Polaris 2011 Annual Report Download - page 37

We may encounter difficulties in our manufacturing realignment initiatives, which could adversely affect
our operating results or financial condition.
In May 2010, we announced our plans to realign our manufacturing operations footprint by enhancing our
Roseau, Minnesota and Spirit Lake, Iowa production facilities and establishing a new facility in Mexico. The
realignment led to the sale of a portion of the Osceola manufacturing facility in Wisconsin in 2011. There are
significant risks inherent in our realignment initiatives. The realignment may not be accomplished as quickly as
anticipated and the expected cost reductions may not fully materialize. We have and expect to continue to record
transition charges in connection with the realignment efforts, including both exit costs and startup costs. Even
though we anticipate that the realignment will ultimately result in reduced transportation and logistical expenses
and increased operational efficiencies, we give no assurance that we will be successful in implementing the
realignment efforts or that the amounts of our transition costs or our cost savings will be as anticipated. Other
risks and uncertainties in connection with the realignment initiatives include, but are not limited to, failing to
ensure that:
• there is no negative impact to product quality or delivery to customers as a result of shifting capacity;
• adequate raw material and other service providers are available to meet the needs at the new production
location;
• adequate supervisory, production and support personnel are available to accommodate the shift in
production; and
• violence does not impact our ability to produce and transport products from our facility in Mexico
In the event any of the risks or uncertainties related to the manufacturing realignment initiatives occurs, we may
not recoup our investment, and we could experience lost future sales and increased operating costs as well as
customer relations problems, which could have a material adverse effect on our results of operations.
Increases in the cost of raw material, commodity and transportation costs and shortages of certain raw
materials could negatively impact our business.
The primary commodities used in manufacturing our products are aluminum, steel, plastic resins and certain
rare earth metals used in our charging systems, as well as diesel fuel to transport the products. Our profitability is
affected by significant fluctuations in the prices of the raw materials and commodities we use in our products.
We may not be able to pass along any price increases in our raw materials to our customers. As a result, an
increase in the cost of raw materials, commodities, labor or other costs associated with the manufacturing of our
products could increase our costs of sales and reduce our profitability.
Our reliance upon patents, trademark laws, and contractual provisions to protect our proprietary rights may
not be sufficient to protect our intellectual property from others who may sell similar products and may lead
to costly litigation.
We hold patents and trademarks relating to various aspects of our products, such as our patented “on
demand” all-wheel drive, and believe that proprietary technical know-how is important to our business.
Proprietary rights relating to our products are protected from unauthorized use by third parties only to the extent
that they are covered by valid and enforceable patents or trademarks or are maintained in confidence as trade
secrets. We cannot be certain that we will be issued any patents from any pending or future patent applications
owned by or licensed to us or that the claims allowed under any issued patents will be sufficiently broad to
protect our technology. In the absence of enforceable patent or trademark protection, we may be vulnerable to
competitors who attempt to copy our products, gain access to our trade secrets and know-how or diminish our
brand through unauthorized use of our trademarks, all of which could adversely affect our business. Others may
initiate litigation to challenge the validity of our patents, or allege that we infringe their patents, or they may use
their resources to design comparable products that do not infringe our patents. We may incur substantial costs if
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