Polaris 2011 Annual Report Download - page 38

our competitors initiate litigation to challenge the validity of our patents, or allege that we infringe their patents,
or if we initiate any proceedings to protect our proprietary rights. If the outcome of any such litigation is
unfavorable to us, our business, operating results, and financial condition could be adversely affected. Regardless
of whether litigation relating to our intellectual property rights is successful, the litigation could significantly
increase our costs and divert management’s attention from operation of our business, which could adversely
affect our results of operations and financial condition. We also cannot be certain that our products or
technologies have not infringed or will not infringe the proprietary rights of others. Any such infringement could
cause third parties, including our competitors, to bring claims against us, resulting in significant costs, possible
damages and substantial uncertainty.
Sixteen percent of our total sales are generated outside of North America, and we intend to continue to
expand our international operations. Our international operations require significant management
attention and financial resources, expose us to difficulties presented by international economic, political,
legal, accounting, and business factors, and may not be successful or produce desired levels of sales and
profitability.
We manufacture our products in the United States and beginning in May 2011 began manufacturing
products in Mexico. We sell our products throughout the world and maintain sales and administration facilities in
the United States, Canada, France, Norway, Sweden, United Kingdom, Switzerland, Germany, Spain, Australia,
China, Brazil and India. Our primary distribution facility is in Vermillion, South Dakota which distributes PG&A
products to our North American dealers and we have various other locations around the world that distribute
PG&A to our international dealers and distributors and one of our significant engine suppliers is located in Japan.
Our total sales outside North America were 16 percent, 15 percent, and 16 percent of our total sales for fiscal
2011, 2010, and 2009, respectively. International markets have, and will continue to be, a focus for sales growth.
We believe many opportunities exist in the international markets, and over time we intend for international sales
to comprise a larger percentage of our total sales. Several factors, including weakened international economic
conditions, could adversely affect such growth. Additionally, the expansion of our existing international
operations and entry into additional international markets require significant management attention and financial
resources. Some of the countries in which we sell our products, or otherwise have an international presence, are
to some degree subject to political, economic and/or social instability. Our international operations expose us and
our representatives, agents and distributors to risks inherent in operating in foreign jurisdictions. These risks
include:
• increased costs of customizing products for foreign countries;
• difficulties in managing and staffing international operations and increases in infrastructure costs
including legal, tax, accounting, and information technology;
• the imposition of additional United States and foreign governmental controls or regulations; new or
enhanced trade restrictions and restrictions on the activities of foreign agents, representatives, and
distributors; and the imposition of increases in costly and lengthy import and export licensing and other
compliance requirements, customs duties and tariffs, license obligations, and other non-tariff barriers to
trade;
• the imposition of United States and/or international sanctions against a country, company, person, or
entity with whom we do business that would restrict or prohibit our continued business with the
sanctioned country, company, person, or entity;
• international pricing pressures;
• laws and business practices favoring local companies;
• adverse currency exchange rate fluctuations;
• longer payment cycles and difficulties in enforcing agreements and collecting receivables through
certain foreign legal systems;
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