Polaris 2013 Annual Report Download - page 43

Proprietary rights relating to our products are protected from unauthorized use by third parties only to the
extent that they are covered by valid and enforceable patents or trademarks or are maintained in confidence
as trade secrets. We cannot be certain that we will be issued any patents from any pending or future patent
applications owned by or licensed to us or that the claims allowed under any issued patents will be sufficiently
broad to protect our technology. In the absence of enforceable patent or trademark protection, we may be
vulnerable to competitors who attempt to copy our products, gain access to our trade secrets and know-how
or diminish our brand through unauthorized use of our trademarks, all of which could adversely affect our
business. Others may initiate litigation to challenge the validity of our patents, or allege that we infringe their
patents, or they may use their resources to design comparable products that do not infringe our patents. We
may incur substantial costs if 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 currently manufacture our products in the United States, Mexico, and France. We sell our products
throughout the world and maintain sales and administration facilities in the United States, Canada,
Switzerland and several other Western European countries, Australia, China, Brazil and India. Our primary
distribution facilities are in Vermillion, South Dakota, Wilmington, Ohio, and Rigby, Idaho, which distribute
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, 14 percent, and 16 percent of our
total sales for fiscal 2013, 2012, and 2011, 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. In 2013, we began
construction of a manufacturing facility in Europe. 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 manufacture and/or 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;
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