Polaris 2010 Annual Report Download - page 29

Item 1A. Risk Factors
The following are significant factors known to us that could materially adversely affect our business, financial
condition, or operating results, as well as adversely affect the value of an investment in our common stock.
Our products are subject to extensive United States federal and state and international safety, environmental
and other government regulation that may require us to incur expenses or modify product offerings in order to
maintain compliance with the actions of regulators and could decrease the demand for our products.
Our products are subject to extensive laws and regulations relating to safety, environmental and other
regulations promulgated by the United States federal government and individual states as well as international
regulatory authorities. Failure to comply with applicable regulations could result in fines, increased expenses to
modify our products and harm to our reputation, all of which could have an adverse effect on our operations. In
addition, future regulations could require additional safety standards or emission reductions that would require
additional expenses and/or modification of product offerings in order to maintain compliance with applicable
regulations. Our products are also subject to laws and regulations that restrict the use or manner of use during certain
hours and locations, and these laws and regulations could decrease the popularity and sales of our products. We
continue to monitor regulatory activities in conjunction with industry associations and support balanced and
appropriate programs that educate the product user on safe use of our products and how to protect the environment.
A significant adverse determination in any material product liability claim against us could adversely
affect our operating results or financial condition.
The manufacture, sale and usage of our products expose us to significant risks associated with product liability
claims. If our products are defective or used incorrectly by our customers, bodily injury, property damage or other
injury, including death, may result and this could give rise to product liability claims against us or adversely affect
our brand image or reputation. Any losses that we may suffer from any liability claims, and the effect that any
product liability litigation may have upon the reputation and marketability of our products, may have a negative
impact on our business and operating results.
Because of the high cost of product liability insurance premiums and the historically insignificant amount of
product liability claims paid by us, we were self-insured from 1985 to 1996. In 1996, we purchased excess insurance
coverage for catastrophic product liability claims for incidents occurring subsequent to the policy date that
exceeded our self-insured retention levels. Since September 2002, due to insurance market conditions resulting in
significantly higher proposed premium costs, we have elected not to purchase insurance for product liability losses.
The estimated costs resulting from any losses are charged to expense when it is probable a loss has been incurred
and the amount of the loss is reasonably determinable.
We had a product liability reserve accrual on our balance sheet of $12.0 million at December 31, 2010 for the
possible payment of pending claims related to continuing operations and $1.6 million for discontinued operations
for product liability, regulatory and other legal costs related to marine products. We believe such accruals are
adequate. We do not believe the outcome of any pending product liability litigation will have a material adverse
effect on our operations. However, no assurance can be given that our historical claims record, which did not include
ATVs prior to 1985 or motorcycles and side-by-side vehicles prior to 1998, will not change or that material product
liability claims against us will not be made in the future. Adverse determination of material product liability claims
made against us would have a material adverse effect on our financial condition.
Significant product repair and/or replacement due to product warranty claims or product recalls could
have a material adverse impact on the results of operations.
We provide a limited warranty for ORVs for a period of six months and for a period of one year for our
snowmobiles and motorcycles. We may provide longer warranties related to certain promotional programs, as well
as longer warranties in certain geographical markets as determined by local regulations and market conditions. We
also provide a limited emission warranty for certain emission-related parts in our ORVs, snowmobiles, and
motorcycles as required by the United States Environmental Protection Agency and the California Air Resources
Board. Although we employ quality control procedures, sometimes a product is distributed that needs repair or
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