Polaris 2008 Annual Report Download - page 22

Polaris has been designing and producing its own engines for select models of snowmobiles since 1995 and for
all Victory motorcycles since 1998, and for select ORV models since 2001.
In 2000, Polaris entered into an agreement with a Taiwan manufacturer to co-design, develop and produce
youth ATVs. Polaris expanded the agreement with the Taiwan manufacturer in 2004 to include the design,
development and production of value-priced smaller adult ATV models and in 2008 to include a youth side-by-side
vehicle, the RANGER RZR 170. In 2002, Polaris entered into an agreement with a German manufacturer to co-
design, develop and produce four-stroke engines for snowmobiles. In 2006, Polaris entered into a long term supply
agreement with KTM Power Sports AG (“KTM”) whereby KTM supplies four-stroke engines for use in certain
Polaris ATVs.
Polaris anticipates no significant difficulties in obtaining substitute supply arrangements for other raw
materials or components that it generally obtains from limited sources.
Contract carriers ship Polaris’ products from its manufacturing and distribution facilities to its customers.
Polaris maintains distribution facilities in Vermillion, South Dakota; Passy, France; Askim, Norway;
Ostersund, Sweden; Birmingham, United Kingdom; Griesheim, Germany; Barcelona, Spain and Ballarat, Victoria,
Australia. These facilities distribute PG&A products to our North American dealers and international dealers and
distributors.
Production Scheduling
Polaris’ products are produced and delivered throughout the year. Orders for ORVs are placed by the dealers
and distributors periodically throughout the year. Delivery of snowmobiles to consumers begins in autumn and
continues during the winter season. Orders for each year’s production of snowmobiles are placed by the dealers and
distributors in the spring. Orders for Victory motorcycles are placed by the dealers in the summer after meetings
with dealers. Units are built to order each year subject to fluctuations in market conditions and supplier lead times.
In addition, non-refundable deposits made by consumers to dealers in the spring for pre-ordered snowmobiles assist
in production planning. The anticipated volume of units to be produced is substantially committed to by dealers and
distributors prior to production. Retail sales activity at the dealer level is monitored by Polaris for snowmobiles,
ORVs, and motorcycles and incorporated into each product’s production scheduling. Beginning in 2008, Polaris
began testing a new dealer ordering process called Maximum Velocity Program (MVP) with select dealers in North
America. Under MVP, dealers place ORVorders in approximately two week intervals driven by retail sales trends at
the respective dealer. If successful, the new MVP process will be rolled out to additional dealers over the next
several years.
Manufacture of snowmobiles commences in late winter of the previous season and continues through late
autumn or early winter of the current season. Since 1993, Polaris has manufactured ORVs year round. Victory
motorcycle manufacturing began in 1998 and continues year round. Polaris has the ability to alternate production of
the various products on the existing manufacturing lines as demand dictates.
Sales and Marketing
Polaris products are sold through a network of 1,500 independent dealers in North America, and through seven
subsidiaries and 43 distributors in approximately 130 countries outside of North America.
Polaris sells its snowmobiles directly to dealers in the snowbelt regions of the United States and Canada. Many
dealers and distributors of Polaris snowmobiles also distribute Polaris’ ORVs. At the end of 2008, approximately
700 Polaris dealers were located in areas of the United States where snowmobiles are not regularly sold. Unlike its
primary competitors, which market their ORV products principally through their affiliated motorcycle dealers,
Polaris also sells its ORVs through lawn and garden and farm implement dealers.
With the exception of France, Great Britain, Sweden, Norway, Australia, New Zealand, Germany and Spain,
sales of Polaris’ products in Europe and other offshore markets are handled through independent distributors. In
1999, Polaris acquired certain assets of its distributor in Australia and New Zealand and now distributes its products
to its dealer network in those countries through a wholly-owned subsidiary. During 2000, Polaris acquired its
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