Polaris 2008 Annual Report Download - page 24

arrangement was unacceptable and, absent some modification of that arrangement, HSBC might significantly
tighten its underwriting standards for Polaris customers, reducing the number of qualified retail credit customers
who would be able to obtain credit from HSBC. In order to avoid the potential reduction of revolving retail credit
available to Polaris consumers, Polaris agreed to forgo the receipt of a volume based fee provided for under its
agreement with HSBC effective March 1, 2008. Additionally, the Company initiated legal action against HSBC
alleging, among other things, breach of contract. The Company and HSBC reached an amicable settlement in the
case and have agreed to dismiss the lawsuit. The settlement will not result in a financial payment to Polaris.
Management anticipates that the elimination of the volume based fee will continue and that HSBC will continue to
provide revolving retail credit to qualified customers through the end of the contract term on October 31, 2010. See
Note 6 of Notes to Consolidated Financial Statements for a discussion of this financial services arrangement.
In April 2006, a wholly-owned subsidiary of Polaris entered into a multi-year contract with GE Money Bank
(“GE Bank”) under which GE Bank makes available closed-end installment consumer and commercial credit to
customers of Polaris dealers for both Polaris and non-Polaris products. See Note 6 of Notes to Consolidated
Financial Statements for a discussion of this financial services arrangement.
In January 2009, a wholly-owned subsidiary of Polaris entered into a multi-year contract with Sheffield
Financial (“Sheffield”) pusuant to which Sheffield agreed to make available closed-end installment consumer and
commercial credit to customers of Polaris dealers for Polaris products.
Polaris promotes the Polaris brand among the riding and non-riding public and provides a wide range of
products for enthusiasts by licensing the name Polaris. The Company currently licenses the production and sale of a
range of items, including die cast toys, ride on toys, video games, and numerous other products.
During 2000, a wholly-owned subsidiary of Polaris established an e-commerce site, purepolaris.com, to sell
clothing and accessories over the Internet directly to consumers. The site has been developed with a revenue sharing
arrangement with the dealers.
Polaris’ marketing activities are designed primarily to promote and communicate directly with consumers and
secondarily to assist the selling and marketing efforts of its dealers and distributors. Polaris makes available and
advertises discount or rebate programs, retail financing or other incentives for its dealers and distributors to remain
price competitive in order to accelerate retail sales to consumers and gain market share. Polaris advertises its
products directly using print advertising in the industry press and in user group publications, billboards, television
and radio. Polaris also provides media advertising and partially underwrites dealer and distributor media advertising
to a degree and on terms which vary by product and from year to year. From time to time, Polaris produces
promotional films for its products, which are available to dealers for use in the showroom or at special promotions.
Polaris also provides product brochures, leaflets, posters, dealer signs, and miscellaneous other promotional items
for use by dealers.
Polaris expended approximately $137.0 million for sales and marketing in 2008, $123.9 million in 2007, and
$108.9 million in 2006.
Engineering, Research and Development, and New Product Introduction
Polaris employs approximately 400 persons primarily in its Roseau and Wyoming, Minnesota facilities, who
are engaged in the development and testing of existing products and research and development of new products and
improved production techniques. Management believes Polaris and its predecessors were the first to develop, for
wide commercial use, independent front suspensions for snowmobiles, long travel rear suspensions for snowmo-
biles, liquid cooled snowmobile brakes, hydraulic brakes for snowmobiles, the three cylinder engine in snowmo-
biles, the adaptation of the MacPherson strut front suspension, “on demand” four-wheel drive systems and the
Concentric Drive System for use in ORVs, the application of a forced air cooled variable power transmission system
to ORVs and the use of electronic fuel injection for ORVs.
Polaris utilizes internal combustion engine testing facilities to design and optimize engine configurations for
its products. Polaris utilizes specialized facilities for matching engine, exhaust system and clutch performance
parameters in its products to achieve desired fuel consumption, power output, noise level and other objectives.
Polaris’ engineering department is equipped to make small quantities of new product prototypes for testing by
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