Polaris 2011 Annual Report Download - page 34

promotional programs, as well as longer warranties in certain geographical markets as determined by local
regulations and market conditions. We also provide a limited emission warranty for certain emission-related parts
in our ORVs, snowmobiles, and motorcycles as required by the United States Environmental Protection Agency
and the California Air Resources Board. Although we employ quality control procedures, sometimes a product is
distributed that needs repair or replacement. Our standard warranties require us or our dealers to repair or replace
defective products during such warranty periods at no cost to the consumer. Historically, product recalls have
been administered through our dealers and distributors. The repair and replacement costs we could incur in
connection with a recall could adversely affect our business. In addition, product recalls could harm our
reputation and cause us to lose customers, particularly if recalls cause consumers to question the safety or
reliability of our products.
Changing weather conditions may reduce demand and negatively impact net sales and production of certain
of our products.
Lack of snowfall in any year in any particular geographic region may adversely affect snowmobile retail
sales and related PG&A sales in that region. Additionally, to the extent that unfavorable weather conditions are
exacerbated by global climate change or otherwise, our sales may be affected to a greater degree than we have
previously experienced. There is no assurance that weather conditions or natural disasters could not have a
material effect on our sales, production capability or component supply continuity for any of our products.
We face intense competition in all product lines, including from some competitors that have greater
financial and marketing resources. Failure to compete effectively against competitors would negatively
impact our business and operating results.
The snowmobile, off-road vehicle, motorcycle and small electric vehicle 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 which are substantially greater than ours, which
allow these competitors to invest more heavily in intellectual property, product development and advertising. If
we are not able to compete with new products or models of our competitors, our future business performance
may be materially and adversely affected. Internationally, our products typically face more competition where
foreign competitors manufacture and market products in their respective countries because that allows those
competitors to sell products at lower prices, which could adversely affect our competitiveness. In addition, 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. A failure to effectively compete with these
other competitors could have a material adverse effect on our performance.
Termination or interruption of informal supply arrangements could have a material adverse effect on our
business or results of operations.
Pursuant to our informal agreements with Fuji in Japan, Fuji was the sole manufacturer of our two-cycle
snowmobile engines from 1968 to 1995. Fuji has manufactured engines for our ATV products since their
introduction in the spring of 1985 and remains a supplier of engines to us. Such engines are developed by Fuji to
our specific requirements. Although we have alternative sources for our engines and do not currently have
knowledge that Fuji intends to terminate supplying engines to us, a termination of the supply relationship with
Fuji could adversely affect our production until substitute supply arrangements for the quantity of engines
required by us could be established. There can be no assurance that alternate supply arrangements will be made
on satisfactory terms. If we need to enter into supply arrangements on unsatisfactory terms, or if there are any
delays to our supply arrangements, it could adversely affect our business and operating results.
18