Polaris 2010 Annual Report Download - page 63

Other intangibles consist of the following (in thousands):
Gross
Amount
Accumulated
Amortization
Gross
Amount
Accumulated
Amortization
December 31, 2010 December 31, 2009
Amortized intangible assets:
Existing Technology........................ $3,147 $(188) — —
Amortized intangible assets totaled $2,959,000 at December 31, 2010 and consisted of product technology
acquired during 2010. Gross amounts and related accumulated amortization amounts include adjustments related to
the impact of foreign currency translation and changes in the fair value of net assets. Aggregate amortization
expense for intangibles was $188,000, $0 and $0 for the years ended December 31, 2010, 2009 and 2008,
respectively. The weighted average amortization period for the existing technology is seven years. Estimated
amortization expense for each of the years 2011 to 2015 is expected to be $450,000 per year. The preceding
expected amortization expenses is an estimate and actual amounts could differ due to additional intangible asset
acquisitions, changes in foreign currency rates or impairment of intangible assets.
Research and Development Expenses: Polaris records research and development expenses in the period in
which they are incurred as a component of operating expenses. In the years ended December 31, 2010, 2009, and
2008 Polaris incurred $84,940,000, $62,999,000, and $77,472,000, respectively.
Advertising Expenses: Polaris records advertising expenses as a component of selling and marketing expenses
in the period in which they are incurred. In the years ended December 31, 2010, 2009, and 2008 Polaris incurred
$40,833,000, $37,433,000 and $51,193,000, respectively.
Shipping and Handling Costs: Polaris records shipping and handling costs as a component of cost of sales at
the time the product is shipped.
Product warranties: Polaris provides a limited warranty for its off-road vehicles for a period of six months and
for a period of one year for its snowmobiles and motorcycles. Polaris 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. Polaris’ standard warranties require the Company or its dealers to repair or
replace defective products during such warranty periods at no cost to the consumer. The warranty reserve is
established at the time of sale to the dealer or distributor based on management’s best estimate using historical rates
and trends. Adjustments to the warranty reserve are made from time to time as actual claims become known in order
to properly estimate the amounts necessary to settle future and existing claims on products sold as of the balance
sheet date. Factors that could have an impact on the warranty accrual in any given year include the following:
improved manufacturing quality, shifts in product mix, changes in warranty coverage periods, snowfall and its
impact on snowmobile usage, product recalls and any significant changes in sales volume.
The activity in the warranty reserve during the years presented is as follows (in thousands):
2010 2009 2008
For the Year Ended December 31,
Balance at beginning of year ........................... $ 25,520 $ 28,631 $ 31,782
Additions charged to expense ........................... 43,721 40,977 39,960
Warranty claims paid ................................. (36,590) (44,088) (43,111)
Balance at end of year ................................ $32,651 $ 25,520 $ 28,631
Sales promotions and incentives: Polaris provides for estimated sales promotion and incentive expenses, which
are recognized as a reduction to sales, at the time of sale to the dealer or distributor. Examples of sales promotion
and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and sales
associate incentives. Sales promotion and incentive expenses are estimated based on current programs and
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POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)