Polaris 2010 Annual Report Download - page 22

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We expended approximately $142.4 million, $111.1 million and $137.0 million for sales and marketing
activities in 2010, 2009 and 2008, respectively.
Engineering, Research and Development, and New Product Introduction
We have approximately 390 employees who are engaged in the development and testing of existing products
and research and development of new products and improved production techniques primarily in our Roseau and
Wyoming, Minnesota facilities and in Burgdorf, Switzerland We believe Polaris was the first to develop, for wide
commercial use, independent front suspensions for snowmobiles, long travel rear suspensions for snowmobiles,
liquid cooled snowmobile brakes, hydraulic brakes for snowmobiles, the three cylinder engine in snowmobiles, the
adaptation of the MacPherson strut front suspension, “on demand” all-wheel drive systems and the Concentric
Drive System for use in ORVs, the application of a forced air cooled variable power transmission system to ORVs
and the use of electronic fuel injection for ORVs.
We utilize internal combustion engine testing facilities to design and optimize engine configurations for our
products. We utilize specialized facilities for matching engine, exhaust system and clutch performance parameters
in our products to achieve desired fuel consumption, power output, noise level and other objectives. Our engineering
department is equipped to make small quantities of new product prototypes for testing by our testing teams and for
the planning of manufacturing procedures. In addition, we maintain numerous test facilities where each of the
products is extensively tested under actual use conditions. In 2005, we completed construction of our
127,000 square-foot research and development facility in Wyoming, Minnesota for engineering, design and
development personnel for our line of engines and powertrains, ORVs and Victory motorcycles. The total cost of the
facility was approximately $35.0 million. In 2010, we acquired Swissauto Powersports Ltd., an engineering
company that develops high performance and high efficiency engines and innovative vehicles.
We expended approximately $84.9 million, $63.0 million and $77.5 million for research and development
activities in 2010, 2009 and 2008, respectively.
Intellectual Property
We rely on a combination of patents, trademarks, copyrights, trade secrets, and nondisclosure and non-
competition agreements to establish and protect our intellectual property and proprietary technology. We have filed
and obtained numerous patents in the United States and abroad, and regularly file patent applications worldwide in
our continuing effort to establish and protect our proprietary technology. We hold patents in the United States and
foreign countries and apply for patents as applicable. Additionally, we have numerous registered trademarks, trade
names and logos in the United States, Canada and international locations.
Investment in KTM Power Sports AG
In 2005, we purchased a 25 percent interest in Austrian motorcycle manufacturer KTM and began several
important strategic projects with KTM intended to strengthen the competitive position of both companies and
provide tangible benefits to our respective customers, dealers, suppliers and shareholders. Additionally, Polaris and
KTM’s largest shareholder, Cross Industries AG (“Cross”), entered into an option agreement, which provided that
under certain conditions in 2007, either Cross could purchase our interest in KTM or, alternatively, we could
purchase Cross’ interest in KTM. In December 2006, Polaris and Cross cancelled the option agreement and entered
into a share purchase agreement for the sale by us of approximately 1.38 million shares of KTM, or approximately
80 percent of our investment in KTM, to a subsidiary of Cross. The agreement provided for completion of the sale of
the KTM shares in two stages. In the first half of 2007, we completed both stages of our sale of KTM shares
generating proceeds of $77.1 million. After the completion of the sale of the KTM shares, we held ownership of
approximately 0.34 million shares, representing slightly less than five percent of KTM’s outstanding shares. During
the first quarter 2009, we determined that the decline in the market value of the KTM shares owned by us was other
than temporary; therefore, we recorded the decrease in the fair value of the investment as a charge to the income
statement in the first quarter of 2009 totaling $9.0 million. During the second quarter 2010, we determined that the
further decline in the market value of the KTM shares owned by us was other than temporary and, therefore, we
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