Polaris 2011 Annual Report Download - page 52

Reported Net Income:
The following table reflects our reported net income for the 2011, 2010 and 2009 periods:
For the Year Ended December 31,
($ in millions except per share data) 2011 2010
Change
2011 vs. 2010 2009
Change
2010 vs. 2009
Net Income ..................................... $227.6 $147.1 55% $101.0 46%
Diluted net income per share ....................... $ 3.20 $ 2.14 50% $ 1.53 40%
Weighted Average Shares Outstanding:
The weighted average diluted shares outstanding for 2011, 2010 and 2009 were 71.1 million, 68.8 million
and 66.1 million shares, respectively. The increase in weighted average diluted shares outstanding for 2011
compared to 2010 is due to the issuance of shares under employee compensation plans, and the higher dilutive
effect of stock options outstanding due to a higher stock price in 2011. The increase in the average diluted shares
outstanding for 2010 compared to 2009 is due to no open market share repurchases under our stock repurchase
program, the issuance of shares under employee compensation plans, and the higher dilutive effect of stock
options outstanding due to a higher stock price in 2010.
Critical Accounting Policies
The significant accounting policies that management believes are the most critical to aid in fully
understanding and evaluating our reported financial results include the following: revenue recognition, sales
promotions and incentives, dealer holdback programs, share-based employee compensation, product warranties
and product liability.
Revenue recognition: Revenues are recognized at the time of shipment to the dealer, distributor or other
customers. Historically, product returns, whether in the normal course of business or resulting from repurchases
made under the floorplan financing program, have not been material. However, we have agreed to repurchase
products repossessed by the finance companies up to certain limits. Our financial exposure is limited to the
difference between the amount paid to the finance companies and the amount received on the resale of the
repossessed product. No material losses have been incurred under these agreements. We have not historically
recorded any significant sales return allowances because it has not been required to repurchase a significant
number of units. However, an adverse change in retail sales could cause this situation to change. Polaris sponsors
certain sales incentive programs and accrues liabilities for estimated sales promotion expenses and estimated
holdback amounts that are recognized as reductions to sales when products are sold to the dealer or distributor
customer.
Sales promotions and incentives: We provide for estimated sales promotion and incentive expenses, which
are recognized as a reduction to sales, at the time of sale to the dealer or distributor. Examples of sales promotion
and incentive programs include dealer and consumer rebates, volume incentives, retail financing programs and
sales associate incentives. Sales promotion and incentive expenses are estimated based on current programs and
historical rates for each product line. We record these amounts as a liability in the consolidated balance sheet
until they are ultimately paid. At December 31, 2011 and 2010, accrued sales promotions and incentives were
$81.2 million and $75.5 million, respectively, resulting primarily from an increase in the volume of units sold.
Actual results may differ from these estimates if market conditions dictate the need to enhance or reduce sales
promotion and incentive programs or if the customer usage rate varies from historical trends. Adjustments to
sales promotions and incentives accruals are made from time to time as actual usage becomes known in order to
properly estimate the amounts necessary to generate consumer demand based on market conditions as of the
balance sheet date. Historically, actual sales promotion and incentive expenses have been within our expectations
and differences have not been material.
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