Polaris 2010 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 of the 2010 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 94

  • 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
  • 91
  • 92
  • 93
  • 94

Income from financial services as included in the consolidated statements of income is comprised of the
following (in thousands):
2010 2009 2008
For the Year Ended December 31,
Equity in earnings of Polaris Acceptance .................... $ 4,574 $ 4,021 $ 4,604
Income from Securitization Facility ........................ 8,027 9,559 8,620
Income from HSBC, GE Bank and Sheffield retail credit
agreements . ....................................... 2,422 1,090 5,703
Income from other financial services activities ................ 1,833 2,401 2,278
Total income from financial services ....................... $16,856 $17,071 $21,205
Note 7: Investment in Manufacturing Affiliates
The caption Investments in manufacturing affiliates in the consolidated 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 as well as Polaris’ equity investment in KTM prior to the 2010 third quarter. 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 income statement 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 income statement a non-cash impairment charge on securities held for sale of $8,952,000.
Polaris’ investments in manufacturing affiliates, including associated transaction costs, totaled $1,009,000 at
December 31, 2010 and $10,536,000 at December 31, 2009. The investment in Robin is accounted for under the
equity method.
Note 8: Commitments and Contingencies
Product liability: Polaris is subject to product liability claims in the normal course of business. Polaris is
currently self-insured for all product liability claims. The estimated costs resulting from any losses are charged to
operating expenses when it is probable a loss has been incurred and the amount of the loss is reasonably
determinable. The Company utilizes historical trends and actuarial analysis tools to assist in determining the
appropriate loss reserve levels. At December 31, 2010 the Company had an accrual of $11,956,000 for the probable
payment of pending claims related to continuing operations. This accrual is included as a component of Other
Accrued expenses in the accompanying consolidated balance sheets. In addition, the Company had an accrual of
$1,550,000 for the probable payment of pending claims related to discontinued operations at December 31, 2010.
Litigation: Polaris is a defendant in lawsuits and subject to claims arising in the normal course of business. In
the opinion of management, it is unlikely that any legal proceedings pending against or involving Polaris will have a
material adverse effect on Polaris’ financial position or results of operations.
Leases: Polaris leases buildings and equipment under non-cancelable operating leases. Total rent expense
under all lease agreements was $5,553,000, $4,999,000 and $5,777,000 for 2010, 2009 and 2008, respectively.
61
POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)