Financing Agreement

Debt and capital lease obligations and the average related interest rates were as follows (in thousands):



	Average interest rate at December 31, 2015	Maturity	December 31, 2015		December 31, 2014
Revolving loan facility	1.07%	March 2020	$	225,707	—
Senior notes—fixed rate	3.81%	May 2018	25,000		$	25,000
Senior notes—fixed rate	4.60%	May 2021	75,000		75,000
Senior notes—fixed rate	3.13%	December 2020	100,000		100,000
Capital lease obligations	5.00%	Various through 2029	21,874		26,148
Notes payable and other	3.50%	June 2027	15,698		—
Total debt, capital lease obligations, and notes payable			$	463,279	$	226,148
Less: current maturities			5,059		2,528
Total long-term debt, capital lease obligations, and notes payable			$	458,220	$	223,620

Bank financing. In August 2011, Polaris entered into a $350,000,000 unsecured revolving loan facility. In January 2013, Polaris amended the loan facility to provide more beneficial covenant and interest rate terms and extend the expiration date from August 2016 to January 2018. In March 2015, Polaris amended the loan facility to increase the facility to $500,000,000 and to provide more beneficial covenant and interest rate terms. The amended terms also extended the expiration date to March 2020. Interest is charged at rates based on a LIBOR or “prime” base rate.

In December 2010, the Company entered into a Master Note Purchase Agreement to issue $25,000,000 of unsecured senior notes due May 2018 and $75,000,000 of unsecured senior notes due May 2021 (collectively, the “Senior Notes”). The Senior Notes were issued in May 2011. In December 2013, the Company entered into a First Supplement to Master Note Purchase Agreement, under which the Company issued $100,000,000 of unsecured senior notes due December 2020.

The unsecured revolving loan facility and the amended Master Note Purchase Agreement contain covenants that require Polaris to maintain certain financial ratios, including minimum interest coverage and maximum leverage ratios. Polaris was in compliance with all such covenants as of December 31, 2015.

A property lease agreement for a manufacturing facility which Polaris began occupying in Opole, Poland commenced in February 2014. The Poland property lease is accounted for as a capital lease.

In January 2015, the Company announced plans to build a new production facility in Huntsville, Alabama to provide additional capacity and flexibility. The 725,000 square-foot facility will focus on ORV and Slingshot production. The Company broke ground on the facility in the first quarter of 2015 and expects to start production in the second quarter of 2016. A mortgage note payable agreement of $14,500,000 for land, on which Polaris is building the facility, commenced in February 2015. The payment of principal and interest for the note payable is forgivable if the Company satisfies certain job commitments over the term of the note. Forgivable loans related to other Company facilities are also included within notes payable.

The following summarizes activity under Polaris’ credit arrangements (dollars in thousands):



	2015			2014			2013
Total borrowings at December 31	$	425,707		$	200,000		$	280,500
Average outstanding borrowings during year	$	403,097		$	361,715		$	138,400
Maximum outstanding borrowings during year	$	523,097		$	500,000		$	411,000
Interest rate at December 31	2.33		%	3.77		%	2.98		%

The carrying amount of the Company’s long-term debt approximates its fair value as December 31, 2015 and 2014.

Letters of credit. At December 31, 2015, Polaris had open letters of credit totaling $21,563,000. The amounts are primarily related to inventory purchases and are reduced as the purchases are received.

Dealer financing programs. Certain finance companies, including Polaris Acceptance, an affiliate (see Note 8), provide floor plan financing to dealers on the purchase of Polaris products. The amount financed by worldwide dealers under these arrangements at December 31, 2015, was approximately $1,562,014,000. Polaris has agreed to repurchase products repossessed by the finance companies up to an annual maximum of no more than 15 percent of the average month-end balances outstanding during the prior calendar year. Polaris’ financial exposure under these arrangements is limited to the difference between the amount paid to the finance companies for repurchases and the amount received on the resale of the repossessed product. No material losses have been incurred under these agreements during the periods presented. As a part of its marketing program, Polaris contributes to the cost of dealer financing up to certain limits and subject to certain conditions. Such expenditures are included as an offset to sales in the accompanying consolidated statements of income.