Polaris 2011 Annual Report Download - page 85

Income from financial services as included in the consolidated statements of income is comprised of the
following (in thousands):
For the Year Ended December 31,
2011 2010 2009
Equity in earnings of Polaris Acceptance ............. $ 4,444 $ 4,574 $ 4,021
Income from Securitization Facility .................. 7,686 8,027 9,559
Income from HSBC, GE Bank and Sheffield retail credit
agreements ................................... 9,056 2,422 1,090
Income from other financial services activities ......... 2,906 1,833 2,401
Total income from financial services ................. $24,092 $16,856 $17,071
Note 8. Investment in Other Affiliates
The caption Investments in Other Affiliates in the consolidated balance sheets for the period ended
December 31, 2011 represents the Company’s investment in Brammo, Inc., a privately held manufacturer of
electric motorcycles made in October 2011. This $5,000,000 investment represents a minority interest in
Brammo and is accounted for under the cost method. The amount recorded as of December 31, 2010 represents
the Company’s 40 percent ownership in Robin Manufacturing, U.S.A. (“Robin”), which assembled engines in the
United States for recreational and industrial products. The Robin operations were closed during third quarter
2011 as the production volumes of engines made by Robin had declined significantly in recent years. Polaris
received the return of its remaining equity investment in Robin during the fourth quarter 2011 as Robin was
liquidated.
Note 9. Commitments and Contingencies
Product liability: Polaris is subject to product liability claims in the normal course of business. Polaris is
currently self-insured for all product liability claims. The estimated costs resulting from any losses are charged to
operating expenses when it is probable a loss has been incurred and the amount of the loss is reasonably
determinable. The Company utilizes historical trends and actuarial analysis tools, along with an analysis of
current claims, to assist in determining the appropriate loss reserve levels. At December 31, 2011, the Company
had an accrual of $16,861,000 for the probable payment of pending claims related to product liability litigation
associated with Polaris products. This accrual is included as a component of Other Accrued expenses in the
accompanying consolidated balance sheets. The Company is party to a lawsuit which the Plaintiff alleges that she
was injured in a 2008 accident involving a collision between a 2001 Polaris Virage personal watercraft and a
boat. Management believes the claim to be without merit and intends to defend vigorously against the action, but
there can be no assurances that the ultimate outcome of the lawsuit will be favorable to the Company or that the
defense of the suit or its outcome will not have a material adverse effect on the Company’s financial condition.
Management is unable to estimate the range of reasonably possible loss associated with this claim. The Company
discontinued the manufacture of marine products in 2004.
Litigation: Polaris is a defendant in lawsuits and subject to other claims arising in the normal course of
business. In the opinion of management, it is unlikely that any legal proceedings pending against or involving
Polaris will have a material adverse effect on Polaris’ financial position or results of operations.
Leases: Polaris leases buildings and equipment under non-cancelable operating leases. Total rent expense
under all operating lease agreements was $9,184,000, $5,553,000 and $4,999,000 for 2011, 2010 and 2009,
respectively. With the acquisition of Goupil in late 2011, the Company assumed capital lease obligations related
to certain lease agreements entered into by Goupil. These transactions are classified as capital lease obligations
and recorded at fair value. Polaris will make payments totaling $7,253,000 over the next six years.
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