Polaris 2010 Annual Report Download - page 43

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Income from Financial Services
The following table reflects our income from financial services for the 2010, 2009 and 2008 periods:
($ in millions) 2010 2009
Change
2010 vs. 2009 2008
Change
2009 vs. 2008
For the Year Ended December 31,
Equity in earnings of Polaris Acceptance ........... $ 4.6 $ 4.0 15% $ 4.6 ⫺13%
Income from Securitization Facility............... 8.0 9.6 ⫺17% 8.6 12%
Income from HSBC, Sheffield and GE Bank retail
credit agreements .......................... 2.4 1.1 118% 5.7 ⫺81%
Income from other financial services activities....... 1.9 2.4 ⫺21% 2.3 4%
Total income from financial services ............ $16.9 $17.1 ⫺1% $21.2 ⫺19%
Income from financial services decreased one percent to $16.9 million in 2010 compared to $17.1 million in
2009. This decrease is due to lower wholesale financing income resulting from lower dealer inventories, which was
somewhat offset by higher retail credit income. Income from financial services for 2009 decreased 19 percent to
$17.1 million compared to $21.2 million in 2008. This decrease was due to our revolving retail credit provider,
HSBC, eliminating the volume-based fee income payment to us as of March 1, 2008 partially offset by higher
interest rates paid to Polaris Acceptance by both Polaris and its dealers during the 2009 fourth quarter.
Interest Expense
Interest expense decreased to $2.7 million in 2010 compared to $4.1 million in 2009. This decrease is due to
lower interest rates on our bank borrowings during the 2010 period. Interest expense decreased to $4.1 million in
2009 compared to $9.6 million in 2008. This decrease was due to lower interest rates on our bank borrowings and
lower average debt outstanding during the 2009 period.
(Gain) Loss on Securities Available for Sale
The net gain of $0.8 million in 2010 on securities available for sale resulted from a $1.6 million gain on the sale
of our remaining investment in KTM during the 2010 third quarter offset by a related non-cash impairment charge
of $0.8 million during the 2010 second quarter. In the first quarter 2009, we recorded a non-cash impairment charge
on securities held for sales of $9.0 million from the decline in the fair value of the KTM shares owned by us as of
March 31, 2009, when it was determined that the decline in the fair value of the KTM shares owned by us was other
than temporary.
Other Expense (Income), Net
Non-operating other expense (income) was $0.3 million of expense, $0.7 million of expense, and $3.9 million
of income for 2010, 2009 and 2008, respectively. The changes primarily relate to fluctuations of the U.S. dollar and
the resulting effects on currency hedging activities and foreign currency transactions related to the foreign
subsidiaries.
Provision for Income Taxes
The income tax provision rate was similar for 2010, 2009 and 2008 and reflected an effective rate of 32.7, 33.2,
and 33.7 percent of pretax income, respectively.
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