8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 2, 2018

POLARIS INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

Minnesota	1-11411	41-1790959
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)
2100 Highway 55, Medina MN		55340
(Address of principal executive offices)		(Zip Code)
	(763) 542-0500 (Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

EXPLANATORY NOTE

On July 2, 2018, Polaris Industries, Inc. (“Polaris”) filed a current report on Form 8-K with the Securities and Exchange Commission (the “Initial 8-K”) reporting Polaris’ acquisition of Boat Holdings, LLC (“Boat Holdings”). Polaris is filing this Amendment No. 1 (this “Amendment No. 1”) to the Initial Form 8-K to amend and supplement the Initial Form 8-K to include financial statements and pro forma financial information as required by Item 9.01(a) and Item 9.01(b) of Form 8-K. This Amendment No. 1 should be read together with the Initial 8-K.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired.

The unaudited condensed consolidated financial statements of Boat Holdings as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017 are filed as Exhibit 99.1 to this Amendment No. 1 and incorporated herein

by reference. The audited consolidated financial statements of Boat Holdings as of and for the year ended December 31, 2017 are filed as Exhibit 99.2 to this Amendment No. 1 and incorporated herein by reference.

(b) Pro Forma Financial Information.

The unaudited pro forma condensed combined balance sheet as of March 31, 2018 and unaudited pro forma condensed combined statements of income for the three months ended March 31, 2018 and the year ended December 31, 2017 and the notes to such unaudited pro forma condensed combined financial statements, all giving effect to the acquisition of Boat Holdings, are filed as Exhibit 99.3 and incorporated herein by reference.

(d) Exhibits.

Exhibit Number	Description
23.1	Consent of RSM US, LLP, Independent Auditors of Boat Holdings, LLC
99.1	Unaudited condensed consolidated financial statements of Boat Holdings, LLC as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017
99.2	Audited consolidated financial statements of Boat Holdings, LLC as of and for the year ended December 31, 2017
99.3	Unaudited pro forma condensed combined financial statements as of and for the three months ended March 31, 2018 and unaudited pro forma condensed combined statement of income for the year ended December 31, 2017

SIGNATURES

Pursuant to the requirements 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.

		POLARIS INDUSTRIES INC. (Registrant)
Date:	September 7, 2018	/s/ MICHAEL T. SPEETZEN
		Michael T. Speetzen Executive Vice President — Finance and Chief Financial Officer

EXHIBITS

Exhibit Number	Description	Method of Filing
23.1	Consent of RSM US, LLP, Independent Auditors of Boat Holdings, LLC	Filed herewith
99.1	Unaudited condensed consolidated financial statements of Boat Holdings, LLC as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and 2017	Filed herewith
99.2	Audited consolidated financial statements of Boat Holdings, LLC as of and for the year ended December 31, 2017	Filed herewith
99.3	Unaudited pro forma condensed combined financial statements as of and for the three months ended March 31, 2018 and unaudited pro forma condensed combined statement of income for the year ended December 31, 2017	Filed herewith

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITOR

We consent to the incorporation by reference in the Registration Statements (Nos. 333-161919, 333-147799, 33-57503, 33-60157, 333-05463, 333-21007, 333-77765, 333-94451, 333-84478, 333-110541, 333-174159, 333-129335 and 333-207631) on Form S-8 of Polaris Industries Inc. of our report dated June 19, 2018, relating to the consolidated financial statements of Boat Holdings, LLC and Subsidiaries and Affiliate, appearing in this Current Report on Form 8-K/A.

/s/ RSM US, LLP

Elkhart, Indiana

September 7, 2018

EX-99.1

EXHIBIT 99.1

BOAT HOLDINGS, LLC UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2018 AND DECEMBER 31, 2017 AND FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017
	Page
Unaudited Condensed Consolidated Balance Sheets	2
Unaudited Condensed Consolidated Statements of Income	3
Unaudited Condensed Consolidated Statements of Cash Flows	4
Unaudited Notes to Condensed Consolidated Financial Statements	5

1

BOAT HOLDINGS, LLC UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31, 2018			December 31, 2017
Assets	(Unaudited)
Current assets:
Cash	$	11,779,391		$	10,163,887
Trade receivables	19,767,494			4,463,958
Other receivables	2,975,736			1,847,977
Inventories	38,506,504			36,483,133
Prepaid expenses	1,227,282			953,682
Total current assets	74,256,407			53,912,637
Property and equipment, at depreciated cost	30,920,734			30,020,101
Goodwill	600,226			600,226
Intangible assets, net of amortization	3,562,068			3,724,509
Total assets	$	109,339,435		$	88,257,473
Liabilities and Members’ (Deficit)
Current liabilities:
Current maturities of long-term debt	$	8,633,243		$	11,511,388
Current portion of deferred revenue	1,957,143			1,957,143
Accounts payable	31,838,899			19,428,366
Accrued liabilities	22,417,676			21,720,611
Total current liabilities	64,846,961			54,617,508
Long-term debt, less current maturities	99,274,193			108,743,873
Deferred revenue, less current maturities	10,275,000			10,764,286
Commitments and contingencies (Note 11)
Members’ (deficit):
Class B Membership Interests	(30,329,416		)	(39,285,484		)
Class A Membership Interests	(19,194,643		)	(24,862,687		)
Class C Membership Interests	(3,913,477		)	(5,069,099		)
Class D Membership Interests	(7,826,957		)	(10,138,203		)
Class E Membership Interests	(7,826,957		)	(10,138,203		)
Noncontrolling interest	4,034,731			3,625,482
Total members’ (deficit)	(65,056,719		)	(85,868,194		)
Total liabilities and members’ (deficit)	$	109,339,435		$	88,257,473

See notes to unaudited condensed consolidated financial statements.

2

BOAT HOLDINGS, LLC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	Three months ended March 31,
	2018			2017
	(Unaudited)			(Unaudited)
Net sales	$	167,947,447		$	146,550,157
Cost of goods sold	130,039,785			114,477,858
Gross profit	37,907,662			32,072,299
Selling, general, and administrative expenses	16,332,123			14,271,271
Operating income	21,575,539			17,801,028
Nonoperating income (expense):
Interest expense, net	(1,274,666		)	(395,354		)
Other	531,407			181,001
Net income	20,832,280			17,586,675
Less: noncontrolling interest in net income of subsidiary and affiliate	(411,330		)	(367,491		)
Net income attributable to Boat Holdings, LLC	$	20,420,950		$	17,219,184

See notes to unaudited condensed consolidated financial statements.

3

BOAT HOLDINGS, LLC UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three months ended March 31,
	2018			2017
Cash flows from operating activities:	(Unaudited)			(Unaudited)
Net income	$	20,832,280		$	17,586,675
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	812,836			790,640
Amortization of intangibles	161,692			162,442
Recognition of deferred revenue	(489,286		)	—
Loss on disposal of equipment	14,272			80,664
Amortization of deferred financing costs	93,602			—
(Increase) decrease in:
Trade receivables	(16,431,295		)	(10,005,499		)
Inventories	(2,023,371		)	(767,398		)
Prepaid expenses and others receivables	(273,600		)	15,936
Increase in:
Accounts payable	12,410,533			13,946,261
Accrued liabilities	1,869,906			(3,070,833		)
Net cash provided by operating activities	16,977,569			18,738,888
Cash flows from investing activities:
Purchase of property and equipment	(1,727,797		)	(1,111,754		)
Net cash (used in) investing activities	(1,727,797		)	(1,111,754		)
Cash flows from financing activities:
Principal payments on long-term borrowings	(12,441,427		)	(2,108,000		)
Distributions	(1,190,841		)	(2,762,047		)
Distributions to noncontrolling interest	(2,000		)	(393,023		)
Net cash (used in) financing activities	(13,634,268		)	(5,263,070		)
Increase in cash	1,615,504			12,364,064
Cash, beginning	10,163,887			8,616,360
Cash, ending	$	11,779,391		$	20,980,424
Supplemental disclosures of cash flow information
Cash payments for interest	$	1,336,388		$	109,127
Dividends accrued, not paid	$	709,756		$	6,015,268

See notes to unaudited condensed consolidated financial statements.

4

BOAT HOLDINGS, LLC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: Boat Holdings, LLC is a holding company. Boat Holdings, LLC and Subsidiaries is collectively referred to as the “Company” in the notes to the unaudited condensed consolidated financial statements.

Pontoon Boat, LLC d/b/a Bennington, is primarily engaged in the manufacture and marketing of pontoon boats for sale via its dealership network throughout the United States and Canada under the name “Bennington”, generally under terms of floorplan arrangements that are typical in the marine business. Bennington also sells optional equipment and replacement parts to its dealers.

Highwater Marine, LLC is primarily engaged in the manufacture of boats, including recreational cruisers, pontoons, deck boats and cuddys/bowriders for sale via its dealership network throughout the United States and Canada under the names “Rinker”, “Godfrey”, and “Hurricane” respectively, generally under terms of floorplan arrangements that are typical in the marine business. Highwater Marine, LLC also sells optional equipment and replacement parts to its dealers.

Pontoon Boat Disc Corporation and Pontoon-Highwater Disc Partners, LLC are interest charge domestic international sales corporations.

Marine Realty, LLC is a real estate company that leases real estate to Pontoon Boat, LLC d/b/a Bennington.

Reporting entity and principles of consolidation: The unaudited condensed consolidated financial statements include the accounts of Boat Holdings, LLC (“Holdings”) and its wholly-owned subsidiaries, Pontoon Boat, LLC d/b/a Bennington, Pontoon Boat Disc Corporation, Pontoon-Highwater Disc Partners, LLC, a 90 percent owned subsidiary, Highwater Marine, LLC, and an affiliate, Marine Realty, LLC, collectively referred to as the Company.

Marine Realty, LLC exists for the sole purpose of leasing real estate to Pontoon Boat, LLC d/b/a Bennington and requires the financial support of Pontoon Boat, LLC d/b/a Bennington through lease agreements. Marine Realty, LLC does not have the right to receive the expected residual returns as all lease payments received are used for debt service costs. Management has determined that this relationship represents variable interests in Marine Realty, LLC. Pontoon Boat, LLC d/b/a Bennington is the primary beneficiary of the variable interest entity (“VIE”) which requires Marine Realty, LLC to be consolidated in accordance with accounting principles generally accepted in the United States of America. Accordingly, the financial statements of Marine Realty, LLC have been included in these unaudited condensed consolidated financial statements.

All significant intercompany accounts and transactions between Holdings and subsidiaries and affiliates have been eliminated in consolidation.

Noncontrolling interest: Noncontrolling interest represents the portion of equity in Highwater Marine, LLC and in Marine Realty, LLC not attributable, directly or indirectly, to Holdings. The profit or loss derived from the noncontrolling interest in the performance of Highwater Marine, LLC and Marine Realty, LLC is allocated to the net income attributable to the noncontrolling interest in the 2018 and 2017 unaudited condensed consolidated statement of income.

Basis of presentation: The accompanying unaudited condensed consolidated financial statements of Boat Holdings, LLC and Subsidiaries and Affiliate have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and, therefore, do not include all information and disclosures of results of operations, financial position and changes in cash flows in conformity with accounting principles generally accepted in the United States for complete financial statements. Accordingly, such statements should be read in conjunction with the Company's annual consolidated financial statements for the year ended December 31, 2017. In the opinion of management, such statements reflect all adjustments (which include only normal recurring adjustments) necessary for fair presentation of the financial position, results of operations, and cash flows for the periods presented. Due to the seasonality trends for certain products and to certain changes in production and shipping cycles, results of such periods are not necessarily indicative of the results to be expected for the complete year.

Subsequent events: The Company has evaluated subsequent events for potential recognition and/or disclosure through August 31, 2018, the date the unaudited condensed consolidated financial statements were available to be issued.

On July 2, 2018, the Company was acquired by Polaris Industries, Inc. valued at a net present value of approximately $805,000,000.

5

Note 2. Inventories

As of March 31, 2018 and December 31, 2017, inventories consisted of the following:

	March 31, 2018		December 31, 2017
	(Unaudited)
Raw materials	$	22,642,779	$	22,206,882
Work in process	3,803,470		3,870,066
Finished goods	6,813,765		6,560,178
Engines	5,246,490		3,846,007
	$	38,506,504	$	36,483,133

Note 3. Property and Equipment

Property and equipment as of March 31, 2018 and December 31, 2017 is as follows:

	March 31, 2018		December 31, 2017
	(Unaudited)
Land and improvements	$	4,216,866	$	4,216,866
Buildings and improvements	17,837,467		17,837,467
Leasehold improvements	6,390,112		5,678,623
Machinery and equipment	6,643,594		6,375,578
Furniture and fixtures	1,719,289		1,669,928
Tools and dies	4,011,486		3,967,190
Computer equipment	3,547,443		3,530,956
Construction in progress	1,264,386		652,872
	45,630,643		43,929,480
Less accumulated depreciation	14,709,909		13,909,379
	$	30,920,734	$	30,020,101

Note 4. Intangible Assets

As of March 31, 2018 and December 31, 2017, intangible assets consisted of the following:

	March 31, 2018 (Unaudited)
	Cost		Accumulated Amortization		Net Book Value		Useful Lives
Trade names	$	4,646,513	2,384,435		$	2,262,078	6-15 Years
Customer list	1,800,000		500,010		1,299,990		6 Years
	$	6,446,513	$	2,884,445	$	3,562,068

	December 31, 2017
	Cost		Accumulated Amortization		Net Book Value		Useful Lives
Trade names	$	4,646,513	2,271,995		$	2,374,518	6-15 Years
Customer list	1,800,000		450,009		1,349,991		6 Years
	$	6,446,513	$	2,722,004	$	3,724,509

Aggregate amortization expense of intangible assets for the three months ended March 31, 2018 and 2017 was $162,500 per period.

6

Approximate annual amortization for intangible assets for the years ending December 31, 2018 through 2022 and thereafter is as follows:

2018 (remainder)	$	487,000
2019	650,000
2020	650,000
2021	592,000
2022	416,000
Thereafter	767,068
	$	3,562,068

Note 5. Accrued Liabilities

Accrued liabilities as of March 31, 2018 and December 31, 2017 consist of the following:

	March 31, 2018		December 31, 2017
	(Unaudited)
Warranty	$	12,415,750	$	10,850,549
Payroll and other related expenses	2,733,735		1,929,705
Dealer interest reimbursement	1,199,879		1,822,957
Insurance	648,908		740,183
Property taxes	999,349		809,831
Accrued dealer incentives	2,926,560		2,732,963
Distributions	709,756		2,273,399
Other	783,739		561,024
	$	22,417,676	$	21,720,611

Note 6. Warranties

The Company provides a limited warranty for its products. The Company's standard warranties require the Company or its dealers to repair or replace defective products during such warranty period at no cost to the consumer. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability for costs at the time product revenue is recognized. Factors that affect the Company's warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. The Company utilizes historical trends to assist in determining the appropriate expense accrual.

Changes in the Company's accrued warranty liability during the three months ended March 31, 2018 and the year ended December 31, 2017 is as follows:

	March 31, 2018			December 31, 2017
	(Unaudited)
Balance, beginning	$	10,850,549		$	8,264,267
Accruals for products sold	2,925,704			9,585,776
Payments made	(1,360,503		)	(6,999,494		)
Balance, ending	$	12,415,750		$	10,850,549

7

Note 7. Line of Credit, Notes Payable and Pledged Assets

Long-term debt as of March 31, 2018 and December 31, 2017 is as follows:

	March 31, 2018		December 31, 2017
	(Unaudited)
Term loan (1) (2)	$	102,729,834	$	105,640,093
Line of credit (3)	6,500,000		16,000,000
Capital lease	200,568		231,734
	109,430,402		121,871,827
Less unamortized debt finance costs	1,522,966		1,616,566
Less current maturities	8,633,243		11,511,388
	$	99,274,193	$	108,743,873

1. The Company has a term note with a bank, which bears interest at LIBOR (1.7 percent at March 31, 2018) plus an applicable margin set by the bank (2.4 percent at March 31, 2018). The term loan requires quarterly principal payments of approximately $2,802,000 and matures in April 2022, at which time a balloon payment of approximately $56,051,000 is due. The loan is collateralized by substantially all assets of the Company and is subject to certain covenants including a leverage ratio and a fixed charge coverage ratio. On March 31, 2018, $100,691,447 was outstanding.

2. The Company has a term loan that requires monthly payments of approximately $42,000, including monthly interest payments at LIBOR (1.7 percent at March 31, 2018), plus 2.65 percent, maturing in June 2022, at which time a balloon payment of approximately $93,000 is due, of which $2,038,387 was outstanding as of March 31, 2018. The loan is collateralized by substantially all assets of the Company and is subject to certain non-financial covenants.

3. The Company has a $40,000,000 revolving line of credit with a bank, $6,500,000 of which was outstanding at March 31, 2018. Borrowings against the line of credit bear interest at LIBOR (1.7 percent at March 31, 2018) plus an applicable margin set by the bank (2.4 percent at March 31, 2018). The revolving line of credit is subject to certain covenants including a leverage ratio and a fixed charge coverage ratio. The borrowings are collateralized by substantially all assets of the Company and are due in April 2022.

Approximate aggregate maturities of outstanding debt in accordance with the agreements described above for the years ending December 31, 2018 through 2022 are as follows:

2018 (remainder)	$	8,633,000
2019	11,723,000
2020	11,720,000
2021	11,722,000
2022	65,632,402
	$	109,430,402

Note 8. Unearned Revenue

On July 1, 2017, the Company entered into a seven year exclusive floor planning arrangement with a finance company. In exchange for exclusivity, the finance company agreed to an incentive cash payment of $13,700,000 paid to the Company at the date of execution of the agreement. The Company is recognizing revenue from the incentive payment on a pro-rata basis over the term of the agreement. For three months ended March 31, 2018, the Company recognized approximately $489,000 of income in the accompanying unaudited condensed consolidated statement of income.

8

Approximate unearned revenue to be recognized in income for the years ending December 31, 2018 through 2022 and thereafter are as follows:

2018 (remainder)	$	1,468,000
2019	1,957,000
2020	1,957,000
2021	1,957,000
2022	1,957,000
Thereafter	2,936,000
	$	12,232,000

Note 9. Leases, Note Receivable and Related Party Transactions

Pontoon Boat, LLC leases its facilities from Marine Realty, LLC, a variable interest entity (as described in Note 1), under a verbal month-to-month lease. The leases provide that the lessee pay all property taxes, insurance and maintenance plus monthly rentals of approximately $64,000.

Pontoon Boat, LLC also leases various vehicles and equipment with monthly payments totaling approximately $19,000 under operating leases expiring at various dates through December 2023. As of March 31, 2018, approximate minimum future lease and rentals under the noncancelable operating agreements are as follows:

During the year ending December 31,
2018 (remainder)	$	114,000
2019	102,000
2020	69,000
2021	29,000
2022	18,000
Thereafter	14,000
	$	346,000

Note 10. Variable Interest Entity

Boat Holdings is the primary beneficiary of and consolidates a related party (Marine Realty, LLC) that is a variable interest entity (VIE). Marine Realty does not have the right to receive the expected residual returns as all lease payments received are used for the debt service costs. Through the lease agreements, Boat Holdings controls the significant activities of the VIE.

The total amount of the VIE’s borrowings was approximately $2,038,000 as of March 31, 2018. The total carrying value of Marine Realty’s assets is approximately $6,355,000 at March 31, 2018. In the event Marine Realty is unable to satisfy its obligations, the value of the assets pledged on the bank debt would be available to liquidate and recover some or all of the amounts paid.

Under the terms of the lease agreements with the VIE, Boat Holdings is required to make monthly payments currently approximating $64,000 to the VIE. The leases expire at various dates over the next five years and are subject to voluntary renewal periods. In addition, the Company is required to pay for property taxes, insurance and maintenance on the related property.

9

The following table shows the approximate significance of the VIE as of March 31, 2018 and December 31, 2017 and for the three months ended March 31, 2018 and March 31, 2017:

	March 31, 2018		December 31, 2017
	(Unaudited)
Cash	$	368,930	$	315,290
Prepaid expenses	28,901		28,901
Property and equipment, net	5,956,980		6,014,967
	$	6,354,811	$	6,359,158
Current maturities of long-term debt	$	317,423	$	423,231
Accrued liabilities	633,269		621,799
Long-term debt, less current maturities	2,728,845		2,729,982
Noncontrolling interest	2,675,274		2,584,146
	$	6,354,811	$	6,359,158
	Three months ended March 31,
	2018		2017
	(Unaudited)		(Unaudited)
Net income	$	91,128	$	94,682

Note 11. Commitments and Contingencies

Repurchase agreements: In connection with the wholesale floorplan financing of boats, the Company has entered into repurchase agreements with lending institutions. The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institutions through payment date by the dealer, generally not exceeding 900 days. The outstanding obligation under this agreement was approximately $201,000,000 at March 31, 2018. Such agreements are customary in the industry and the Company’s exposure to loss under such agreements is limited by the resale value of the inventory and related costs to sell the unit, which is required to be repurchased.

The reserve methodology used to record an estimated expense and loss reserve in each accounting period is based upon the Company’s repurchase history. Subsequent to the inception of the repurchase commitment, the Company evaluates the likelihood of repurchase and adjusts the estimated loss reserve and related income statement account accordingly. Potential increases in losses may result from any market difficulties in the marine industry. If the Company were obligated to repurchase a significant number of units under any repurchase agreement, its business, operating results and financial condition could be adversely affected. At March 31, 2018, the Company determined that no reserve was necessary related to these agreements.

Inventory purchase commitment: On June 23, 2017, the Company entered into a ten year purchase commitment with an engine manufacturer, whereby the Company makes variable annual purchase commitments which determine the Company’s engine discount percentage. Additionally, the Company is subject to an aggregate minimum purchase commitment over the life of the agreement. If the minimum purchase amount in any given year is not met, the Company is subjected to a 1 percent shortfall penalty, whereby the penalty is withheld from future discounts to the extent available. If no funds are available, the Company is required to remit payment within 60 days of the shortfall. The Company has committed to purchase volume between $50,000,000 and $125,000,000 during the first year of the agreement. The agreement also contains a provision allowing the Company to terminate the agreement at any time. In the event the Company exercises this option, the Company is required to pay a 3.5 percent shortfall penalty on the aggregate ten year commitment. In connection with the sale of assets utilized to manufacture boat furnishings in January 2016, the Company entered into an agreement with the buyer whereby the Company committed to purchase a minimum amount of goods and services used in the Company’s normal operations for an initial term of five years. The total future minimum purchase obligation over the term of the agreement is approximately $122,102,000. If the minimum purchase amount over the period of the agreement is not met, the Company is required to remit a payment to the buyer equal to 10 percent of the shortfall within 30 days after the date of expiration of the agreement. The agreement does include a clause stating if industry retail sales decrease by certain stated percentages in the agreement over the 5 year period, the Company will be granted additional years to meet the aggregate purchase commitment as defined in the agreement.

Self-insured plans: Pontoon Boat, LLC participates in a partially self-insured employee health plan. Under the plan, Pontoon Boat, LLC is responsible for health insurance liabilities of up to $100,000 per claim and an aggregate limit based on total

10

participants. The total annual aggregate liability was approximately $3,740,244 at March 31, 2018. The excess loss portion of the coverage has been reinsured with a commercial carrier.

Highwater Marine, LLC participates in a partially self-insured employee health plan. Under the plan, Highwater Marine, LLC is responsible for health insurance liabilities of up to $150,000 per participant per plan year and an aggregate limit which is calculated based on the number of participants. The excess loss portion of the coverage has been reinsured with a commercial carrier.

Total expense incurred by the Company under these plans for the period ended March 31, 2018 was approximately $1,234,000.

11

EX-99.2

EXHIBIT 99.2

BOAT HOLDINGS, LLC

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED

DECEMBER 31, 2017, AND INDEPENDENT AUDITOR'S REPORT

1

BOAT HOLDINGS, LLC TABLE OF CONTENTS
		Page
	REPORT OF INDEPENDENT AUDITORS	3
	CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2017
	Consolidated Balance Sheet	4
	Consolidated Statement of Income	5
	Consolidated Statement of Members' Deficit	6
	Consolidated Statement of Cash Flows	7
	Notes to Consolidated Financial Statements	8

2

INDEPENDENT AUDITOR'S REPORT

To the Board of Managers and Members

Boat Holdings, LLC

Elkhart, Indiana

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Boat Holdings, LLC, and Subsidiaries and Affiliate which comprise the consolidated balance sheet as of December 31, 2017, and the related consolidated statements of income, members’ (deficit) and cash flows for the year then ended and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our unqualified audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Boat Holdings, LLC and Subsidiaries and Affiliate as of December 31, 2017, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ RSM US LLP

Elkhart, Indiana

June 19, 2018

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BOAT HOLDINGS, LLC CONSOLIDATED BALANCE SHEET
	December 31, 2017
Assets
Current assets:
Cash	$	10,163,887
Trade receivables	4,463,958
Other receivables	1,847,977
Inventories	36,483,133
Prepaid expenses	953,682
Total current assets	53,912,637
Property and equipment, at depreciated cost	30,020,101
Goodwill	600,226
Intangible assets, net of amortization	3,724,509
Total assets	$	88,257,473
Liabilities and Members’ (Deficit)
Current liabilities:
Current maturities of long-term debt	$	11,511,388
Current portion of deferred revenue	1,957,143
Accounts payable	19,428,366
Accrued liabilities	21,720,611
Total current liabilities	54,617,508
Long-term debt, less current maturities	108,743,873
Deferred revenue, less current maturities	10,764,286
Commitments and contingencies (Note 13)
Members’ (deficit):
Class B Membership Interests	(39,285,484		)
Class A Membership Interests	(24,862,687		)
Class C Membership Interests	(5,069,099		)
Class D Membership Interests	(10,138,203		)
Class E Membership Interests	(10,138,203		)
Noncontrolling interest	3,625,482
Total members’ (deficit)	(85,868,194		)
Total liabilities and members’ (deficit)	$	88,257,473

See notes to consolidated financial statements.

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BOAT HOLDINGS, LLC. CONSOLIDATED STATEMENT OF INCOME
	Year ended December 31, 2017
Net sales	$	560,901,860
Cost of goods sold	434,147,934
Gross profit	126,753,926
Selling, general, and administrative expenses	56,547,474
Operating income	70,206,452
Nonoperating income (expense):
Interest expense, net	(4,417,335		)
Other	1,275,841
Net income	67,064,958
Less: noncontrolling interest in net income of subsidiary and affiliate	(1,148,232		)
Net income attributable to Boat Holdings, LLC	$	65,916,726

See notes to consolidated financial statements.

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BOAT HOLDINGS, LLC CONSOLIDATED STATEMENT OF MEMBERS' (DEFICIT)
	Class B Membership Interests			Class A Membership Interests			Class C Membership Interests			Class D Membership Interests			Class E Membership Interests			Noncontrolling Interest			Total
Balance, December 31, 2016	$	(1,235,195	)	$	(781,720	)	$	(159,383	)	$	(318,760	)	$	(318,760	)	$	4,117,908		$	1,304,090
Net income	28,935,795			18,312,655			3,733,656			7,467,310			7,467,310			1,148,232			67,064,958
Distributions	(66,986,084		)	(42,393,622		)	(8,643,372		)	(17,286,753		)	(17,286,753		)	(1,640,658		)	(154,237,242		)
Balance, December 31, 2017	$	(39,285,484	)	$	(24,862,687	)	$	(5,069,099	)	$	(10,138,203	)	$	(10,138,203	)	$	3,625,482		$	(85,868,194	)

See notes to consolidated financial statements.

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BOAT HOLDINGS, LLC CONSOLIDATED STATEMENT OF CASH FLOWS
	Year ended December 31, 2017
Cash flows from operating activities:
Net income	$	67,064,958
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	3,103,894
Amortization of intangibles	649,767
Recognition of deferred revenue	(978,571		)
Loss on disposal of equipment	92,510
Amortization of deferred financing costs	250,726
Change in fair value of interest rate swap	(404,323		)
(Increase) decrease in:
Trade receivables	206,613
Inventories	(4,335,777		)
Prepaid expenses and others receivables	(282,020		)
Increase in:
Accounts payable	3,583,473
Accrued liabilities	3,012,924
Deferred revenue	13,700,000
Net cash provided by operating activities	85,664,174
Cash flows from investing activities:
Purchase of property and equipment	(4,582,014		)
Proceeds from sale of certain equipment	58,000
Net cash (used in) investing activities	(4,524,014		)
Cash flows from financing activities:
Proceeds from long-term borrowings	142,142,954
Principal payments on long-term borrowings	(68,953,754		)
Principal payments on equipment notes payable	(120,607		)
Distributions	(152,661,226		)
Net cash (used in) financing activities	(79,592,633		)
Increase in cash	1,547,527
Cash, beginning	8,616,360
Cash, ending	$	10,163,887

See notes to consolidated financial statements.

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BOAT HOLDINGS, LLC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2017

Note 1. Nature of Business, Principles of Consolidation, Noncontrolling Interest and Significant Accounting Policies

Nature of business: Boat Holdings, LLC is a holding company. Boat Holdings, LLC and Subsidiaries is collectively referred to as the “Company” in the notes to the consolidated financial statements.

Pontoon Boat, LLC d/b/a Bennington, is primarily engaged in the manufacture and marketing of pontoon boats for sale via its dealership network throughout the United States and Canada under the name “Bennington”, generally under terms of floorplan arrangements that are typical in the marine business. Bennington also sells optional equipment and replacement parts to its dealers.

Highwater Marine, LLC is primarily engaged in the manufacture of boats, including recreational cruisers, pontoons, deck boats and cuddys/bowriders for sale via its dealership network throughout the United States and Canada under the names “Rinker”, “Godfrey”, and “Hurricane” respectively, generally under terms of floorplan arrangements that are typical in the marine business. Highwater Marine, LLC also sells optional equipment and replacement parts to its dealers.

Pontoon Boat Disc Corporation and Pontoon-Highwater Disc Partners, LLC are interest charge domestic international sales corporations.

Marine Realty, LLC is a real estate company which leases real estate to Pontoon Boat, LLC d/b/a Bennington.

Reporting entity and principles of consolidation: The consolidated financial statements include the accounts of Boat Holdings, LLC (“Holdings”) and its wholly-owned subsidiaries, Pontoon Boat, LLC d/b/a Bennington, Pontoon Boat Disc Corporation, Pontoon-Highwater Disc Partners, LLC, a 90 percent owned subsidiary, Highwater Marine, LLC, and an affiliate, Marine Realty, LLC, collectively referred to as the Company.

Marine Realty, LLC exists for the sole purpose of leasing real estate to Pontoon Boat, LLC d/b/a Bennington and requires the financial support of Pontoon Boat, LLC d/b/a Bennington through lease agreements. Marine Realty, LLC doesn’t have the right to receive the expected residual returns as all lease payments received are assigned to Marine Realty’s lender for debt service costs. Management has determined that this relationship represents variable interests in Marine Realty, LLC. Pontoon Boat, LLC d/b/a Bennington is the primary beneficiary of the variable interest entity (“VIE”) which requires Marine Realty, LLC to be consolidated in accordance with accounting principles generally accepted in the United States of America. Accordingly, the financial statements of Marine Realty, LLC have been included in these consolidated financial statements.

All significant intercompany accounts and transactions between Holdings and subsidiaries and affiliates have been eliminated in consolidation.

Noncontrolling interest: Noncontrolling interest represents the portion of equity in Highwater Marine, LLC and in Marine Realty, LLC not attributable, directly or indirectly, to Holdings. The profit or loss derived from the noncontrolling interest in the performance of Highwater Marine, LLC and Marine Realty, LLC is allocated to the net income attributable to the noncontrolling interest in the 2017 consolidated statement of income.

Significant accounting policies:

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

Cash: The Company may have cash on deposit in financial institutions which, at times, may be in excess of FDIC insurance limits.

Trade receivables: Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Trade receivables in the accompanying consolidated balance sheet at December 31, 2017 are stated net of an allowance for doubtful accounts of approximately $54,000 respectively. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. A trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than 30 days.

Inventories: Inventories are stated at the lower of cost, determined using the first-in, first-out (FIFO) method, or net realizable value.

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Advertising costs: The Company follows the policy of charging the costs of advertising to expense as incurred. For the year ended December 31, 2017, advertising expense totaling approximately $4,796,000, and is included in selling, general, and administrative expenses in the accompanying consolidated statement of income.

Depreciation: Depreciation of leasehold improvements is computed primarily by the straight-line method over the lesser of the remaining lease term or the estimated useful life. Depreciation of buildings and equipment is computed primarily by the straight-line method over the estimated useful life as follows:

	Years
Leasehold improvements	Lease term
Land improvements	10-20
Buildings and improvements	20-40
Machinery and equipment	3-7
Furniture and fixtures	5-10
Tools and dies	3-7
Computer equipment	3-5

Expenditures for major betterments are capitalized, and expenditures for repairs and maintenance are charged to operations as incurred. When capitalized assets are retired or sold, the cost and related accumulated amortization is removed from the accounts, with any gain or loss reflected in operations.

Goodwill: The Company recognizes goodwill using the provisions prescribed in No. 2014-02 Intangibles - Goodwill and Other (Topic 350): Accounting for Goodwill. Goodwill results from a business acquisition and represents the excess of the purchase price over the fair value of the identifiable net assets acquired and liabilities assumed. The Company assesses its goodwill for impairment annually on December 31 of each year, as well as when an event triggering impairment may have occurred, by first assessing qualitative factors to determine whether it is more likely than not that the reporting unit’s fair value is less than its carrying amount. If this assessment indicates that fair value of the reporting unit is more likely than not to be less than book value, the Company performs a two-step impairment test. The first step tests for impairment, while the second step, if necessary, measures the impairment. If the fair value of the reporting unit is less than the carrying value of the net assets and related goodwill, the Company performs the second step to determine the amount of impairment loss, if any. The Company concluded that its goodwill was not impaired at December 31, 2017.

Intangibles and long-lived assets: In connection with business combinations in previous years, the Company has recorded intangible assets consisting primarily of trademarks and customer lists which are recorded based upon their initial fair market values at the date of acquisition. The intangible assets are amortized on the straight-line method, with no residual value, over their estimated useful lives.

The Company reviews its long-lived assets periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future net undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future net undiscounted cash flows be less than the carrying value, the Company would recognize an impairment loss at that date. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived asset. The Company concluded that there was no impairment at December 31, 2017.

Deferred financing costs: Deferred financing costs are being amortized over the term of the related debt.

Fair value measurements: The Company uses a framework for measuring fair value of all financial instruments that are being measured and reported on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

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Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3 - Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The application of valuation techniques applied to similar assets and liabilities has been consistent for all periods presented.

Fair value of financial instruments: The estimated fair values of the Company’s short-term financial instruments, including receivables and payables arising in the ordinary course of business, approximate their individual carrying amounts due to the relatively short period of time between their origination and expected realization.

The carrying value of the Company’s bank debt approximates fair value since the debt instruments contain variable interest rates.

The fair value of the interest rate swap (used for purposes other than trading) is the estimated amount the Company would pay to terminate the swap agreements at the reporting date, taking into account current interest rates and the creditworthiness of the counterparty for assets and creditworthiness of the Company for liabilities.

Derivative financial instruments: All derivative financial instruments are recognized as either assets or liabilities at their fair value in the consolidated balance sheets with the changes in the fair value reported in current period earnings. These instruments are included in accrued liabilities in the accompanying consolidated balance sheets and the change in the fair value is recorded as a component of interest expense on the consolidated statements of income.

Warranties: The Company provides a limited warranty for its products. The Company's standard warranties require the Company or its dealers to repair or replace defective products during such warranty period at no cost to the consumer. The Company estimates the costs that may be incurred under its basic limited warranty and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company's warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. The Company utilizes historical trends to assist in determining the appropriate expense accrual.

Changes in the Company's accrued warranty liability during the year ended December 31, 2017 is as follows:

Balance, beginning	$	8,264,267
Accruals for products sold	9,585,776
Payments made	(6,999,494		)
Balance, ending	$	10,850,549

Revenue recognition: The Company generally manufactures product based on specific orders from customers and generally ships completed product only after receiving credit approval from the floorplan source or terms of COD. Revenue is primarily recorded when all of the following conditions have been met: an order for a product has been received, a common carrier signs the delivery ticket accepting responsibility for the product, and the product is removed from the Company’s property for delivery. These conditions are primarily met when title passes, which is when boats are shipped to dealers in accordance with shipping terms. Dealers generally have no rights to return unsold boats. From time to time, however, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy, which generally limits returns to instances of manufacturing defects. The Company estimates the costs that may be incurred under its basic limited warranty and records as a liability the amount of such costs at the time the product revenue is recognized. The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure. The Company accrues estimated losses when a loss, due to the default of one of its dealers, is determined to be probable and the amount of the loss is reasonably estimable.

As part of boat sales, dealers typically order engines for the boats. The Company generally arranges for the outboard engines to be shipped direct to the dealer from the engine manufacturer and revenue is recognized upon invoicing at the time the engines are shipped to the dealer.

Dealer incentives: The Company provides for various structured dealer rebate and sales promotions incentives, which are recognized as a reduction in net sales, at the time of sale to the dealer. Examples of such programs include rebates, promotional co-op arrangements and other allowances. Dealer rebates and sales promotion expenses are estimated based on current programs and historical achievement and/or usage rates. Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends.

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New accounting pronouncements: In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. The updated standard will be effective for annual reporting periods beginning after December 15, 2018. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the patterns of expense recognition in the consolidated income statement. The new standard is effective for fiscal years beginning after December 15, 2019. The Company is evaluating the impact of adoption of the new standard will have on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the measurement of goodwill impairment by eliminating the requirement that an entity compute the implied fair value of goodwill based on the fair values of its assets and liabilities to measure impairment. Instead, goodwill impairment will be measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The ASU also clarifies the treatment of the income tax effect of tax deductible goodwill when measuring goodwill impairment loss. ASU 2017-04 will be effective for the Company beginning on January 1, 2022. ASU 2017-04 must be applied prospectively with early adoption permitted. The adoption of ASU 2017-04 is not expected to have a material impact on the consolidated financial statements.

Subsequent events: The Company has evaluated subsequent events for potential recognition and/or disclosure through June 19, 2018, the date the consolidated financial statements were available to be issued.

On May 30, 2018, the Company signed a definitive agreement to be acquired by Polaris Industries Inc. valued at a net present value of approximately $805,000,000.

Note 2. Inventories

Inventories at December 31, 2017 are as follows:

Raw materials	$	22,206,882
Work in process	3,870,066
Finished goods	6,560,178
Engines	3,846,007
	$	36,483,133

Inventories above at December 31, 2017 are stated net of a reserve of approximately $1,614,000.

Note 3. Property and Equipment

Property and equipment at December 31, 2017 is as follows:

Land and improvements	$	4,216,866
Buildings and improvements	17,837,467
Leasehold improvements	5,678,623
Machinery and equipment	6,375,578
Furniture and fixtures	1,669,928
Tools and dies	3,967,190
Computer equipment	3,530,956
Construction in progress	652,872
	43,929,480
Less accumulated depreciation	13,909,379
	$	30,020,101

Note 4. Intangible Assets

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Intangible assets at December 31, 2017 is as follows:

	Cost		Accumulated Amortization		Net Book Value		Useful Lives
Trade names	$	4,646,513	2,271,995		$	2,374,518	6-15 Years
Customer list	1,800,000		450,009		1,349,991		6 Years
	$	6,446,513	$	2,722,004	$	3,724,509

Amortization expense recognized on intangible assets was approximately $650,000 for the year ended December 31, 2017.

Approximate annual amortization for intangible assets for the years ending December 31, 2018 through 2022 and thereafter is as follows:

2018	$	650,000
2019	650,000
2020	650,000
2021	592,000
2022	416,000
Thereafter	766,509
	$	3,724,509

Note 5. Accrued Liabilities

Accrued liabilities at December 31, 2017 consist of the following:

Warranty	$	10,850,549
Payroll and other related expenses	1,929,705
Dealer interest reimbursement	1,822,957
Insurance	740,183
Property taxes	809,831
Accrued dealer incentives	2,732,963
Distributions	2,273,399
Other	561,024
	$	21,720,611

Note 6. Line of Credit, Notes Payable and Pledged Assets

Long-term debt at December 31, 2017 consist of the following:

Term loan (1) (2)	$	105,640,093
Line of credit (3)	16,000,000
Capital lease	231,734
	121,871,827
Less unamortized debt finance costs	1,616,566
Less current maturities	11,511,388
	$	108,743,873

1. The Company had a term note with a bank, due in quarterly principal payments of $1,908,083, plus monthly interest payments at LIBOR plus the “applicable rate” as defined by the agreement and was set to expire on October 2, 2020. During 2017, the Company renegotiated the terms of this loan agreement with the same bank. The Company’s revised term loan bears interest at LIBOR (1.6 percent at December 31, 2017) plus an applicable margin set by the bank (2.5 percent at December 31, 2017). The term loan requires quarterly principal payments of approximately $2,802,000 and matures in April 2022, at which time a balloon payment of approximately $56,051,000 is due. The loan is collateralized by substantially all assets of the Company and is subject to certain covenants including a leverage ratio and a fixed charge coverage ratio. On December 31, 2017, $103,494,011 was outstanding.

2. The Company has a term loan that requires monthly payments of approximately $42,000, including monthly interest

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payments at LIBOR (1.6 percent at December 31, 2017), plus 2.65 percent, maturing in June 2022, at which time a balloon payment of approximately $93,000 is due, of which $2,146,082 was outstanding as of December 31, 2017. The loan is collateralized by substantially all assets of the Company and is subject to certain non-financial covenants.

3. The Company has a $40,000,000 revolving line of credit with a bank, $16,000,000 of which was outstanding at December 31, 2017. Borrowings against the line of credit bear interest at LIBOR (1.6 percent at December 31, 2017) plus an applicable margin set by the bank (2.5 percent at December 31, 2017). The revolving line of credit is subject to certain covenants including a leverage ratio and a fixed charge coverage ratio. The borrowings are collateralized by substantially all assets of the Company and are due in April 2022.

Approximate aggregate maturities of outstanding debt in accordance with the agreements described above for the years ending December 31, 2018 through 2022 are as follows:

2018	$	11,511,000
2019	11,723,000
2020	11,720,000
2021	11,722,000
2022	75,195,827
	$	121,871,827

Note 7. Interest Rate Swap

The Company maintains an interest rate risk management strategy that uses interest rate swap derivative instruments to minimize significant, unanticipated earnings fluctuations caused by interest-rate volatility.

The Company's specific goal is to lower (where possible) the cost of its borrowed funds. The Company has an interest rate swap agreement with the bank which has an amortizing notional principal amount of approximately $29,391,000 at December 31, 2017, maturing September 2020. Under the swap agreement, the Company pays interest at a fixed rate of 1.85 percent and receives interest at a variable rate equal to 30 day LIBOR (1.6 percent at December 31, 2017) based on the notional amount. Both the debt and the swap require payments to be made quarterly. The one-month LIBOR rate on each reset date determines the variable portion of the interest rate swap for the following quarter.

The Company is exposed to credit loss in the event of nonperformance by the counter party to the interest rate swap agreement. However, the Company does not anticipate nonperformance by the counter party. The Company has chosen to recognize the change in the fair value of the interest rate swap in the consolidated statement of income as a component of interest expense. The total fair value of the asset (liability) derivative instrument of approximately $73,000 (a Level 3 liability) at December 31, 2017, and is included within accrued liabilities in the accompanying consolidated balance sheet at December 31, 2017. For the year ended December 31, 2017, the Company recognized income of approximately $404,000 in the accompanying consolidated statement of income related to the change in the fair value of the interest rate swap.

Note 8. Unearned Revenue

On July 1, 2017, the Company entered into a seven year exclusive floor planning arrangement with a finance company. In exchange for exclusivity, the finance company agreed to an incentive cash payment of $13,700,000 paid to the Company at the date of execution of the agreement. The Company is recognizing revenue from the incentive payment on a pro-rata basis over the term of the agreement. For the year ended December 31, 2017, the Company recognized approximately $979,000 of income in the accompanying consolidated statement of income.

Approximate unearned revenue to be recognized in income for the years ending December 31, 2018 through 2022 and thereafter are as follows:

2018	$	1,957,000
2019	1,957,000
2020	1,957,000
2021	1,957,000
2022	1,957,000
Thereafter	2,936,000
	$	12,721,000

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Note 9. Income Taxes

The Company is taxed in accordance with the partnership sections of the Internal Revenue Code and a similar section of the state tax laws which provide that, in lieu of income taxes, the members account for their proportionate shares of the LLC's items of income, deductions, losses, and credits. However, the Company anticipates making or has made distributions for member income taxes resulting from taxable income generated by the Company.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (TCJA) tax reform legislation. This legislation makes significant changes in U.S. tax law including numerous changes to individual tax rules, a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. Since the Company is a pass-through entity, the passing of the TCJA will not impact the Company.

Management has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of ASC 740-10. The Company is no longer subject to tax examinations by the U.S. federal, state or local tax authorities for years before 2014.

Note 10. Members' (Deficit)

The Company is a limited liability company. Under the terms of the limited liability agreement, the Company is authorized to establish a capital account for each member equal to the member's initial capital contribution. Member's ownership interests in the Company are represented by membership interests. The total number of membership interests that the Company has authority to issue is 12,358,334, classified as 3,433,334 Class A Membership Interests, 5,425,000 Class B Membership Interests, 700,000 Class C Membership Interests, 1,400,000 Class D Membership Interests, and 1,400,000 Class E Membership Interests. On December 31, 2017, all Classes of Membership Interests were issued and outstanding.

Effective January 1, 2016 Holdings amended the operating agreement of Highwater Marine, LLC such that certain management members were granted Class M units representing a 10 percent interest in Highwater Marine, LLC which were immediately vested. The fair value of these granted units, determined to be $529,000 at the date of grant, is included in the noncontrolling interest in the accompanying consolidated financial statements.

The Operating Agreement provides for specific allocation of income and losses to the various membership interests based upon taxable income under the Internal Revenue Code. The allocation of income and losses for consolidated financial statement purposes has been made based upon the same allocation methods; however, there are significant differences in determination of income and loss for financial reporting and tax reporting. The significant differences between financial reporting and the tax basis of reporting income and losses are the amortization of goodwill and intangibles, depreciation of fixed assets, the deduction of acquisition costs, and the expensing of certain prepaid expenses and accruals.

In connection with the liquidation and dissolution of the Company, the Operating Agreement provides for certain allocations of income and distribution rights which require distributions in the following order:

• To the holders of Class B Membership Interests of $1.00 and $0.50 per membership interest outstanding.

• Pro rata to the holders of Class A and B Membership Interests of the next $7,370,000.

• Pro rata to the Class A, B, and C Membership Interests of the next $13,170,000.

• Pro rata to the Class A, B, C, and D Membership Interests of the next $20,640,000.

• All remaining distributions pro rata to the Class A, B, C, D, and E Membership Interests.

Note 11. Leases, Note Receivable and Related Party Transactions

Pontoon Boat, LLC leases its facilities from Marine Realty, LLC, a variable interest entity (as described in Note 1), under a verbal month-to-month lease. The leases provide that the lessee pay all property taxes, insurance and maintenance plus monthly rentals of approximately $64,000.

Pontoon Boat, LLC also leases various vehicles and equipment with monthly payments totaling approximately $19,000 under operating leases expiring at various dates through July 2021. As of December 31, 2017, approximate minimum future lease and rentals under the noncancelable operating agreements are as follows:

14

During the year ending December 31,
2018	$	152,000
2019	102,000
2020	69,000
2021	29,000
2022	18,000
Thereafter	14,000
	$	384,000

Note 12. Variable Interest Entity

The Pontoon Boat, LLC is the primary beneficiary of and consolidates the related party Marine Realty, LLC which is considered a variable interest entity (“VIE”). The Company would absorb more than a significant amount of the VIE’s expected losses based on leasing and guarantee agreements as discussed in Note 1. Through the lease agreement, the Company controls the significant activities of the VIE.

For no consideration, the Company has agreed to guarantee certain long-term debt of the VIE. The Company’s maximum exposure under these guarantees was approximately $2,197,000 as of December 31, 2017. The details of these debt instruments are included in Note 6 to the consolidated financial statements. The Company can be required to perform these guarantees in the event of nonpayment of these arrangements by the VIE. In the event the Company would be required to pay the entire guaranteed amount, the value of the assets pledged on the bank debt would be available to liquidate and recover some or all of the amounts paid. However, any decision to liquidate the collateral would be made after an evaluation of the circumstances at the time and the amount of any recovery available to the Company is not currently estimable.

The following table shows the approximate significance of the VIE:

Cash	$	315,290
Prepaid expenses	28,901
Property and equipment, net	6,014,967
	$	6,359,158
Current maturities of long-term debt	423,231
Accrued liabilities	621,799
Long-term debt, less current maturities	2,729,982
Noncontrolling interest	2,584,146
	$	6,359,158
Net income	$	336,502

Note 13. Commitments and Contingencies

Repurchase agreements: In connection with the wholesale floorplan financing of boats, the Company has entered into repurchase agreements with lending institutions. The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institutions through payment date by the dealer, generally not exceeding 900 days. The outstanding obligation under this agreement was approximately $147,408,000 at December 31, 2017. Such agreements are customary in the industry and the Company’s exposure to loss under such agreements is limited by the resale value of the inventory and related costs to sell the unit which is required to be repurchased.

The reserve methodology used to record an estimated expense and loss reserve in each accounting period is based upon the Company’s repurchase history. Subsequent to the inception of the repurchase commitment, the Company evaluates the likelihood of repurchase and adjusts the estimated loss reserve and related income statement account accordingly. Potential increases in losses may result from any market difficulties in the marine industry. If the Company were obligated to repurchase a significant number of units under any repurchase agreement, its business, operating results and financial condition could be adversely affected. At December 31, 2017, the Company determined that no reserve was necessary related to these agreements.

Inventory purchase commitment: On June 23, 2017, the Company entered into a ten year purchase commitment with an engine manufacturer, whereby the Company makes variable annual purchase commitments which determine the Company’s engine discount percentage. Additionally, the Company is subject to an aggregate minimum purchase commitment over the life of the agreement. If the minimum purchase amount in any given year is not met, the Company is subjected to a 1 percent

15

shortfall penalty, whereby the penalty is withheld from future discounts to the extent available. If no funds are available, the Company is required to remit payment within 60 days of the shortfall. The Company has committed to purchase volume between $50,000,000 and $125,000,000 during the first year of the agreement. The agreement also contains a provision allowing the Company to terminate the agreement at any time. In the event the Company exercises this option, the Company is required to pay a 3.5 percent shortfall penalty on the aggregate ten year commitment.

In connection with the sale of assets utilized to manufacture boat furnishings in January 2016, the Company entered into an agreement with the buyer whereby the Company committed to purchase a minimum amount of goods and services used in the Company’s normal operations for an initial term of five years. The total future minimum purchase obligation over the term of the agreement is approximately $122,102,000. If the minimum purchase amount over the period of the agreement is not met, the Company is required to remit a payment to the buyer equal to 10 percent of the shortfall within 30 days after the date of expiration of the agreement. The agreement does include a clause stating if industry retail sales decrease by certain stated percentages in the agreement over the 5 year period, the Company will be granted additional years to meet the aggregate purchase commitment as defined in the agreement.

Self-insured plans: Pontoon Boat, LLC participates in a partially self-insured employee health plan. Under the plan, Pontoon Boat, LLC is responsible for health insurance liabilities of up to $100,000 per claim and an aggregate limit based on total participants. The total annual aggregate liability was approximately $3,740,244 at December 31, 2017. The excess loss portion of the coverage has been reinsured with a commercial carrier.

Highwater Marine, LLC participates in a partially self-insured employee health plan. Under the plan, Highwater Marine, LLC is responsible for health insurance liabilities of up to $150,000 per participant per plan year and an aggregate limit which is calculated based on the number of participants. The excess loss portion of the coverage has been reinsured with a commercial carrier.

Total expense incurred by the Company under these plans for the year ended December 31, 2017 was approximately $5,041,000.

Employee 401(k) plan: Pontoon Boat, LLC and Highwater Marine, LLC both have a defined contribution retirement plan, more commonly known as a 401(k) plan covering all eligible employees, as defined by the Plans’ document. The Company may make discretionary contributions as determined annually by the Board, not to exceed the amount allowed under applicable tax laws. Contributions made by Pontoon Boat, LLC totaled approximately $196,000 for the year ended December 31, 2017. There were no contributions by Highwater Marine, LLC for the year.

Note 14. Related Party Management Fee Agreement

The Company has a management agreement with a related party of one of its members which may be terminated at any point, provided that either of the parties breaches the terms of the agreement. Under the agreement, the Company is required to pay a management fee equal to the greater of $100,000 or 3 percent of earnings before interest, income taxes, depreciation and amortization subject to an annual maximum of $200,000 plus out-of-pocket expenses. Total management fees for the year ended December 31, 2017 was approximately $200,000.

Note 15. Litigation

The Company has various claims and pending legal proceedings that generally involve terms and conditions of contract agreements and employment issues. While the outcome of these claims and proceedings cannot be predicted with any certainty, these matters are, in the opinion of management, ordinary routine matters incidental to the normal business conducted by the Company. In the opinion of management, the ultimate dispositions of such proceedings are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Note 16. Cash Flow Information

Supplemental information relative to the statements of cash flows for the year ended December 31, 2017 is as follows:

Supplemental disclosures of cash flows information:
Cash payments for interest	$	4,490,527
Dividends accrued, not paid	$	2,273,399

16

EX-99.3

EXHIBIT 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of Polaris Industries Inc. (“Polaris” and “Company”) and Boat Holdings, LLC (“Boat Holdings”) after giving effect to Polaris’ acquisition of Boat Holdings (the “Acquisition”) and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The effective date of the Acquisition was July 2, 2018.

The following selected unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting, with Polaris being the acquiring entity, and reflects estimates and assumptions deemed appropriate by Company management to give effect to the Acquisition as if it had been completed effective March 31, 2018, with respect to the Unaudited Pro Forma Condensed Combined Balance Sheet, and as of January 1, 2017 (the beginning of the Company’s fiscal 2017), with respect to the Unaudited Pro Forma Condensed Combined Statements of Income.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon preliminary estimates. The preliminary estimated fair values of certain assets and liabilities have been determined with the assistance of a third-party valuation firm and such firm’s preliminary work. Polaris' estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as Polaris finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed in connection with the Acquisition. The primary areas of the purchase price allocation which are not yet finalized relate to identifiable intangible assets and goodwill.

The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the results of operations or financial position of Polaris that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of the future results of operations or financial position of Polaris. The unaudited pro forma condensed combined financial statements, including the notes thereto, do not reflect any potential operating efficiencies and cost savings that Polaris may achieve with respect to the combined companies. The unaudited pro forma condensed combined financial statements and notes thereto should be read in conjunction with the historical financial statements of Polaris included in the annual report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 15, 2018, and in conjunction with the subsequent quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2018 filed with the SEC on April 26, 2018, and in conjunction with the historical financial statements of Boat Holdings included in exhibits 99.1 and 99.2 of this Form 8-K/A.

1

POLARIS INDUSTRIES INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 2018 (In thousands, except per share data)
	Historical Results						Pro forma				Pro forma
	Polaris			Boat Holdings [1]			Adjustments [2]			Notes	Combined
Assets
Current assets:
Cash and cash equivalents	$	166,357		$	11,779		$	—			$	178,136
Trade receivables, net	186,044			19,767			—				205,811
Inventories, net	922,925			38,507			7,303			[4]	968,735
Prepaid expenses and other	96,247			4,203			—				100,450
Income taxes receivable	13,013			—			—				13,013
Total current assets	1,384,586			74,256			7,303				1,466,145
Property and equipment, net	759,957			30,921			4,378			[4]	795,256
Investment in finance affiliate	95,511			—			—				95,511
Deferred tax assets	114,881			—			6,844			[5]	121,725
Goodwill and other intangible assets, net	777,844			4,162			756,630			[4]	1,538,636
Other long-term assets	86,828			—			—				86,828
Total assets	$	3,219,607		$	109,339		$	775,155			$	4,104,101
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of debt, capital lease obligations and notes payable	$	65,245		$	8,633		$	8,744		[6]	$	82,622
Accounts payable	366,872			31,839			—				398,711
Accrued expenses:
Compensation	85,997			2,734			—				88,731
Warranties	116,286			12,416			—				128,702
Sales promotions and incentives	174,610			4,126			—				178,736
Dealer holdback	107,829			—			—				107,829
Other	191,057			5,099			26,921			[3] [7]	223,077
Income taxes payable	6,599			—			—				6,599
Total current liabilities	1,114,495			64,847			35,665				1,215,007
Long-term income taxes payable	22,432			—			—				22,432
Capital lease obligations	18,497			201			—				18,698
Long-term debt	945,737			99,073			706,742			[6]	1,751,552
Deferred tax liabilities	10,006			—							10,006
Other long-term liabilities	123,680			10,275			(10,275		)	[7]	123,680
Total liabilities	$	2,234,847		$	174,396		$	732,132			$	3,141,375
Deferred compensation	$	11,298		$	—		$	—			$	11,298
Shareholders’ equity:
Preferred stock $0.01 par value, 20,000 shares authorized, no shares issued and outstanding	—			—			—				—
Common stock $0.01 par value, 160,000 shares authorized, 63,098 shares issued and outstanding	631			—			—				631
Additional paid-in capital	755,888			—			—				755,888
Retained earnings	246,980			(65,057		)	43,023			[8]	224,946
Accumulated other comprehensive loss, net	(30,037		)	—			—				(30,037		)
Total shareholders’ equity	973,462			(65,057		)	43,023				951,428
Total liabilities and shareholders’ equity	$	3,219,607		$	109,339		$	775,155			$	4,104,101

See accompanying Notes to Unaudited Pro Forma Condensed Combined Balance Sheet

2

POLARIS INDUSTRIES INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2017 (In thousands, except per share data)
	Historical Results					Pro forma				Pro forma
	Polaris		Boat Holdings [1]			Adjustments			Notes	Combined
Sales	$	5,428,477	$	552,264		$	—			$	5,980,741
Cost of sales	4,103,826		438,538			2,451			[2]	4,544,815
Gross profit	1,324,651		113,726			(2,451		)		1,435,926
Operating expenses:
Selling and marketing	471,805		24,300			—				496,105
Research and development	238,299		3,366			—				241,665
General and administrative	331,196		15,854			18,123			[3]	365,173
Total operating expenses	1,041,300		43,520			18,123				1,102,943
Income from financial services	76,306		—			—				76,306
Operating income	359,657		70,206			(20,574		)		409,289
Non-operating expense:
Interest expense	32,155		4,417			29,206			[4]	65,778
Equity in loss of other affiliates	6,760		—			—				6,760
Other expense (income), net	1,951		(1,276		)	979			[5]	1,654
Income before income taxes	318,791		67,065			(50,759		)		335,097
Provision for income taxes	146,299		—			6,049			[6]	152,348
Net income	$	172,492	$	67,065		$	(56,808	)		$	182,749
Less: noncontrolling interest in net income of subsidiary and affiliate	—		(1,148		)	1,148			[7]	—
Net income attributable to shareholders	$	172,492	$	65,917		$	(55,660	)		$	182,749
Net income per share:
Basic	$	2.74								$	2.90
Diluted	$	2.69								$	2.85
Weighted average shares outstanding:
Basic	62,916									62,916
Diluted	64,180									64,180

See accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of Income

3

POLARIS INDUSTRIES INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME THREE MONTHS ENDED MARCH 31, 2018 (In thousands, except per share data)
	Historical Results						Pro forma				Pro forma
	Polaris			Boat Holdings [1]			Adjustments			Notes	Combined
Sales	$	1,297,473		$	164,642		$	—			$	1,462,115
Cost of sales	973,992			130,638			587			[2]	1,105,217
Gross profit	323,481			34,004			(587		)		356,898
Operating expenses:
Selling and marketing	117,707			6,906			—				124,613
Research and development	65,230			1,002			—				66,232
General and administrative	78,693			4,520			4,521			[3]	87,734
Total operating expenses	261,630			12,428			4,521				278,579
Income from financial services	21,425			—			—				21,425
Operating income	83,276			21,576			(5,108		)		99,744
Non-operating expense:
Interest expense	8,048			1,275			7,130			[4]	16,453
Equity in loss of other affiliates	21,511			—			—				21,511
Other expense, net	(19,975		)	(531		)	489			[5]	(20,017		)
Income before income taxes	73,692			20,832			(12,727		)		81,797
Provision for income taxes	17,978			—			1,929			[6]	19,907
Net income	$	55,714		$	20,832		$	(14,656	)		$	61,890
Less: noncontrolling interest in net income of subsidiary and affiliate	—			(411		)	411			[7]	—
Net income attributable to shareholders	$	55,714		$	20,421		$	(14,245	)		$	61,890
Earnings per share:
Basic	$	0.88									$	0.98
Diluted	$	0.85									$	0.95
Weighted average shares outstanding:
Basic	63,303										63,303
Diluted	65,219										65,219

See accompanying Notes to Unaudited Pro Forma Condensed Combined Statement of Income

4

POLARIS INDUSTRIES INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial statements are prepared in accordance with Article 11 of SEC Regulation S-X. The historical financial information has been adjusted to give effect to the transactions that are (i) directly attributable to the Acquisition, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed combined statements of income, expected to have a continuing impact on the operating results of the combined company. The historical financial information of Polaris and Boat Holdings is presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

The acquisition accounting adjustments relating to the Acquisition are preliminary and subject to change, as additional information becomes available and as additional analyses are performed. There can be no assurances that the final valuations will not result in material changes to this preliminary purchase price allocation. The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of any anticipated benefits from cost savings or operating synergies that may result from the Acquisition or to any future integration costs. The unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of the combined company following the Acquisition. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” in the Company’s annual report on Form 10-K for the year ended December 31, 2017, as updated by the Company's subsequent filings with the SEC.

Certain reclassifications have been made to Boat Holdings’ historical financial statements to conform to the presentation used in Polaris’ historical consolidated financial statements.

Note 2. Preliminary Purchase Price Allocation

On July 2, 2018, Polaris acquired Boat Holdings for total consideration of approximately $823.2 million. The Company financed the Acquisition through borrowings on its credit agreement, proceeds from the issuance of private placement Senior Notes, and cash on hand. The unaudited pro forma condensed combined financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed of Boat Holdings based on management’s best estimates of fair value. The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary and have been made solely for illustrative purposes.

The Company's acquisition of Boat Holdings has been accounted for as a business combination, and assets acquired and liabilities assumed were recorded at their estimated fair values as of July 2, 2018. Goodwill as of the acquisition date is measured as the excess of consideration transferred, which is also generally measured at fair value or the net acquisition date fair values of the assets acquired and the liabilities assumed.

For the unaudited pro forma condensed combined balance sheet, the $823.2 million purchase price has been allocated based on Boat Holdings' March 31, 2018 financial information and our preliminary estimate of the fair value of the assets acquired and liabilities assumed. Under the acquisition method of accounting, the final purchase price allocation will be based on the fair value of the final assets acquired and liabilities assumed as of the closing date of the Acquisition.

The preliminary estimated consideration is allocated as follows (in thousands):

Cash and cash equivalents	$	11,779
Receivables	19,767
Inventory	45,810
Other current assets	4,203
Intangible assets	547,950
Goodwill	212,842
Property, plant and equipment	35,299
Accounts payable	(31,839		)
Accrued and other liabilities	(22,619		)
Total purchase price	$	823,192

Note 3. Notes to Unaudited Pro Forma Condensed Combined Balance Sheet

The following pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet:

5

[1] Certain reclassifications have been made to the historical presentation of Boat Holdings' financial information in order to conform to Polaris’ presentation.

[2] Represents estimated sources and uses of funds as follows (in thousands):

Sources of funds:
Proceeds from issuance of private placement Senior Notes	$	350,000
Proceeds under the credit agreement	388,003
Payable to seller	89,099
Cash and cash equivalents	28,878
Total sources	$	855,980
Uses of funds:
Acquisition of Boat Holdings	$	823,192
Debt issuance costs	3,910
Transaction costs paid subsequent to March 31, 2018	28,878
Total uses	$	855,980

[3] Reflects the following accrued expense adjustments (in thousands):

Payment of non-recurring, direct, incremental transaction costs subsequent to March 31, 2018	$	28,878
Decrease in the assumed current portion of deferred income (see note [7] below)	(1,957		)
	$	26,921

[4] Reflects the following preliminary write-up of the assets to fair market value:

Inventories. Inventories have been adjusted by $7.3 million to their estimated fair market value. As this adjustment is directly attributable to the Acquisition and will not have a continuing impact, it is not reflected in the unaudited pro forma condensed combined income statements. However, this inventory adjustment will result in an expense to cost of sales in the periods subsequent to the consummation of the Acquisition during which the related inventories are sold.

Property and Equipment. Property, Plant and Equipment have been adjusted by $4.4 million to their estimated fair market value, and will be depreciated over the estimated useful lives of the respective assets using the straight-line method for financial reporting purposes. The estimated useful lives are as follows: 12 years for buildings, six years for machinery and equipment, and three years for furniture and fixtures.

Goodwill and other intangible assets. Intangible assets primarily consist of customer relationships and trade names. The customer relationships have finite lives and are expected to be amortized over periods of fifteen to twenty years, depending on the customer class. Specifically, this adjustment consists of the elimination of the historical Boat Holdings intangible assets and goodwill, plus estimated amortizable intangible assets and goodwill recognized based on the preliminary purchase price allocation.

The adjustment for intangible assets and goodwill consists of the following (in thousands):

Elimination of historical goodwill and intangible assets
Elimination of historical Boat Holdings goodwill	$	(600	)
Elimination of historical Boat Holdings intangible assets	(3,562		)
Total elimination of historical goodwill and intangible assets	(4,162		)
Estimated goodwill and intangible assets based on the preliminary purchase price allocation
Trade names	210,680
Customer relationships	334,680
Non-compete agreements	2,590
Goodwill	212,842
Total goodwill and intangible assets	760,792
Total adjustment	$	756,630

6

[5] Deferred income tax related impacts incurred by the Company (in thousands):

Income tax effect on payment of acquisition costs directly related to the acquisition $ 6,844

[6] Represents increased borrowings under the credit agreement, issuance of private placement Senior Notes, and extinguishment of existing Boat Holdings debt (in thousands):

Short-term debt
Decrease for extinguishment of existing Boat Holdings debt	$	(8,633	)
Payable to seller	17,377
	$	8,744
Long-term debt
Decrease for extinguishment of existing Boat Holdings debt	(99,073		)
Proceeds from issuance of private placement Senior Notes	350,000
Proceeds under the credit agreement	388,003
Payable to seller	71,722
Less debt issuance costs	(3,910		)
	$	706,742

[7] This adjustment is to decrease the assumed deferred income to its fair value, a reduction of $12.2 million from the carrying value. The adjustment impacts both current and noncurrent liabilities, as deferred income is recorded to both line items in the balance sheet.

[8] Reflects the following retained earnings adjustments (in thousands):

Costs directly related to the Acquisition, net of tax, which will be expensed as incurred and are assumed to be incurred on the date of Acquisition	$	(22,034	)
Elimination of Boat Holdings' historical deficit balances (1)	65,057
	$	43,023

⁽¹⁾ The Membership Interest and Noncontrolling interest balances of Boat Holdings as of March 31, 2018 are presented within Retained earnings on the unaudited pro forma condensed combined balance sheet.

Note 4. Notes to Unaudited Pro Forma Condensed Combined Statements of Income

The following pro forma adjustments are included in the unaudited pro forma condensed combined statements of income:

[1] Certain reclassifications have been made to the historical presentation of Boat Holdings' financial information in order to conform to Polaris’ presentation.

[2] Reflects the following (in thousands):

	Three months ended March 31, 2018		Year ended December 31, 2017
Adjustment to Boat Holdings' historical depreciation expense based on the assigned fair value and estimated useful lives of Net Property and Equipment	$	587	$	2,451

[3] Reflects the following (in thousands):

	Three months ended March 31, 2018		Year ended December 31, 2017
Adjustment to Boat Holdings' historical intangible asset amortization expense based on the assigned fair value and estimated useful lives of such assets	$	4,326	$	17,306
Adjustment to Boat Holdings' historical depreciation expense based on the assigned fair value and estimated useful lives of Net Property and Equipment	195		817
	$	4,521	$	18,123

[4] Reflects the following (in thousands):

7

	Three months ended March 31, 2018			Year ended December 31, 2017
Interest on the borrowing under the credit agreement and private placement Senior Notes of approximately 3.9% used in financing the acquisition	$	8,147		$	32,592
Amortization of capitalized borrowing costs incurred by the Company in connection with the new term loan and revolving credit facilities	165			660
Elimination of interest expense and amortization of debt issuance costs - outstanding Boat Holdings debt	(1,182		)	(4,046		)
	$	7,130		$	29,206

A 1/8^th, or 0.125%, change in the interest rate payable on the outstanding amount of the borrowing under the credit agreement and private placement Senior Notes would change annual interest expense by approximately $1.0 million before the effect of income taxes on an annual basis.

[5] After the Acquisition, the deferred income adjustment disclosed in Note 3 will have a continuing impact on the unaudited condensed combined pro form financial statements. Accordingly, pro forma adjustments were made to reduce Other income by $0.5 million for the three months ended March 31, 2018 and $1.0 million for the year ended December 31, 2017.

	Three months ended March 31, 2018			Year ended December 31, 2017
Difference in recognition of deferred income resulting from a change in fair value	$	(489	)	$	(979	)

[6] Reflects the following (in thousands):

	Three months ended March 31, 2018		Year ended December 31, 2017
Estimated income tax effect on both Boat Holdings' income before taxes, as it had no tax provision as a limited liability corporation entity, and the net impact of the adjustments noted above	$	1,929	$	6,049

Assumed statutory tax rates of 23.8% and 37.1% were utilized for 2018 and 2017, respectively. The assumed statutory tax rates do not take into account any possible future tax events that may impact the combined company.

[7] Noncontrolling interest represents the portion of equity in Boat Holdings' subsidiary and affiliate not attributable to Boat Holdings. As a result of the Acquisition, these equity interests were settled and will not exist going forward. The pro forma adjustments to the noncontrolling interest in net income of $0.4 million for the three months ended March 31, 2018 and $1.1 million for the year ended December 31, 2017 reflect the elimination of these interests, assuming the transaction was consummated on January 1, 2017.

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