Polaris Inc.
02/13/2026 | Press release | Distributed by Public on 02/13/2026 13:23
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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 Annual Report. This section of this Annual Report generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report 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, 2024.
Overview
2025 sales totaled $7.2 billion and were approximately flat as compared to 2024. This was primarily driven by decreased shipments and lower net pricing driven by higher promotional costs, mostly offset by product mix.
Our gross profit of $1.4 billion decreased seven percent from $1.5 billion in 2024. Gross profit, as a percentage of sales, decreased primarily due to incremental tariff charges, lower net pricing driven by higher promotional costs and increased incentive compensation costs, partially offset by favorable operational costs and reduced warranty expense.
Full year net loss attributable to Polaris Inc. was $465.5 million, or $8.18 net loss per diluted share, compared to 2024 full year net income attributable to Polaris Inc. of $110.8 million, or $1.95 per diluted share. These decreases were primarily the result of impairment and other charges recorded as a result of the Indian Motorcycle business being classified as held for sale, goodwill and other intangible asset impairment charges recorded, incremental tariff charges and increased incentive compensation costs, partially offset by favorable operating costs. We reported Adjusted EBITDA of $410.2 million in 2025 compared to $635.4 million in 2024. For information on how we define and calculate Adjusted EBITDA, and a reconciliation from net (loss) income to Adjusted EBITDA, see "Non-GAAP Financial Measures".
On October 10, 2025, we entered into a definitive agreement to sell a majority interest in the Indian Motorcycle business. During the year ended December 31, 2025, operating results of the Indian Motorcycle business were reported in our On Road segment and its assets and liabilities were classified as held for sale as of December 31, 2025. The sale closed in the first quarter of 2026.
On January 29, 2026, we announced that our Board of Directors declared a quarterly cash dividend of $0.68 per share for the first quarter of 2026, a one percent increase from the prior quarterly cash dividend, representing the 31st consecutive year of increased dividends to shareholders.
Global Economic Conditions
We continue to monitor macroeconomic trends and uncertainties and changes in international trade relations and trade policy, including those related to tariffs. The U.S. government has implemented a general tariff on all imports from countries not exempted under certain trade reciprocity criteria and elevated tariffs have been imposed on imports from major trading partners. Impacted countries have and may impose retaliatory tariffs, and such actions could give rise to an escalation of other trade measures by the countries subjected to such tariffs. Although the validity of certain tariffs are being challenged in litigation pending before the Supreme Court of the United States, there can be no guarantee about the outcome of such proceedings. The tariff policy environment is rapidly evolving and there is no guarantee that additional or increased tariffs will not be imposed.
We currently procure components from countries subject to such tariffs, which are utilized in our facilities in the United States and Mexico. A portion of our annual sales originate from products manufactured in our facilities in Mexico, and we sell our products globally. As a result of the current tariffs, we anticipate increased supply chain challenges, commodity cost volatility, economic uncertainty, and economic pressures on customers and consumers as a result of the challenges of high inflation combined with the effects of increased tariffs. To mitigate the impact of tariffs on our supply chain and manufacturing, we continue to evaluate sourcing alternatives, negotiate with suppliers, and work to increase the percentage of shipments qualified under favorable trade agreements. Incremental tariffs and changed trade policies had a notable impact on our financial results for 2025, and could continue to adversely impact our results in the future. We will continue to evaluate the impact of tariffs on our operations and profitability.
Consolidated Results of Operations
The consolidated results of operations were as follows:
| For the Years Ended December 31, | |||||||||||||||||||||||||||||
| ($ in millions except per share data) | 2025 | 2024 |
Change 2025 vs. 2024 |
2023 |
Change 2024 vs. 2023 |
||||||||||||||||||||||||
| Sales | $ | 7,152.0 | $ | 7,175.4 | - | % | $ | 8,934.4 | (20) | % | |||||||||||||||||||
| Cost of sales | $ | 5,783.3 | $ | 5,708.6 | 1 | % | $ | 6,974.5 | (18) | % | |||||||||||||||||||
| Gross profit | $ | 1,368.7 | $ | 1,466.8 | (7) | % | $ | 1,959.9 | (25) | % | |||||||||||||||||||
| Percentage of sales | 19.1 | % | 20.4 | % | -130 basis points | 21.9 | % | -149 basis points | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Selling and marketing | $ | 505.0 | $ | 500.4 | 1 | % | $ | 542.3 | (8) | % | |||||||||||||||||||
| Research and development | 371.9 | 336.9 | 10 | % | 374.3 | (10) | % | ||||||||||||||||||||||
| General and administrative | 541.8 | 436.5 | 24 | % | 422.8 | 3 | % | ||||||||||||||||||||||
| Goodwill impairment | 52.6 | - | NM | - | NM | ||||||||||||||||||||||||
| Loss on disposal group held for sale | 330.4 | - | NM | - | NM | ||||||||||||||||||||||||
| Total operating expenses | $ | 1,801.7 | $ | 1,273.8 | 41 | % | $ | 1,339.4 | (5) | % | |||||||||||||||||||
| Percentage of sales | 25.2 | % | 17.8 | % | +744 basis points | 15.0% | +276 basis points | ||||||||||||||||||||||
| Income from financial services | $ | 84.3 | $ | 97.6 | (14) | % | $ | 80.4 | 21 | % | |||||||||||||||||||
| Operating (loss) income | $ | (348.7) | $ | 290.6 | NM | $ | 700.9 | (59) | % | ||||||||||||||||||||
| Non-operating expense: | |||||||||||||||||||||||||||||
| Interest expense | $ | 131.4 | $ | 137.0 | (4) | % | $ | 125.0 | 10 | % | |||||||||||||||||||
| Other expense (income), net | $ | 52.6 | $ | 12.8 | NM | $ | (44.5) | NM | |||||||||||||||||||||
| (Loss) income before income taxes | $ | (532.7) | $ | 140.8 | NM | $ | 620.4 | (77) | % | ||||||||||||||||||||
| (Benefit) provision for income taxes | $ | (67.9) | $ | 29.6 | NM | $ | 117.7 | (75) | % | ||||||||||||||||||||
| Effective income tax rate | 12.8 | % | 21.0 | % | -829 basis points | 19.0 | % | +207 basis points | |||||||||||||||||||||
| Net (loss) income | $ | (464.8) | $ | 111.2 | NM | $ | 502.7 | (78) | % | ||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interest | (0.7) | (0.4) | 75 | % | 0.1 | NM | |||||||||||||||||||||||
| Net (loss) income attributable to Polaris Inc. | $ | (465.5) | $ | 110.8 | NM | $ | 502.8 | (78) | % | ||||||||||||||||||||
| Percentage of sales | (6.5) | % | 1.5 | % | -805 basis points | 5.6 | % | -408 basis points | |||||||||||||||||||||
| Adjusted EBITDA | $ | 410.2 | $ | 635.4 | (35) | % | $ | 1,020.9 | (38) | % | |||||||||||||||||||
| Adjusted EBITDA Margin | 5.7 | % | 8.9 | % | -311 basis points | 11.4 | % | -257 basis points | |||||||||||||||||||||
| Diluted net (loss) income per share attributable to Polaris Inc. shareholders | $ | (8.18) | $ | 1.95 | NM | $ | 8.71 | (78) | % | ||||||||||||||||||||
| Weighted average diluted shares outstanding | 56.9 | 56.8 | - | % | 57.7 | (2) | % | ||||||||||||||||||||||
| NM = not meaningful | |||||||||||||||||||||||||||||
Sales:
The year-over-year decrease in sales was due to decreased shipments and lower net pricing driven by higher promotional costs, partially offset by favorable product mix.
The components of the consolidated sales change were as follows:
| Percent change in total Company sales compared to the prior year | |||||||||||
| 2025 | 2024 | ||||||||||
| Volume | (3) | % | (21) | % | |||||||
| Product mix and price | 3 | 1 | |||||||||
| Currency | - | - | |||||||||
| - | % | (20) | % | ||||||||
The year-over-year volume decrease was primarily due to reduced recreational ORV, snowmobile and On Road shipments, partially offset by increased utility ORV shipments. Product mix was favorable as a result of a higher sales mix of ORVs. This favorability was partially offset by lower net pricing driven by higher promotional costs.
Sales by geographic region were as follows:
| For the Years Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | Percent of Total Sales | 2024 | Percent of Total Sales | Percent Change 2025 vs. 2024 | 2023 | Percent of Total Sales | Percent Change 2024 vs. 2023 | |||||||||||||||||||||||||||||||||||||||
| United States | $ | 5,662.3 | 79 | % | $ | 5,629.0 | 79 | % | 1 | % | $ | 7,122.2 | 80 | % | (21) | % | |||||||||||||||||||||||||||||||
| Canada | 419.9 | 6 | % | 446.2 | 6 | % | (6) | % | 584.0 | 6 | % | (24) | % | ||||||||||||||||||||||||||||||||||
| Other countries | 1,069.8 | 15 | % | 1,100.2 | 15 | % | (3) | % | 1,228.2 | 14 | % | (10) | % | ||||||||||||||||||||||||||||||||||
| Total sales | $ | 7,152.0 | 100 | % | $ | 7,175.4 | 100 | % | - | % | $ | 8,934.4 | 100 | % | (20) | % | |||||||||||||||||||||||||||||||
Sales in the United States increased primarily as a result of higher Marine and ORV shipments, partially offset by reduced snowmobile and motorcycle shipments.
Sales in Canada decreased primarily as a result of reduced snowmobile shipments. Currency rate movements had an unfavorable impact of two percentage points on sales in 2025.
Sales in other countries decreased primarily as a result of reduced On Road shipments. Currency rate movements had a favorable impact of two percentage points on sales in 2025.
Cost of sales:
The following table reflects our cost of sales in dollars and as a percentage of sales:
| For the Years Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | Percent of Total Cost of Sales | 2024 | Percent of Total Cost of Sales | Change 2025 vs. 2024 | 2023 | Percent of Total Cost of Sales | Change 2024 vs. 2023 | |||||||||||||||||||||||||||||||||||||||
|
Purchased materials and logistics
|
$ | 4,801.8 | 83 | % | $ | 4,693.6 | 82 | % | 2 | % | $ | 5,802.9 | 83 | % | (19) | % | |||||||||||||||||||||||||||||||
| Labor costs | 627.4 | 11 | % | 628.8 | 11 | % | - | % | 756.7 | 11 | % | (17) | % | ||||||||||||||||||||||||||||||||||
|
Depreciation and amortization
|
218.2 | 4 | % | 220.8 | 4 | % | (1) | % | 205.8 | 3 | % | 7 | % | ||||||||||||||||||||||||||||||||||
| Warranty | 135.9 | 2 | % | 165.4 | 3 | % | (18) | % | 209.1 | 3 | % | (21) | % | ||||||||||||||||||||||||||||||||||
| Total cost of sales | $ | 5,783.3 | 100 | % | $ | 5,708.6 | 100 | % | 1 | % | $ | 6,974.5 | 100 | % | (18) | % | |||||||||||||||||||||||||||||||
| Percentage of sales | 80.9 | % | 79.6 | % | +130 basis points | 78.1 | % | +149 basis points | |||||||||||||||||||||||||||||||||||||||
The year-over-year increase in cost of sales was primarily due to higher materials costs driven by incremental tariff charges, partially offset by reduced warranty expense.
Gross profit:
Gross profit for 2025, as a percentage of sales, decreased primarily as a result of incremental tariff charges, lower net pricing driven by higher promotional costs and increased incentive compensation costs, partially offset by favorable operational costs and reduced warranty expense.
Operating expenses:
Operating expenses for 2025, in absolute dollars and as a percentage of sales, increased primarily due to impairment and other charges recorded as a result of the Indian Motorcycle business being classified as held for sale, goodwill and other intangible asset impairment charges recorded, and higher general and administrative and research and development expenses.
Income from financial services:
The following table reflects our income from financial services:
| For the Years Ended December 31, | |||||||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 |
Change 2025 vs. 2024 |
2023 |
Change 2024 vs. 2023 |
||||||||||||||||||||||||
|
Income from Polaris Acceptance joint venture
|
$ | 42.1 | $ | 53.8 | (22) | % | $ | 41.5 | 30 | % | |||||||||||||||||||
|
Income from retail credit agreements
|
39.5 | 42.7 | (7) | % | 39.0 | 9 | % | ||||||||||||||||||||||
|
Net income (expense) from other financial services activities
|
2.7 | 1.1 | NM | (0.1) | NM | ||||||||||||||||||||||||
|
Total income from financial services
|
$ | 84.3 | $ | 97.6 | (14) | % | $ | 80.4 | 21 | % | |||||||||||||||||||
| Percentage of sales | 1.2 | % | 1.4 | % | -18 basis points | 0.9 | % | +46 basis points | |||||||||||||||||||||
Income from financial services decreased 14 percent in 2025, primarily as a result of lower wholesale financing income from Polaris Acceptance due to reduced interest rates and dealer inventory levels.
Interest expense:
Interest expense decreased for 2025 primarily as a result of lower average debt levels.
Other expense (income), net:
The increase in other expenses in 2025 was primarily attributable to an impairment charge recorded related to a strategic investment held by the Company. Other expense (income) is also impacted by currency exchange rate movements and the corresponding effects on currency transactions related to our international subsidiaries.
Provision for income taxes:
The income tax benefit for 2025 was primarily due to the pre-tax loss generated, partially offset by unfavorable adjustments related to non-deductible impairment charges.
Adjusted EBITDA:
Adjusted EBITDA, in absolute dollars and as a percentage of sales, decreased in 2025 primarily due to increased incentive compensation costs, incremental tariff charges and lower net pricing driven by higher promotional costs, partially offset by favorable operating costs.
Weighted average diluted shares outstanding:
Weighted average diluted shares outstanding increased throughout 2025 primarily due to reduced share repurchases, partially offset by a reduction in the dilutive effect of share-based equity awards as a result of the net loss incurred during 2025.
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 costs that are not
allocated to segments, including certain manufacturing costs, the impacts from certain foreign currency transactions, and certain incentive compensation costs and related adjustments.
Our sales and gross profit by reporting segment, which includes the respective PG&A, as well as amounts related corporate costs and other activities, were as follows:
| For the Years Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | Percent of Sales | 2024 | Percent of Sales | Percent Change 2025 vs. 2024 | 2023 | Percent of Sales | Percent Change 2024 vs. 2023 | |||||||||||||||||||||||||||||||||||||||
| Off Road | $ | 5,713.1 | 80 | % | $ | 5,706.7 | 79 | % | - | % | $ | 6,984.4 | 78 | % | (18) | % | |||||||||||||||||||||||||||||||
| On Road | 926.5 | 13 | % | 987.8 | 14 | % | (6) | % | 1,184.6 | 13 | % | (17) | % | ||||||||||||||||||||||||||||||||||
| Marine | 512.4 | 7 | % | 480.9 | 7 | % | 7 | % | 765.4 | 9 | % | (37) | % | ||||||||||||||||||||||||||||||||||
| Total sales | $ | 7,152.0 | 100 | % | $ | 7,175.4 | 100 | % | - | % | $ | 8,934.4 | 100 | % | (20) | % | |||||||||||||||||||||||||||||||
| For the Years Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | Percent of Sales | 2024 | Percent of Sales | Percent Change 2025 vs. 2024 | 2023 | Percent of Sales | Percent Change 2024 vs. 2023 | |||||||||||||||||||||||||||||||||||||||
| Off Road | $ | 1,155.1 | 20.2 | % | $ | 1,160.5 | 20.3 | % | - | % | $ | 1,531.6 | 21.9 | % | (24) | % | |||||||||||||||||||||||||||||||
| On Road | 157.2 | 17.0 | % | 179.4 | 18.2 | % | (12) | % | 240.4 | 20.3 | % | (25) | % | ||||||||||||||||||||||||||||||||||
| Marine | 72.5 | 14.2 | % | 80.6 | 16.8 | % | (10) | % | 169.0 | 22.1 | % | (52) | % | ||||||||||||||||||||||||||||||||||
| Corporate costs and other | (16.1) | 46.3 | NM | 18.9 | NM | ||||||||||||||||||||||||||||||||||||||||||
| Total gross profit | $ | 1,368.7 | 19.1 | % | $ | 1,466.8 | 20.4 | % | (7) | % | $ | 1,959.9 | 21.9 | % | (25) | % | |||||||||||||||||||||||||||||||
| NM = not meaningful | |||||||||||||||||||||||||||||||||||||||||||||||
Off Road:
Off Road sales, inclusive of PG&A sales, were approximately flat in 2025. This was primarily the result of increased PG&A sales and utility ORV shipments, mostly offset by reduced snowmobile and recreational ORV shipments. The average per unit sales price for the Off Road segment decreased approximately two percent, primarily due to lower net pricing driven by higher promotional costs.
Sales to customers outside of North America were approximately flat in 2025. This was primarily the result of reduced ORV shipments, mostly offset by increased snowmobile shipments.
Gross profit, as a percentage of sales, decreased in 2025 primarily due to incremental tariff charges and lower net pricing driven by higher promotional costs, partially offset by favorable operating costs, lower warranty expense and favorable product mix.
Additional information on our end markets for 2025:
•Polaris North America utility unit retail sales up mid-single digits percent
•Polaris North America recreation excluding youth unit retail sales down high-sigle digits percent
•Total Polaris North America ORV excluding youth unit retail sales up low-single digits percent
•Estimated North America industry ORV excluding youth unit retail sales up low-single digits percent
•Total Polaris North America ORV excluding youth dealer inventories down approximately nine percent
•Polaris North America snowmobile unit retail sales for the 2025-2026 season-to-date period through December 31, 2025 up high-forties percent
•Estimated North America industry snowmobile unit retail sales for the 2025-2026 season-to-date period through December 31, 2025 up mid-teens percent
•Total Polaris North America snowmobile dealer inventories down approximately 43 percent
On Road:
On Road sales, inclusive of PG&A sales, decreased six percent in 2025, primarily as a result of decreased shipments across the product portfolio. The average per unit sales price for the On Road segment increased approximately four percent, primarily driven by product mix and higher net pricing.
On Road sales to customers outside of North America decreased six percent in 2025, primarily as a result of decreased sales in Europe.
Gross profit, as a percentage of sales, decreased in 2025 primarily due to unfavorable product mix and incremental tariff charges, partially offset by favorable operating costs.
Additional information on our end markets for 2025:
•Indian Motorcycle North America unit retail sales down low-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 down approximately six percent
Marine:
Marine sales increased seven percent as a result of increased shipments. The average per unit sales price for the Marine segment decreased approximately one percent, primarily due to product mix.
Gross profit, as a percentage of sales, decreased in 2025 primarily due to higher operational costs and unfavorable product mix, partially offset by higher net pricing.
Additional information on our end markets for 2025:
•Polaris U.S pontoon unit retail sales down high-single digits percent
•Estimated U.S. industry pontoon unit retail sales down low-double digits percent
•Polaris U.S. deck boat unit retail sales down high-teens percent
•Estimate U.S. industry deck boat unit retail sales down high-teens percent
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 (loss) income, excluding interest expense, income tax expense, depreciation and amortization, and certain other non-cash, non-recurring, or non-operating
items impacting net (loss) income from time to time. For example, costs associated with 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 adjusted 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 (loss) income 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 (loss) income, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the periods presented:
| For the Years Ended December 31, | |||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Sales | $ | 7,152.0 | $ | 7,175.4 | $ | 8,934.4 | |||||||||||
|
Product wind downs (5)
|
(9.2) | (0.7) | - | ||||||||||||||
| Adjusted sales | $ | 7,142.8 | $ | 7,174.7 | $ | 8,934.4 | |||||||||||
| Net (loss) income | $ | (464.8) | $ | 111.2 | $ | 502.7 | |||||||||||
| (Benefit) provision for income taxes | (67.9) | 29.6 | 117.7 | ||||||||||||||
| Interest expense | 131.4 | 137.0 | 125.0 | ||||||||||||||
| Depreciation | 263.5 | 264.4 | 241.2 | ||||||||||||||
|
Intangible amortization (1)
|
23.0 | 21.9 | 17.7 | ||||||||||||||
|
Distributions from other affiliates (2)
|
- | - | (1.4) | ||||||||||||||
|
Acquisition-related costs(3)
|
0.2 | 1.4 | 1.3 | ||||||||||||||
|
Restructuring (4)
|
20.1 | 23.4 | 8.2 | ||||||||||||||
|
Product wind downs (5)
|
10.4 | 10.0 | - | ||||||||||||||
|
Class action litigation expenses(6)
|
8.0 | 7.0 | 8.5 | ||||||||||||||
|
Impairment charges (7)
|
155.9 | 29.5 | - | ||||||||||||||
|
Loss on disposal group held for sale (8)
|
330.4 | - | - | ||||||||||||||
| Adjusted EBITDA | $ | 410.2 | $ | 635.4 | $ | 1,020.9 | |||||||||||
| Adjusted EBITDA Margin | 5.7 | % | 8.9 | % | 11.4 | % | |||||||||||
| (1) Represents amortization expense for intangible assets acquired through business combinations and asset acquisitions | |||||||||||||||||
| (2) Represents distributions received related to an impaired investment held by the Company | |||||||||||||||||
| (3) Represents adjustments for integration and acquisition-related expenses | |||||||||||||||||
| (4) Represents adjustments for corporate restructuring | |||||||||||||||||
| (5) Represents adjustments related to product wind downs, including the FTR product line within the Company's On Road segment and the Timbersled product line within the Company's Off Road segment | |||||||||||||||||
| (6) Represents adjustments for certain class action litigation-related expenses | |||||||||||||||||
| (7) Represents goodwill impairment charges associated with the Company's On Road segment, impairment charges related to other intangible assets associated with the Company's Off Road segment, and impairment charges related to strategic investments held by the Company | |||||||||||||||||
| (8) Represents impairment and other charges recorded to report the held for sale Indian Motorcycle business at fair value less an amount of estimated transaction costs | |||||||||||||||||
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, capital investments, cash dividends to shareholders, and repurchases and retirement of common stock for at least the next 12 months and for the foreseeable future thereafter.
Cash Flows
The following table summarizes the cash flows from operating, investing and financing activities:
| ($ in millions) | For the Years Ended December 31, | ||||||||||||||||||||||||||||
| 2025 | 2024 |
Change 2025 vs. 2024 |
2023 |
Change 2024 vs. 2023 |
|||||||||||||||||||||||||
| Total cash provided by (used for): | |||||||||||||||||||||||||||||
| Operating activities | $ | 741.0 | $ | 268.2 | $ | 472.8 | $ | 925.8 | $ | (657.6) | |||||||||||||||||||
| Investing activities | (139.5) | (270.9) | 131.4 | (462.0) | 191.1 | ||||||||||||||||||||||||
| Financing activities | (693.0) | (59.2) | (633.8) | (431.3) | 372.1 | ||||||||||||||||||||||||
Operating Activities:
The increase in net cash provided by operating activities in 2025 was primarily the result of working capital improvements, partially offset by lower net income.
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, and distributions from and contributions to Polaris Acceptance. Net cash used for investing activities decreased due to a reduction in property, equipment and tooling purchases, as well as strategic investments in 2024 that did not recur in 2025.
Financing Activities:
The increase in net cash used for financing activities was primarily the result of net repayments under debt arrangements in 2025 compared to net borrowings under debt arrangements in 2024, as well as lower share repurchases. Net repayments totaled $543.6 million in 2025 compared to net borrowings of $165.8 million in 2024.
Financing Arrangements:
We were party to an unsecured Master Note Purchase Agreement, as amended and supplemented, under which we previously issued senior notes. All outstanding unsecured senior notes were prepaid in full in June 2025 using proceeds of revolving loans under the Company's unsecured credit facility.
We are also party to an unsecured credit facility, which includes a $1.4 billion variable interest rate Revolving Loan Facility that matures in December 2029, under which we have unsecured borrowings. As of December 31, 2025, there were borrowings of $35.4 million outstanding under the Revolving Loan Facility. Our credit facility also includes a Term Loan Facility, pursuant to which $475.0 million was outstanding as of December 31, 2025. We are required to make principal payments under the Term Loan Facility totaling $25.0 million over the next 12 months. We amended the agreement governing the credit facility (the "Credit Facility Amendment") in June 2025 to modify the financial covenants in the existing credit agreement for each quarter ending June 30, 2025 through and including June 30, 2026 (the "Covenant Relief Period"). During the Covenant Relief Period, the Credit Facility Amendment limits us from repurchasing shares and paying dividends other than regular quarterly dividends and certain other exceptions, and limits
the amount of debt certain of our subsidiaries may incur. For the credit facility, interest is charged at rates based on adjusted Term SOFR plus the applicable add-on percentage, as defined in the credit agreement. As of December 31, 2025, we had $1.4 billion of availability on the Revolving Loan Facility.
In July 2024, we amended the credit facility to provide for a new incremental 364-day term loan in the amount of $400 million (the "Incremental Term Loan Facility"). At the time of issuance, the Incremental Term Loan Facility had a term ending in July 2025. The Credit Facility Amendment extended the maturity date of the Incremental Term Loan Facility to June 26, 2026. The Incremental Term Loan Facility was prepaid in full in November 2025 using proceeds from the Company's Senior Notes due 2031 issued in November 2025 in an underwritten public offering.
The credit agreement contains 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. The interest coverage ratio is calculated as Adjusted EBITDA to interest expense for the then most-recently ended four fiscal quarters. The leverage ratio is calculated as consolidated funded indebtedness less cash and cash equivalents, capped at $300 million, to Adjusted EBITDA for the then most-recently ended four fiscal quarters. The Credit Facility Amendment completed in June 2025 modified the requirements related to the interest coverage ratio and leverage ratio during the Covenant Relief Period. During the Covenant Relief Period, the interest coverage ratio is 2.50 to 1.00 for the quarters ending June 30, 2025, September 30, 2025 and December 31, 2025, and 2.00 to 1.00 for the quarters ending March 31, 2026 and June 30, 2026. During the Covenant Relief Period, the leverage ratio is 4.00 to 1.00 for the quarter ending June 30, 2025, 4.50 to 1.00 for the quarter ending September 30, 2025, and 5.50 to 1.00 for the quarters ending December 31, 2025, March 31, 2026 and June 30, 2026.
In November 2023, we issued $500 million aggregate principal amount of 6.95% Senior Notes due 2029 in an underwritten public offering. We received approximately $492 million in net proceeds from the notes offering after deducting the underwriting discount and other fees and expenses. The 6.95% Senior Notes bear interest at a rate of 6.95% per year and mature in March 2029. In November 2025, the Company issued $500 million aggregate principal amount of 5.60% Senior Notes due 2031 in an underwritten public offering. The Company received approximately $497 million in net proceeds from the offering after deducting the underwriting discount and other fees and expenses. The 5.60% Senior Notes bear interest at a rate of 5.60% and mature in March 2031. All of the Company's senior notes are governed by an indenture and are subject to customary covenants and make-whole provisions upon early redemption.
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 $36.8 million was outstanding as of December 31, 2025.
As of December 31, 2025 and December 31, 2024, we were in compliance with all debt covenants. Our debt to total capital ratio was 65 percent and 62 percent as of December 31, 2025 and December 31, 2024, respectively. Additionally, as of December 31, 2025, we had outstanding letters of credit of $58.4 million, primarily related to purchase obligations for raw materials.
Share Repurchases:
We did not repurchase shares of our common stock in open-market transactions under our share repurchase program during 2025. As of December 31, 2025, up to an additional $1.1 billion of our common stock remains available for repurchase under our share repurchase program.
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 ORVs, snowmobiles, 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, 2025 and 2024, the outstanding amount financed worldwide by dealers under these arrangements was approximately $2,085.5 million and $2,255.5 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, 2025, the potential aggregate repurchase obligations were approximately $333.9 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 finance 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 2025, consumers financed 30 percent of our vehicles sold in the United States through these arrangements. The volume of installment credit contracts written in calendar year 2025 with these institutions was $1,436.3 million, a three percent decrease from 2024.
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 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.For the majority of 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 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 finance companies up to certain limits. Our financial exposure under these repurchase agreements is limited to the difference between the amounts unpaid by the dealer with respect to the repurchased product plus costs of repossession 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 sheets until they are ultimately paid. As of December 31, 2025 and 2024, accrued sales promotions and incentives were $278.4 million and $249.0 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 sheets until they are ultimately paid. As of December 31, 2025 and 2024, the accrued warranty liability was
$135.5 million and $162.8 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. We purchase excess insurance coverage annually 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 actuarial analysis, which considers claims experience and historical trends, along with an analysis of current claims, to assist in determining the appropriate loss reserve levels. As of December 31, 2025 and 2024, we had accruals of $374.1 million and $385.3 million, respectively, for the probable payment of pending claims related to product liability litigation associated with our products. Amounts due from insurance carriers, to the extent applicable, reduce our financial exposure to product liability claims. As of December 31, 2025 and 2024, we recorded $182.5 million and $227.1 million, respectively, for probable insurance recoveries related to product liability accruals. Adverse determination of material product liability claims made against us could have a material adverse effect on our financial condition and results of operations.
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 considering 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 differ significantly 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 revenue and EBITDA. We determine our estimated values by applying these comparable revenue and 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 second quarter of 2025, as a result of a continued decline in financial performance and prolonged deterioration of industry conditions, the Company determined it was more-likely-than-not that the fair value of the On Road reporting unit was less than its carrying value. As a result, the Company performed an interim quantitative goodwill impairment test of the On Road reporting unit in the second quarter of 2025. As a result of this analysis, the Company recorded an impairment charge of $52.6 million in the second quarter of 2025 related to goodwill of the On Road reporting unit. Subsequent to the impairment charge, there is no remaining goodwill balance for the On Road reporting unit.
In the fourth quarter of 2025, 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 quantitative goodwill test for the Off Road and Marine reporting units. No assessment was performed for the On Road reporting unit as it did not have a goodwill balance as of the annual testing date. The difference between the fair value and carrying value for both the Off Road and Marine reporting units was in excess of 10%. While management believes the projections, discount rate, and other assumptions and judgments made were reasonable, the estimated fair value for the Marine reporting unit was particularly dependent upon future industry strength which will provide improved sales, margin expansion and cash flow growth. As a result, there can be no assurance that the estimates and assumptions made in our analysis will prove to be an accurate prediction of the future. To the extent future operating results differ from those in our current forecast or our assumptions change pertaining to the markets in which we compete, it is possible that an impairment charge could be recorded in a future accounting period.
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 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 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 2025, we completed the annual impairment test for indefinite-lived intangible assets, and also tested our amortizable developed technology intangible asset for impairment. As a result of entering into a definitive agreement for the sale of the Indian Motorcycle business, impairment charges of $17.5 million were recorded during the fourth quarter of 2025 related to an indefinite-lived brand/trade name in the Company's On Road segment. Additionally, we recorded impairment charges of $53.9 million during the fourth quarter of 2025 related to an indefinite-lived brand/trade name and an amortizable developed technology intangible asset in the Company's Off Road segment as a result of changes in the planned usage of such assets. It was determined that all other remaining 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."
Polaris Inc. published this content on February 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 13, 2026 at 19:24 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]