Polaris 2008 Annual Report Download - page 75

value of these securities as of December 31, 2008 is $12,873,000 and unrealized holding losses of $6,676,000 and
unrealized currency translation gains of $1,835,000 relating to these securities are included as a component of
Accumulated other comprehensive income (loss) in the December 31, 2008 consolidated balance sheet. In
accordance with SFAS 115, the Company assessed the situation where the fair value of the KTM shares has
dropped below the cost basis of the shares. Based upon the expected limited duration of the KTM share price decline
and the Company’s ability and intent to retain this investment, the Company has classified the impairment of this
investment as temporary and has recorded the unrealized holding loss as a component of Accumulated other
comprehensive income (loss) rather than in the income statement.
Note 8: Commitments and Contingencies
Product liability: Polaris is subject to product liability claims in the normal course of business. Polaris is
currently self insured for all product liability claims. The estimated costs resulting from any losses are charged to
operating expenses when it is probable a loss has been incurred and the amount of the loss is reasonably
determinable. The Company utilizes historical trends and actuarial analysis tools to assist in determining the
appropriate loss reserve levels. At December 31, 2008 the Company had an accrual of $11,069,000 for the probable
payment of pending claims related to continuing operations. This accrual is included as a component of Other
Accrued expenses in the accompanying consolidated balance sheets. In addition, the Company had an accrual of
$1,850,000 for the probable payment of pending claims related to discontinued operations at December 31, 2008.
Litigation: Polaris is a defendant in lawsuits and subject to claims arising in the normal course of business. In
the opinion of management, it is unlikely that any legal proceedings pending against or involving Polaris will have a
material adverse effect on Polaris’ financial position or results of operations.
Leases: Polaris leases buildings and equipment under non-cancelable operating leases. Total rent expense
under all lease agreements was $5,777,000, $4,815,000, and $3,761,000 for 2008, 2007 and 2006, respectively.
Future minimum payments, exclusive of other costs required under non-cancelable operating leases, at
December 31, 2008 total $6,874,000 cumulatively through 2011.
Note 9: Discontinued Operations
On September 2, 2004, the Company announced its decision to discontinue the manufacture of marine
products effective immediately. In the third quarter 2004, the Company recorded a loss on disposal of discontinued
operations of $35,600,000 before tax, or $23,852,000 after tax. This loss included a total of $28,705,000 in expected
future cash payments for costs to assist the dealers in selling their remaining inventory, incentives and discounts to
encourage consumers to purchase remaining products, costs to cancel supplier arrangements, legal and regulatory
issues, and personnel termination costs. In addition, the loss included $6,895,000 in non-cash costs related primarily
to the disposition of tooling, other physical assets, and the Company’s remaining inventory. During 2006, the
Company recorded an additional loss on disposal of discontinued operations of $8,073,000 before tax, or
$5,401,000 after tax. This loss includes the estimated costs required to resolve past and potential future product
liability litigation claims and warranty expenses related to marine products. In 2007 the Company substantially
completed the exit of the marine products division, therefore in the year ended December 31, 2008, there were no
additional material charges incurred related to this discontinued operations event and the Company does not expect
any additional material charges in the future.
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POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)