XML 30 R19.htm IDEA: XBRL DOCUMENT
v3.19.2

Derivative Instruments and Hedging Activities | 6 Months Ended
--- | ---
Jun. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency risk, interest rate risk and commodity price fluctuations. Derivative contracts on various currencies are entered into in order to manage foreign currency exposures associated with certain product sourcing activities and intercompany cash flows. Interest rate swaps are occasionally entered into in order to maintain a balanced risk of fixed and floating interest rates associated with the Company’s long-term debt. Commodity hedging contracts are occasionally entered into in order to manage fluctuating market prices of certain purchased commodities and raw materials that are integrated into the Company’s products. The Company’s foreign currency management objective is to mitigate the potential impact of currency fluctuations on the value of its U.S. dollar cash flows and to reduce the variability of certain cash flows at the subsidiary level. The Company actively manages certain forecasted foreign currency exposures and uses a centralized currency management operation to take advantage of potential opportunities to naturally offset foreign currency exposures. The decision of whether and when to execute derivative instruments, along with the duration of the instrument, may vary from period to period depending on market conditions, the relative costs of the instruments and capacity to hedge. The duration is linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. Polaris does not use any financial contracts for trading purposes. At June 30, 2019 and December 31, 2018, the Company had the following open foreign currency contracts (in thousands):
|  | June 30, 2019 |  | December 31, 2018
Foreign Currency |  | Notional Amounts (in U.S. Dollars) |  | Net Unrealized Gain (Loss) |  | Notional Amounts (in U.S. Dollars) |  | Net Unrealized Gain (Loss)
Australian Dollar |  | $ | 20,217 |  |  | $ | 156 |  |  | $ | — |  |  | $ | — |
Canadian Dollar |  | 151,769 |  |  | (596 | ) |  | 55,133 |  |  | 2,564 |
Mexican Peso |  | 17,590 |  |  | 1,042 |  |  | 19,222 |  |  | 564 |
Total |  | $ | 189,576 |  |  | $ | 602 |  |  | $ | 74,355 |  |  | $ | 3,128 |
These contracts, with maturities through June 2020, met the criteria for cash flow hedges, and are recorded in other current assets or other current liabilities on the consolidated balance sheet. The unrealized gains or losses, after tax, are recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The Company enters into interest rate swap transactions to hedge the variable interest rate payments for the Term Loan Facility. In connection with these transactions, the Company pays interest based upon a fixed rate and receives variable rate interest payments based on the one-month LIBOR. At June 30, 2019 and December 31, 2018, the Company had the following open interest rate swap contracts (in thousands):
|  |  |  | June 30, 2019 |  | December 31, 2018
Effective Date |  | Termination Date |  | Notional Amounts |  | Net Unrealized Gain (Loss) |  | Notional Amounts |  | Net Unrealized Gain (Loss)
May 2, 2018 |  | May 4, 2021 |  | $ | 25,000 |  |  | $ | (45 | ) |  | $ | 25,000 |  |  | $ | 397 |
September 28, 2018 |  | September 30, 2019 |  | 250,000 |  |  | (259 | ) |  | 250,000 |  |  | (163 | )
September 30, 2019 |  | September 30, 2023 |  | 150,000 |  |  | (7,947 | ) |  | 150,000 |  |  | (2,899 | )
May 3, 2019 |  | May 3, 2020 |  | 100,000 |  |  | (397 | ) |  | — |  |  | — |
Total |  |  |  | $ | 525,000 |  |  | $ | (8,648 | ) |  | $ | 425,000 |  |  | $ | (2,665 | )
These contracts, with maturities through September 2023, met the criteria for cash flow hedges, and are recorded in other current assets or other current liabilities on the consolidated balance sheet. Assets and liabilities are offset in the consolidated balance sheet if the right of offset exists. The unrealized gains or losses, after tax, are recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The table below summarizes the carrying values of derivative instruments as of June 30, 2019 and December 31, 2018 (in thousands):
| Carrying Values of Derivative Instruments as of June 30, 2019
| Fair Value— Assets |  | Fair Value— (Liabilities) |  | Derivative Net Carrying Value
Derivatives designated as hedging instruments |  |  |  |  |
Foreign exchange contracts | $ | 602 |  |  | $ | — |  |  | $ | 602 |
Interest rate contracts | — |  |  | (8,648 | ) |  | (8,648 | )
Total derivatives designated as hedging instruments | $ | 602 |  |  | $ | (8,648 | ) |  | $ | (8,046 | )
| Carrying Values of Derivative Instruments as of December 31, 2018
| Fair Value— Assets |  | Fair Value— (Liabilities) |  | Derivative Net Carrying Value
Derivatives designated as hedging instruments |  |  |  |  |
Foreign exchange contracts | $ | 3,128 |  |  | $ | — |  |  | $ | 3,128 |
Interest rate contracts | — |  |  | (2,665 | ) |  | (2,665 | )
Total derivatives designated as hedging instruments | $ | 3,128 |  |  | $ | (2,665 | ) |  | $ | 463 |
Gains and losses on derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in the current statement of income. The amount of gains (losses), net of tax, related to the effective portions of derivative instruments designated as cash flow hedges included in accumulated other comprehensive loss for the three and six months ended June 30, 2019 were $(4,030,000) and $(6,499,000), respectively, compared to $580,000 and $5,109,000 for the same respective periods in 2018. See Note 7 for information about the amount of gains and losses, net of tax, reclassified from accumulated other comprehensive loss into the statements of income for derivative instruments designated as hedging instruments. The ineffective portion of foreign currency contracts was not material for the three and six month period ended June 30, 2019.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration