Polaris 2011 Annual Report Download - page 33

Item 1A. Risk Factors
The following are significant factors known to us that could materially adversely affect our business,
financial condition, or operating results, as well as adversely affect the value of an investment in our common
stock.
Our products are subject to extensive United States federal and state and international safety,
environmental and other government regulation that may require us to incur expenses or modify product
offerings in order to maintain compliance with the actions of regulators and could decrease the demand for
our products.
Our products are subject to extensive laws and regulations relating to safety, environmental and other
regulations promulgated by the United States federal government and individual states as well as international
regulatory authorities. Failure to comply with applicable regulations could result in fines, increased expenses to
modify our products and harm to our reputation, all of which could have an adverse effect on our operations. In
addition, future regulations could require additional safety standards or emission reductions that would require
additional expenses and/or modification of product offerings in order to maintain compliance with applicable
regulations. Our products are also subject to laws and regulations that restrict the use or manner of use during
certain hours and locations, and these laws and regulations could decrease the popularity and sales of our
products. We continue to monitor regulatory activities in conjunction with industry associations and support
balanced and appropriate programs that educate the product user on safe use of our products and how to protect
the environment.
A significant adverse determination in any material product liability claim against us could adversely affect
our operating results or financial condition.
The manufacture, sale and usage of our products expose us to significant risks associated with product
liability claims. If our products are defective or used incorrectly by our customers, bodily injury, property
damage or other injury, including death, may result and this could give rise to product liability claims against us
or adversely affect our brand image or reputation. Any losses that we may suffer from any liability claims, and
the effect that any product liability litigation may have upon the reputation and marketability of our products,
may have a negative impact on our business and operating results.
Because of the high cost of product liability insurance premiums and the historically insignificant amount of
product liability claims paid by us, we were self-insured from 1985 to 1996. In 1996, we purchased excess
insurance coverage for catastrophic product liability claims for incidents occurring subsequent to the policy date
that exceeded our self-insured retention levels. Since September 2002, due to insurance market conditions
resulting in significantly higher proposed premium costs, we have elected not to purchase insurance for product
liability losses. The estimated costs resulting from any losses are charged to expense when it is probable a loss
has been incurred and the amount of the loss is reasonably determinable.
We had a product liability reserve accrued on our balance sheet of $16.9 million at December 31, 2011 for
the probable payment of pending claims related to product liability litigation associated with our products. We
believe such accrual is adequate. We do not believe the outcome of any pending product liability litigation will
have a material adverse effect on our operations. However, no assurance can be given that our historical claims
record, which did not include ATVs prior to 1985 or motorcycles and side-by-side vehicles prior to 1998, will
not change or that material product liability claims against us will not be made in the future. Adverse
determination of material product liability claims made against us would have a material adverse effect on our
financial condition.
Significant product repair and/or replacement due to product warranty claims or product recalls could have
a material adverse impact on the results of operations.
We provide a limited warranty for ORVs for a period of six months and for a period of one year for our
snowmobiles and motorcycles and two years for SEVs. We may provide longer warranties related to certain
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