Polaris 2011 Annual Report Download - page 35

Fluctuations in foreign currency exchange rates could result in declines in our reported sales and net
earnings.
The changing relationships of primarily the United States dollar to the Canadian dollar, the Euro, the
Japanese yen and certain other foreign currencies, have from time to time had a negative impact on our results of
operations because fluctuations in the value of the United States dollar relative to these foreign currencies can
adversely affect the price of our products in foreign markets and the costs we incur to import certain components
for our products. While we actively manage our exposure to fluctuating foreign currency exchange rates by
entering into foreign exchange hedging contracts from time to time, these contracts hedge foreign currency
denominated transactions and any change in the fair value of the contracts would be offset by changes in the
underlying value of the transactions being hedged.
Our business may be sensitive to economic conditions that impact consumer spending.
Our results of operations may be sensitive to changes in overall economic conditions, primarily in North
America and Europe, that impact consumer spending, including discretionary spending. Weakening of, and
fluctuations in, economic conditions affecting disposable consumer income such as employment levels, business
conditions, changes in housing market conditions, capital markets, tax rates, savings rates, interest rates, fuel and
energy costs, the impacts of natural disasters and acts of terrorism and other matters including the availability of
consumer credit could reduce consumer spending or reduce consumer spending on powersports products. A
general reduction in consumer spending or a reduction in consumer spending on powersports products could
adversely affect our sales growth and profitability. In addition, we have a financial services partnership
arrangement with a subsidiary of General Electric Company that requires us to repurchase products financed and
repossessed by the partnership, subject to certain limitations. For calendar year 2011, our maximum aggregate
repurchase obligation was approximately $91.7 million. If adverse changes to economic conditions result in
increased defaults on the loans made by this financial services partnership, our repurchase obligation under the
partnership arrangement could adversely affect our liquidity and harm our business.
We depend on dealers, suppliers, financing sources and other strategic partners who may be sensitive to
economic conditions that could affect their businesses in a manner that adversely affects their relationship
with us.
We distribute our products through numerous dealers and distributors, source component parts and raw
materials through numerous suppliers and have relationships with a limited number of sources of product
financing for our dealers and consumers. Our sales growth and profitability could be adversely affected if
deterioration of economic or business conditions results in a weakening of the financial condition of a material
number of our dealers and distributors, suppliers or financing sources or if uncertainty about the economy or the
demand for our products causes these business partners to voluntarily or involuntarily reduce or terminate their
relationship with us.
Retail credit market deterioration and volatility may restrict the ability of our retail customers to finance the
purchase of our products and adversely affect our income from financial services.
We have arrangements with each of HSBC, Sheffield and GE Bank to make retail financing available to
consumers who purchase our products in the United States. During 2011, consumers financed approximately
34 percent of the vehicles we sold in the United States through the HSBC revolving retail credit, and Sheffield
and GE Bank installment retail credit programs. Furthermore, some customers use financing from lenders who
do not partner with us. There can be no assurance that retail financing will continue to be available in the same
amounts and under the same terms that had previously been available to our customers. If retail financing is not
available to customers on satisfactory terms, it is possible that our sales and profitability could be adversely
affected.
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