Polaris 2008 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2008 Polaris annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 90

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90

the potential 15 percent aggregate repurchase obligation was approximately $107,269,000. Polaris’ financial
exposure under this arrangement is limited to the difference between the amounts unpaid by the dealer with respect
to the repossessed product plus costs of repossession and the amount received on the resale of the repossessed
product. No material losses have been incurred under this agreement during the periods presented. Polaris’ trade
receivables from Polaris Acceptance were $21,377,000 and $910,000 at December 31, 2008 and 2007, respectively.
Polaris’ exposure to losses associated with respect to the Polaris Acceptance Portfolio and the Securitized
Receivables is limited to its equity in its wholly-owned subsidiary that is a partner in Polaris Acceptance.
Polaris’ total investment in Polaris Acceptance at December 31, 2008 of $51,565,000 is accounted for under
the equity method, and is recorded as Investments in finance affiliate in the accompanying consolidated balance
sheets. The partnership agreement provides that all income and losses of the Polaris Acceptance and the Securitized
Receivables are shared 50 percent by Polaris’ wholly-owned subsidiary and 50 percent by GECDF. Polaris’
allocable share of the income of Polaris Acceptance and the Securitized Facility has been included as a component
of Income from financial services in the accompanying statements of income.
Summarized financial information for Polaris Acceptance reflecting the effects of the Securitization Facility is
presented as follows (in thousands):
2008 2007 2006
For the Year Ended December 31,
Revenues............................................ $12,484 $12,974 $61,797
Interest and operating expenses ........................... 3,276 2,436 29,983
Net income before income taxes .......................... $ 9,208 $10,538 $31,814
2008 2007
As of December 31,
Finance receivables, net ..................................... $198,985 $172,331
Other assets.............................................. 98 111
Total Assets ............................................ $199,083 $172,442
Notes payable ............................................ $ 78,042 $ 66,220
Other liabilities ........................................... 21,175 1,774
Partners’ capital .......................................... 99,866 104,448
Total Liabilities and Partners’ Capital ......................... $199,083 $172,442
In October 2001 Household Bank (SB), N.A. (“Household”) and a subsidiary of Polaris entered into a
Revolving Program Agreement to provide retail financing to consumers who buy Polaris products in the
United States. In August 2005, the wholly-owned subsidiary of Polaris entered into a multi-year contract with
HSBC Bank Nevada, National Association (“HSBC”), formerly known as Household Bank (SB), N.A., under
which HSBC is continuing to manage the Polaris private label credit card program under the StarCard label, which
until July 2007 included providing retail credit for non-Polaris products. The 2005 agreement provides for income
to be paid to Polaris based on a percentage of the volume of revolving retail credit business generated including non-
Polaris products. The previous agreement provided for equal sharing of all income and losses with respect to the
retail credit portfolio, subject to certain limitations. The 2005 contract removed all credit, interest rate and funding
risk to Polaris and also eliminated the need for Polaris to maintain a retail credit cash deposit with HSBC, which was
approximately $50,000,000 at August 1, 2005. HSBC ceased financing non-Polaris products under its arrangement
with Polaris effective July 1, 2007. During the first quarter of 2008, HSBC notified the Company that the
profitability to HSBC of the 2005 contractual 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
55
POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)