Polaris 2010 Annual Report Download - page 61

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value its derivative instruments used to hedge interest rate volatility, foreign currency and commodity transactions.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
Total Level 1 Level 2 Level 3
Fair Value Measurements as of
December 31, 2010
Asset (Liability)
Non-qualified deferred compensation assets............ $2,124 $2,124 — —
Interest rate swap agreements ...................... (126) — $ (126) —
Foreign exchange contracts, net .................... (2,019) — (2,019) —
Commodity contracts ............................ 889 — 889 —
Total ........................................ $ 868 $2,124 $(1,256) —
Total Level 1 Level 2 Level 3
Fair Value Measurements as of
December 31, 2009
Asset (Liability)
Investment in KTM ............................. $ 8,150 $ 8,150 — —
Non-qualified deferred compensation assets . . ......... 2,360 2,360 — —
Interest rate swap agreements ..................... (699) $ (699) —
Foreign exchange contracts, net .................... (350) (350) —
Commodity contracts ........................... 3,485 3,485 —
Total ........................................ $12,946 $10,510 $2,436 —
Investment in Finance Affiliate: The caption Investment in finance affiliate in the consolidated balance sheets
represents Polaris’ 50 percent equity interest in Polaris Acceptance, a partnership agreement between GE
Commercial Distribution Finance Corporation (“GECDF”) and one of Polaris’ wholly-owned subsidiaries. Polaris
Acceptance provides floor plan financing to Polaris dealers in the United States. Polaris’ investment in Polaris
Acceptance is accounted for under the equity method, and is recorded as investments in finance affiliate in the
consolidated balance sheets. Polaris’ allocable share of the income of Polaris Acceptance and the Securitized
Receivables has been included as a component of income from financial services in the consolidated statements of
income. Refer to Note 6 for additional information regarding Polaris’ investment in Polaris Acceptance.
Investment in Manufacturing Affiliates: The caption Investments in manufacturing affiliates in the consol-
idated balance sheets represents Polaris’ equity investment in Robin Manufacturing, U.S.A. (“Robin”), which
builds engines in the United States for recreational and industrial products and Polaris’ equity investment in KTM
prior to the sale of that investment. At December 31, 2010, Polaris had a 40 percent ownership interest in Robin. Fuji
and Polaris have agreed to close the Robin facility by mid-2011 as the production volume of engines made at the
facility has declined significantly in recent years. In the third quarter of 2010, the Company sold its remaining
equity investment in the Austrian motorcycle company, KTM Power Sports AG (“KTM”) which manufactures off-
road and on-road motorcycles, for $9,601,000 and recorded a net gain on securities available for sale of $1,594,000.
Prior to the sale of the KTM investment, the Company owned less than 5 percent of KTM’s outstanding shares. The
KTM investment, prior to the sale, had been classified as available for sale securities under ASC Topic 320. During
the second quarter 2010, the Company determined that the decline in the fair value of the KTM shares owned by the
Company as of June 30, 2010 was other than temporary and therefore recorded in the statement of income a non-
cash impairment charge on securities held for sale of $769,000. During the first quarter 2009, the Company
determined that the decline in the fair value of the KTM shares owned by the Company as of March 31, 2009 was
other than temporary and therefore recorded in the statement of income a non-cash impairment charge on securities
held for sale of $8,952,000.
46
POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)