Polaris 2013 Annual Report Download - page 30

Marine Products Division. We entered the personal watercraft market in 1992. In September 2004, we
announced that we had decided to cease manufacturing marine products effective immediately. As technology
and the distribution channel evolved, the marine products division’s lack of commonality with our other
product lines created challenges for us and our dealer base. The marine products division continued to
experience escalating costs and increasing competitive pressures and was never profitable.
Manufacturing and Distribution Operations
Our products are assembled at our original manufacturing facility in Roseau, Minnesota and at our facilities in
Spirit Lake, Iowa, and its surrounding areas, Osceola, Wisconsin, Monterrey, Mexico and in facilities across
France. Since our product lines incorporate similar technology, substantially the same equipment and
personnel are employed in their production in North America. We are vertically integrated in several key
components of our manufacturing process, including plastic injection molding, welding, clutch assembly and
balancing and painting. Fuel tanks, tracks, tires, seats and instruments, and certain other component parts are
purchased from third-party vendors. Raw materials or standard parts are readily available from multiple
sources for the components manufactured by us. Our work force is familiar with the use, operation and
maintenance of the products since many employees own the products we manufacture. In 2010, we announced
plans to realign our manufacturing operations. We have created manufacturing centers of excellence for our
products by enhancing the existing Roseau and Spirit Lake production facilities and established a
manufacturing facility in Monterrey, Mexico, which became operational in 2011, that assembles ORVs and
certain engines. This realignment led to the sale of part of our Osceola, Wisconsin manufacturing operations,
moving frame tube bending into Roseau and Monterrey, and outsourcing some operations including seat
manufacturing and stamping. Several of the engines used in our vehicles continue to be manufactured in
Osceola. In 2013, construction began on a new manufacturing facility in Opole, Poland, which is expected to
be completed in 2014. The Opole, Poland facility is expected to manufacture ORVs to serve the European
market. Goupil has its manufacturing operations in Bourran, France, while Aixam has its manufacturing
operations in Aix-les-Bains and Chanas, France. Our Roseau, Minnesota facility primarily manufactures ORVs
and snowmobiles and our Monterrey, Mexico facility primarily manufactures ORVs. Our facilities in Spirit
Lake, Iowa and its surrounding areas primarily manufacture ORVs, motorcycles and GEM vehicles.
Pursuant to informal agreements between us and Fuji Heavy Industries Ltd. (‘‘Fuji’’), Fuji was the sole
manufacturer of our two-cycle snowmobile engines from 1968 to 1995. Fuji has manufactured engines for our
ATV products since their introduction in 1985. We had entered into an agreement with Fuji to form Robin
Manufacturing, U.S.A. (‘‘Robin’’) in 1995. Under the agreement, we made an investment for a 40 percent
ownership position in Robin, which built engines in the United States for recreational and industrial products.
The Robin facility was closed in 2011 as the production volume of engines made at the facility had declined
significantly in recent years. Since 2011, our reliance on and use of Fuji manufactured engines in our products
has steadily declined as our engine manufacturing capabilities have expanded. We expect our use of Fuji
engines in our vehicles to continue to decline throughout 2014.
We have been designing and producing our own engines for select models of snowmobiles since 1995, for all
Victory motorcycles since 1998, for select ORV models since 2001 and for Indian motorcycles since the
re-launch in 2013. During 2013, approximately 65 percent of the total vehicles we produced were powered by
engines designed and assembled by us.
In 2000, we entered into an agreement with a Taiwanese manufacturer to co-design, develop and produce
youth ATVs. We have since expanded the agreement with the Taiwanese manufacturer in 2004 to include the
design, development and production of value-priced smaller adult ATV models and in 2008 to include a youth
side-by-side vehicle, the RANGER RZR 170.
We do not anticipate any significant difficulties in obtaining substitute supply arrangements for other raw
materials or components that we generally obtain from limited sources.
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