Polaris 2010 Annual Report Download - page 23

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recorded a $0.8 million decrease in the fair value of the investment. In the third quarter 2010, we sold our remaining
investment in KTM and recorded a gain on securities available for sale of $1.6 million.
Competition
The off-road vehicle, snowmobile, motorcycle and low emission vehicle markets in the United States and
Canada are highly competitive. Competition in such markets is based upon a number of factors, including price,
quality, reliability, styling, product features and warranties. At the dealer level, competition is based on a number of
factors, including sales and marketing support programs (such as financing and cooperative advertising). Certain of
our competitors are more diversified and have financial and marketing resources that are substantially greater than
those of Polaris.
We believe that our products are competitively priced and our sales and marketing support programs for
dealers are comparable to those provided by our competitors. Our products compete with many other recreational
products for the discretionary spending of consumers, and to a lesser extent, with other vehicles designed for utility
applications.
Product Safety and Regulation
Safety regulation. The federal government and individual states have promulgated or are considering
promulgating laws and regulations relating to the use and safety of certain of our products. The federal government
is currently the primary regulator of product safety. The Consumer Product Safety Commission (“CPSC”) has
federal oversight over product safety issues related to ATVs, snowmobiles and off-road side-by-side vehicles. The
National Highway Transportation Safety Administration (“NHTSA”) has federal oversight over product safety
issues related to on-road motorcycles and LSV vehicles.
In 1988, Polaris, five competitors and the CPSC entered into a ten-year consent decree settling litigation
involving CPSC’s attempt to force an industry-wide recall of all three-wheel ATVs and four-wheel ATVs sold that
could be used by youth under 16 years of age. The settlement required, among other things, that ATV purchasers
receive “hands on” training. In 1998, this consent decree expired and we entered into a voluntary action plan under
which we agreed to continue various activities previously required under the consent decree, including age
recommendations, warning labels, point of purchase materials, hands on training and an information and education
effort. We also agreed to continue dealer monitoring to ascertain dealer compliance with safety obligations,
including age recommendations and training requirements.
We do not believe that our voluntary action plan has had or will have a material adverse effect on us or
negatively affect our business to any greater degree than those of our competitors who have undertaken similar
action plans with the CPSC. Nevertheless, there can be no assurance that future recommendations or regulatory
actions by the federal government or individual states would not have an adverse effect on us. We will continue to
attempt to assure that our dealers are in compliance with their safety obligations. We have notified our dealers that
we may terminate or not renew any dealer we determine has violated such safety obligations. We believe that our
ATVs have always complied with safety standards relevant to ATVs.
In August 2006, the CPSC issued a Notice of Proposed Rulemaking to establish mandatory standards for ATVs
and to ban three-wheeled ATVs. The CPSC did not complete this rulemaking process or issue a final rule.
In August 2008, the Consumer Product Safety Improvement Act (“Act”) was passed. The Act includes a
provision that requires all manufacturers and distributors who import into or distribute ATVs in the United States to
comply with the American National Standards Institute (“ANSI”) ATV safety standards, which were previously
voluntary. The Act also requires the same manufacturers and distributors to have ATV action plans filed with the
CPSC that are substantially similar to the voluntary action plans that were previously in effect through the voluntary
agreement with the CPSC. We believe that our products comply with the ANSI/SVIA standard and we have had an
action plan filed with the CPSC since 1998 when the consent decree expired. We do not believe the new law will
negatively affect our business to any greater degree than those of our competitors who are now subject to the same
mandatory standards.
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