Polaris 2011 Annual Report Download - page 19

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, including motorcycles and Small Electric Vehicles (“SEV”), 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
2011 ........................................... 69% 11% 5% 15%
2010 ........................................... 69% 10% 4% 17%
2009 ........................................... 65% 12% 3% 20%
Industry Background
Off-Road Vehicles. 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, construction sites, and the military.
All-Terrain Vehicles 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. 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 2011 world-wide industry sales declined seven percent from 2010 levels with approximately 396,000
ATVs sold worldwide.
We estimate that the side-by-side vehicle market sales increased approximately 15 percent during 2011 over
2010 levels with an estimated 275,000 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 off-road vehicle industry sales for 2011, which includes core ATVs and side-by-side
vehicles, increased one percent from 2010 levels with approximately 671,000 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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