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PART I
Item 1. Business
Polaris Industries Inc., a Minnesota corporation, was formed in 1994 and is the successor to Polaris Industries
Partners LP. The terms “Polaris,” the “Company,” “we,” “us,” and “our” as used herein refer to the business and
operations of Polaris Industries Inc., its subsidiaries and its predecessors, which began doing business in the early
1950’s. We design, engineer and manufacture off-road vehicles (“ORV”), including all-terrain vehicles (“ATV”)
and side-by-side vehicles for recreational and utility use, snowmobiles, and on-road vehicles (“On-Road”),
including motorcycles and low emission vehicles (“LEV”), together with the related replacement parts, garments
and accessories (“PG&A”). These products are sold through dealers and distributors principally located in the
United States, Canada and Europe. Sales of ORVs, snowmobiles, on-road vehicles, and PG&A accounted for the
following approximate percentages of our sales for the years ended December 31:
ORVs Snowmobiles On-Road PG&A
2010 ........................................ 69% 10% 4% 17%
2009 ........................................ 65% 12% 3% 20%
2008 ........................................ 67% 10% 5% 18%
We 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 11
of Notes to Consolidated Financial Statements for a discussion of the discontinuation of marine products.
Industry Background
ORVs. Our off-road vehicles include both core ATVs and RANGER»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 Motor Co., Ltd. (“Honda”). Other
Japanese motorcycle manufacturers, including Yamaha Motor Corporation (“Yamaha”), Kawasaki Motors Corp.
(“Kawasaki”), and Suzuki Motor Corporation (“Suzuki”), entered the North American ATV market in the late
1970’s and early 1980’s. We entered the ATV market in 1985, Arctic Cat Inc. (“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 limited 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 ATV industry then grew each year in North America from 1990 until 2005, but has declined in each year since
2005, primarily due to weak overall economic conditions and a move to side-by-side vehicles. Internationally, ATVs
are also sold primarily in Western European countries by similar manufacturers as in North America. We estimate
that during 2010 world-wide industry sales declined 14 percent from 2009 levels with approximately 425,000 ATVs
sold worldwide.
We estimate that the side-by-side vehicle market sales increased approximately seven percent during 2010
over 2009 levels with an estimated 240,000 side-by-side vehicles sold worldwide. The side-by-side market is up
primarily due to the continued shift by the consumer from ATVs to side-by-side vehicles, new competitors entering
the market and continued innovation by existing and new manufacturers. The main competitors for our RANGER»
side-by-side vehicles are Deere & Company (“Deere”), Kawasaki, Yamaha, Arctic Cat, Kubota Tractor Corporation
(“Kubota”), Honda and BRP.
We estimate that total ORV industry sales for 2010, which includes core ATVs and side-by-side vehicles,
decreased eight percent from 2009 levels with approximately 665,000 units sold worldwide.
Snowmobiles. In the early 1950’s, 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.
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