Shareholders' Equity

6 Months Ended

Jun. 30, 2014

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Shareholders' Equity

Note 5. Shareholders’ Equity

During the six months ended June 30, 2014, Polaris paid $3,945,000 to repurchase and retire approximately 30,000 shares of its common stock. As of June 30, 2014, the Board of Directors has authorized the Company to repurchase up to an additional 1,574,000 shares of Polaris stock. The repurchase of any or all such shares authorized for repurchase will be governed by applicable SEC rules and dependent on management’s assessment of market conditions. Polaris paid a regular cash dividend of $0.48 per share on June 16, 2014 to holders of record at the close of business on June 2, 2014. On July 23, 2014, the Polaris Board of Directors declared a regular cash dividend of $0.48 per share payable on September 15, 2014 to holders of record of such shares at the close of business on September 2, 2014. Cash dividends declared per common share for the three and six months ended June 30, 2014 and 2013, were as follows:

	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Cash dividends declared and paid per common share	$	0.48	$	0.42	$	0.96	$	0.84

Net income per share

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each period, including shares earned under The Deferred Compensation Plan for Directors (“Director Plan”), the ESOP and deferred stock units under the 2007 Omnibus Incentive Plan (“Omnibus Plan”). Diluted earnings per share is computed under the treasury stock method and is calculated to compute the dilutive effect of outstanding stock options issued under the 1995 Stock Option Plan and the 2003 Non-Employee Director Stock Option Plan (collectively, the “Option Plans”) and certain shares issued under the Omnibus Plan. A reconciliation of these amounts is as follows (in thousands):

	Three months ended June 30,		Six months ended June 30,
	2014	2013	2014	2013
Weighted average number of common shares outstanding	65,769	68,536	65,663	68,445
Director Plan and deferred stock units	209	233	205	287
ESOP	82	98	78	98
Common shares outstanding—basic	66,060	68,867	65,946	68,830
Dilutive effect of Option Plans and Omnibus Plan	2,028	1,888	2,077	1,929
Common and potential common shares outstanding—diluted	68,088	70,755	68,023	70,759

During the three and six months ended June 30, 2014, the number of options that could potentially dilute earnings per share on a fully diluted basis that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive were 665,000 and 513,000, respectively, compared to 1,018,000 and 799,000 for the same periods in 2013.

Accumulated other comprehensive income

Changes in the accumulated other comprehensive income balance is as follows (in thousands):

	Foreign Currency Items			Cash Flow Hedging Derivatives			Accumulated Other Comprehensive Income
Balance as of December 31, 2013	$	18,582		$	179		$	18,761
Reclassification to the income statement	—			(2,037		)	(2,037		)
Change in fair value	(152		)	1,022			870
Balance as of June 30, 2014	$	18,430		$	(836	)	$	17,594

The table below provides data about the amount of gains and losses, net of tax, reclassified from accumulated other comprehensive income into the income statement for cash flow derivatives designated as hedging instruments for the three and six months ended June 30, 2014 and 2013 (in thousands):

Derivatives in Cash Flow Hedging Relationships	Location of (Gain) Loss Reclassified from Accumulated OCI into Income	Three months ended June 30,						Six months ended June 30,
		2014			2013			2014			2013
Foreign currency contracts	Other (income), net	$	(1,687	)	$	(891	)	$	(2,097	)	$	(1,111	)
Foreign currency contracts	Cost of sales	(42		)	537			60			753
Total		$	(1,729	)	$	(354	)	$	(2,037	)	$	(358	)

The net amount of the existing gains or losses at June 30, 2014 that is expected to be reclassified into the income statement within the next 12 months is expected to not be material. See Note 9 for further information regarding Polaris' derivative activities.