Polaris 2008 Annual Report Download - page 72

options and certain shares issued under the Restricted Plan and Omnibus Plan. A reconciliation of these amounts is
as follows (in thousands):
2008 2007 2006
Weighted average number of common shares outstanding ........... 32,456 34,976 40,072
Director Plan and Deferred stock units......................... 112 86 75
ESOP ................................................. 202 174 177
Common shares outstanding — basic .......................... 32,770 35,236 40,324
Dilutive effect of Restricted Plan and Omnibus Plan............... 178 70 78
Dilutive effect of Option Plan and Omnibus Plan ................. 616 1,018 1,049
Common and potential common shares outstanding — diluted ....... 33,564 36,324 41,451
During 2008, 2007 and 2006, the number of options that could potentially dilute earnings per share on a fully
diluted basis that were not included in the computation of diluted earnings per share because to do so would have
been anti-dilutive was 2,862,000, 1,524,000, and 1,347,000, respectively.
Stock Purchase Plan: Polaris maintains an employee stock purchase plan (“Purchase Plan”). A total of
1,500,000 shares of common stock are reserved for this plan. The Purchase Plan permits eligible employees to
purchase common stock at 95 percent of the average market price each month. As of December 31, 2008,
approximately 533,000 shares had been purchased under the Purchase Plan.
Note 6: Financial Services Arrangements
In 1996, a wholly-owned subsidiary of Polaris entered into a partnership agreement with a subsidiary of
Transamerica Distribution Finance (“TDF”) to form Polaris Acceptance. In 2004, TDF was merged with a
subsidiary of General Electric Company and, as a result of that merger, TDF’s name was changed to GE
Commercial Distribution Finance Corporation (“GECDF”). Polaris’ subsidiary has a 50 percent equity interest
in Polaris Acceptance. In November 2006, Polaris Acceptance sold a majority of its receivable portfolio to the
securitization facility arranged by General Electric Capital Corporation, a GECDF affiliate (“Securitization
Facility”), and the partnership agreement was amended to provide that Polaris Acceptance would continue to
sell portions of its receivable portfolio to a Securitization Facility from time to time on an ongoing basis. At
December 31, 2008 and 2007, the outstanding balance of receivables sold by Polaris Acceptance to the Secu-
ritization Facility (the “Securitized Receivables”) amounted to approximately $508,972,000 and $546,973,000,
respectively. The sale of receivables from Polaris Acceptance to the Securitization Facility is accounted for in
Polaris Acceptance’s financial statements as a “true-sale” under SFAS No. 140: (Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities). Polaris Acceptance is not responsible for any
continuing servicing costs or obligations with respect to the Securitized Receivables. Polaris’ subsidiary and
GECDF have an income sharing arrangement related to income generated from the Securitization Facility. The
remaining portion of the receivable portfolio is recorded on Polaris Acceptance’s books, and is funded to the extent
of 85 percent through a loan from an affiliate of GECDF. Polaris has not guaranteed the outstanding indebtedness of
Polaris Acceptance or the Securitized Receivables. In addition, the two partners of Polaris Acceptance share equally
an equity cash investment equal to 15 percent of the sum of the portfolio balance in Polaris Acceptance plus the
Securitized Receivables. Polaris’ total investment in Polaris Acceptance at December 31, 2008 and 2007, was
$51,565,000 and $53,801,000, respectively. The Polaris Acceptance partnership agreement provides for periodic
options for renewal, purchase, or termination by either party. Substantially all of Polaris’ U.S. sales are financed
through Polaris Acceptance and the Securitization Facility whereby Polaris receives payment within a few days of
shipment of the product. The net amount financed for dealers under this arrangement at December 31, 2008,
including both the portfolio balance in Polaris Acceptance and the Securitized Receivables, was $709,718,000.
Polaris has agreed to repurchase products repossessed by Polaris Acceptance up to an annual maximum of
15 percent of the average month-end balances outstanding during the prior calendar year. For calendar year 2008,
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POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)