Polaris 2011 Annual Report Download - page 83

Stock Purchase Plan: Polaris maintains an employee stock purchase plan (“Purchase Plan”). A total of
3,000,000 shares of common stock are reserved for this plan. The Purchase Plan permits eligible employees to
purchase common stock at 95 percent of the average market price each month. As of December 31, 2011,
approximately 1,198,000 shares had been purchased under the Purchase Plan.
Note 7. Financial Services Arrangements
In 1996, one of Polaris’ wholly-owned subsidiaries entered into a partnership agreement with a subsidiary of
Transamerica Distribution Finance (“TDF”) to form Polaris Acceptance. In 2004, TDF was merged with a
subsidiary of General Electric Company and, as a result of that merger, TDF’s name was changed to GECDF.
Polaris’ subsidiary has a 50 percent equity interest in Polaris Acceptance. In November 2006, Polaris Acceptance
sold a majority of its receivable portfolio to the securitization facility arranged by General Electric Capital
Corporation, a GECDF affiliate (“Securitization Facility”), and the partnership agreement was amended to
provide that Polaris Acceptance would continue to sell portions of its receivable portfolio to a Securitization
Facility from time to time on an ongoing basis. At December 31, 2011 and 2010, the outstanding balance of
receivables sold by Polaris Acceptance to the Securitization Facility (the “Securitized Receivables”) amounted to
approximately $477,604,000 and $323,790,000, respectively. The sale of receivables from Polaris Acceptance to
the Securitization Facility is accounted for in Polaris Acceptance’s financial statements as a “true-sale” under
ASC Topic 860. Polaris Acceptance is not responsible for any continuing servicing costs or obligations with
respect to the Securitized Receivables. Polaris has not guaranteed the outstanding indebtedness of Polaris
Acceptance or the Securitized Receivables. Polaris’ subsidiary and GECDF have an income sharing arrangement
related to income generated from the Securitization Facility. The remaining portion of the receivable portfolio is
recorded on Polaris Acceptance’s books. The two partners of Polaris Acceptance share equally an equity cash
investment equal to 15 percent of the sum of the portfolio balance in Polaris Acceptance plus Securitized
Receivables. Polaris’ total investment in Polaris Acceptance at December 31, 2011and 2010, was $42,251,000
and $37,169,000, respectively. The Polaris Acceptance partnership agreement provides for periodic options for
renewal, purchase, or termination by either party. Substantially all of Polaris’ United States sales are financed
through Polaris Acceptance and the Securitization Facility whereby Polaris receives payment within a few days
of shipment of the product. The net amount financed for dealers under this arrangement at December 31, 2011,
including both the portfolio balance in Polaris Acceptance and the Securitized Receivables, was $568,392,000.
Polaris has agreed to repurchase products repossessed by Polaris Acceptance up to an annual maximum of
15 percent of the average month-end balances outstanding during the prior calendar year. For calendar year 2011,
the potential 15 percent aggregate repurchase obligation was approximately $91,693,000. Polaris’ financial
exposure under this arrangement is limited to the difference between the amounts unpaid by the dealer with
respect to the repossessed product plus costs of repossession and the amount received on the resale of the
repossessed product. No material losses have been incurred under this agreement during the periods presented.
Polaris’ trade receivables from Polaris Acceptance were $1,618,000 and $29,000 at December 31, 2011 and
2010, respectively. Polaris’ exposure to losses with respect to the Polaris Acceptance Portfolio and the
Securitized Receivables is limited to its equity in its wholly-owned subsidiary that is a partner in Polaris
Acceptance.
Polaris’ total investment in Polaris Acceptance at December 31, 2011 of $42,251,000 is accounted for under
the equity method, and is recorded as Investments in finance affiliate in the accompanying consolidated balance
sheets. The partnership agreement provides that all income and losses of the Polaris Acceptance and the
Securitized Receivables are shared 50 percent by Polaris’ wholly-owned subsidiary and 50 percent by GECDF.
Polaris’ allocable share of the income of Polaris Acceptance and the Securitized Facility has been included as a
component of Income from financial services in the accompanying statements of income.
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