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PART I
Item 1. Business
Polaris Industries Inc. (the “Company” or “Polaris”), a Minnesota corporation, was formed in 1994 and is the
successor to Polaris Industries Partners LP. The term “Polaris” as used herein refers to the business and operations of
the Company, its subsidiaries and its predecessors which began doing business in the early 1950’s. Polaris designs,
engineers and manufactures off-road vehicles (“ORV”) which includes all terrain vehicles (“ATV”) and
side-by-side vehicles for recreational and utility use, snowmobiles, and motorcycles and markets them, together
with related replacement parts, garments and accessories (“PG&A”) through dealers and distributors principally
located in the United States, Canada and Europe. Sales of ORVs, snowmobiles, motorcycles, and PG&A accounted
for the following approximate percentages of Polaris’ sales for the years ended December 31:
ORVs Snowmobiles Motorcycles PG&A
2008 ...................................... 67% 10% 5% 18%
2007 ...................................... 67% 10% 6% 17%
2006 ...................................... 67% 10% 7% 16%
The Company discontinued the manufacture of marine products effective September 2, 2004. The marine
products division’s financial results are reported separately as discontinued operations for all periods presented. See
Note 9 of Notes to Consolidated Financial Statements for a discussion of the discontinuation of marine products.
Industry Background
Off-road Vehicles (ORVs). Off-road vehicles include both core ATVs and RANGER
TM
side-by-side vehicles.
ATVs are four-wheel vehicles with balloon style tires designed for off-road use and traversing rough terrain,
swamps and marshland. Side-by-side vehicles are multi-passenger off-road, all terrain vehicles that can carry up to
six passengers in addition to cargo. ORVs are used for recreation, in such sports as fishing and hunting, as well as for
utility purposes on farms, ranches and construction sites.
ATVs were introduced to the North American market in 1971 by Honda. Other Japanese motorcycle
manufacturers including Yamaha, Kawasaki and Suzuki entered the North American ATV market in the late
1970s and early 1980s. Polaris entered the ATV market in 1985, Arctic Cat entered in 1995 and Bombardier
Recreational Products Inc. (“BRP”) entered in 1998. KTM Power Sports AG (“KTM”) entered the market in 2007.
In addition, numerous Chinese and Taiwanese manufacturers of youth and small ATVs exist for which no industry
sales data is available. By 1985, the number of three- and four-wheel ATVs sold in North America had grown to
approximately 650,000 units per year, then dropped dramatically to a low of 148,000 in 1989. The industry grew
each year in North America from 1990 until 2005. The market declined in 2006, 2007 and 2008, primarily due to
weak overall economic conditions. Internationally, similar ATVs are also sold primarily in Western European
countries by similar manufacturers as in North America. Polaris estimates that during the calendar year 2008 world-
wide industry sales declined 31 percent from 2007 levels with approximately 665,000 core ATVs sold worldwide.
Polaris estimates that the side-by-side vehicle market sales grew approximately four percent during the
calendar year 2008 over 2007 levels with an estimated 290,000 side-by-side vehicles sold worldwide. The main
competitors for the RANGER
TM
side-by-side vehicles are John Deere, Kawasaki, Yamaha, Arctic Cat, Kubota and
Honda.
Polaris estimates that during calendar year 2008 the ORV industry sales, which includes core ATVs and
side-by-side vehicles, decreased 24 percent from 2007 levels with approximately 955,000 units sold worldwide.
Snowmobiles. In the early 1950s, a predecessor to Polaris produced a “gas powered sled” which became the
forerunner of the Polaris snowmobile. Snowmobiles have been manufactured under the Polaris name since 1954.
Originally conceived as a utility vehicle for northern, rural environments, the snowmobile gained popularity as
a recreational vehicle. From the mid-1950s through the late 1960s, over 100 producers entered the snowmobile
market and snowmobile sales reached a peak of approximately 495,000 units in 1971. The Polaris product survived
the industry decline in which snowmobile sales fell to a low point of approximately 87,000 units in 1983 and the
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