principal March 29, 1999
Michael W. Malone Financial and Accounting
Officer)
*
- ------------------------------------ Director March 29, 1999
Andris A. Baltins
*
- ------------------------------------ Director March 29, 1999
Raymond J. Biggs
*
- ------------------------------------ Director March 29, 1999
Beverly F. Dolan
*
- ------------------------------------ Director March 29, 1999
Robert S. Moe
*
- ------------------------------------ Director March 29, 1999
Gregory R. Palen
*
- ------------------------------------ Director March 29, 1999
Stephen G. Shank
*
- ------------------------------------ Director March 29, 1999
Bruce Thomson
*
- ------------------------------------ Director March 29, 1999
Thomas C. Tiller
*By: /s/ W. HALL WENDEL, JR. March 29, 1999
------------------------------
(W. Hall Wendel, Jr.
Attorney-in-Fact)
- ------------------------
* W. Hall Wendel, Jr., pursuant to Powers of Attorney executed by each of the
officers and directors listed above whose name is marked by an "*" and filed
as an exhibit hereto, by signing his name hereto does hereby sign and execute
this Report of Polaris Industries Inc. on behalf of each of such officers and
directors in the capacities in which the names of each appear above.
15
POLARIS INDUSTRIES INC.
EXHIBIT INDEX TO ANNUAL REPORT ON
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1998
EXHIBIT
NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------
3.(a) Articles of Incorporation of Polaris Industries Inc. ("the Company"),
as amended, incorporated by reference to Exhibit 3(a) to the Company's
Registration Statement on Form S-4 (No. 33-55769) (the "Form S-4").
(b) Bylaws of the Company, incorporated by reference to Exhibit 3(b) to
the Form S-4.
4. Specimen Stock Certificate of the Company, incorporated by reference
to Exhibit 4 to the Form S-4.
10.(a) Agreement for Deferred Compensation and Disability Income and
Amendment No. 1 thereto with W. Hall Wendel, Jr. incorporated by
reference to Exhibit 10 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
(b) [RESERVED]
(c) Retirement Savings Plan, incorporated by reference to Exhibit 10(g) to
the Form S-1.
(d) Polaris Industries Inc. Employee Stock Ownership Plan effective
January 1, 1997 incorporated by reference to Exhibit 10(a) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997.
(e) Fourth Amendment to Credit Agreement by and between the Company and
First Bank incorporated by reference to Exhibit 10(e) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
(f) Management Bonus Plan, incorporated by reference to Exhibit 10(j) to
the Form S-1.
(g) Polaris Industries Inc. 1995 Stock Option Plan, incorporated by
reference to the Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on June 12, 1995 (No.
33-60157).
(h) Polaris Industries Inc. Deferred Compensation Plan for Directors
incorporated by reference to Exhibit 10(h) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
(i) Joint Venture Agreement between the Company and Transamerica
Commercial Finance Corporation, now known as Transamerica Distribution
Finance ("TDF") dated February 7, 1996 incorporated by reference to
Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
(j) Manufacturer's Repurchase Agreement between the Company and Polaris
Acceptance dated February 7, 1996 incorporated by reference to Exhibit
10(j) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(k) Credit Agreement by and between the Company and First Bank National
Association and Bank of America Illinois and First Union National Bank
of North Carolina, dated May 8, 1995 (the "Credit Agreement")
incorporated by reference to Exhibit 10 to the Company's Quarterly
Report on Form 10-Q dated May 15, 1995.
(l) Plymouth, Minnesota, Executive Office Lease, incorporated by reference
to Exhibit 10(m) to the Form S-1 ("the Executive Office Lease").
(m) Shareholder Agreement with Fuji Heavy Industries LTD., incorporated by
reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
16
EXHIBIT
NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------
(n) Registration Rights Agreement between and among the Company, Victor K.
Atkins, EIP I Inc., EIP Holdings, Inc. and LB I Group Inc.,
incorporated by reference to Exhibit 10(1) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
(o) Amended and Restated Polaris Industries Inc. 1996 Restricted Stock
Plan, incorporated by reference to the Company's Registration
Statement on Form S-8 filed with the Securities and Exchange
Commission on June 7, 1996 (No. 333-05463).
(p) Polaris Industries Inc. Employee Stock Purchase Plan, incorporated by
reference to the Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on February 3, 1997 (No.
333-21007).
(q) Form of Change of Control Agreement entered into with executive
officers of Company incorporated by reference to Exhibit 10(q) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
(r) Amendment to Executive Office Lease dated November 22, 1996
incorporated by reference to Exhibit 10(r) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
(s) Employment Agreement between the Company and Thomas Tiller
incorporated by reference to Exhibit 10(s) to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1998.
(t) Fifth Amendment to Credit Agreement by and between the Company and
U.S. Bank National Association et al. dated August 24, 1998.
(u) Sixth Amendment to Credit Agreement by and between the Company and
U.S. Bank National Association et al. dated December 7, 1998.
13. Portions of the Annual Report to Security Holders for the Year Ended
December 31, 1998 included pursuant to Note 2 to General Instruction
G.
21. Subsidiaries of Registrant
23. Consent of Arthur Andersen LLP
24. Power of Attorney
27. Financial Data Schedule
17