Polaris 2011 Annual Report Download - page 26

SEV’s. The total cost of the facility was approximately $35.0 million. In 2010, we acquired Swissauto
Powersports Ltd., an engineering company that develops high performance and high efficiency engines and
innovative vehicles. In 2011, we acquired GEM and Goupil which included research and development for their
respective product lines.
We expended approximately $105.6 million, $84.9 million and $63.0 million for research and development
activities in 2011, 2010 and 2009, respectively.
Intellectual Property
We rely on a combination of patents, trademarks, copyrights, trade secrets, and nondisclosure and
non-competition agreements to establish and protect our intellectual property and proprietary technology. We
have filed and obtained numerous patents in the United States and abroad, and regularly file patent applications
worldwide in our continuing effort to establish and protect our proprietary technology. We hold patents in the
United States and foreign countries and apply for patents as applicable. Additionally, we have numerous
registered trademarks, trade names and logos in the United States, Canada and international locations.
Investment in KTM Power Sports AG
In 2005, we purchased a 25 percent interest in Austrian motorcycle manufacturer KTM and began several
important strategic projects with KTM intended to strengthen the competitive position of both companies and
provide tangible benefits to our respective customers, dealers, suppliers and shareholders. Additionally, Polaris
and KTM’s largest shareholder, Cross Industries AG (“Cross”), entered into an option agreement, which
provided that under certain conditions in 2007, either Cross could purchase our interest in KTM or, alternatively,
we could purchase Cross’ interest in KTM. In December 2006, Polaris and Cross cancelled the option agreement
and entered into a share purchase agreement for the sale by us of approximately 1.38 million shares of KTM, or
approximately 80 percent of our investment in KTM, to a subsidiary of Cross. The agreement provided for
completion of the sale of the KTM shares in two stages. In the first half of 2007, we completed both stages of our
sale of KTM shares generating proceeds of $77.1 million. After the completion of the sale of the KTM shares, we
held ownership of approximately 0.34 million shares, representing slightly less than five percent of KTM’s
outstanding shares. During the first quarter 2009, we determined that the decline in the market value of the KTM
shares owned by us was other than temporary; therefore, we recorded the decrease in the fair value of the
investment as a charge to the income statement in the first quarter of 2009 totaling $9.0 million. During the
second quarter 2010, we determined that the further decline in the market value of the KTM shares owned by us
was other than temporary and, therefore, we recorded a $0.8 million decrease in the fair value of the investment.
In the third quarter 2010, we sold our remaining investment in KTM and recorded a gain on securities available
for sale of $1.6 million.
Competition
The off-road vehicle, snowmobile, motorcycle and small electric vehicle markets in the United States,
Canada and other global markets are highly competitive. Competition in such markets is based upon a number of
factors, including price, quality, reliability, styling, product features and warranties. At the dealer level,
competition is based on a number of factors, including sales and marketing support programs (such as financing
and cooperative advertising). Certain of our competitors are more diversified and have financial and marketing
resources that are substantially greater than those of Polaris.
We believe that our products are competitively priced and our sales and marketing support programs for
dealers are comparable to those provided by our competitors. Our products compete with many other recreational
products for the discretionary spending of consumers, and to a lesser extent, with other vehicles designed for
utility applications.
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