Polaris 2013 Annual Report Download - page 63

of the Polaris Acceptance portfolio and income and losses realized by GECDF’s affiliates with respect to the
Securitized Receivables are shared 50 percent by our wholly owned subsidiary and 50 percent by GECDF’s
subsidiary. Our exposure to losses associated 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. We have agreed to repurchase products repossessed by Polaris Acceptance or the Securitization
Facility up to an annual maximum of 15 percent of the aggregate average month-end balances outstanding
during the prior calendar year with respect to receivables retained by Polaris Acceptance and the Securitized
Receivables. For calendar year 2014, the potential 15 percent aggregate repurchase obligation is approximately
$120.8 million. Our financial exposure under this arrangement is limited to the difference between the amount
paid to the finance company for repurchases and the amount received on the resale of the repossessed
product. No material losses have been incurred under this agreement. During 2011, Polaris and GECDF
amended the Polaris Acceptance partnership agreement to extend it through February 2017 with similar terms
to the previous agreement.
Our investment in Polaris Acceptance is accounted for under the equity method and is recorded as investment
in finance affiliate in the accompanying consolidated balance sheets. Our allocable share of the income of
Polaris Acceptance and the Securitized Receivables has been included as a component of income from
financial services in the accompanying consolidated statements of income. At December 31, 2013, Polaris
Acceptance’s wholesale portfolio receivables from dealers in the United States (including the Securitized
Receivables) was $928.5 million, a 21 percent increase from $767.2 million at December 31, 2012. Credit
losses in the Polaris Acceptance portfolio have been modest, averaging less than one percent of the portfolio.
We have agreements with Capital One, GE Money Bank and Sheffield Financial under which these financial
institutions provide financing to end consumers of our products. The agreements expire in October 2014,
March 2016 and February 2016, respectively. The income generated from these agreements has been included
as a component of income from financial services in the accompanying consolidated statements of income.
During 2013, consumers financed approximately 32 percent of our vehicles sold in the United States through
the combined Capital One revolving retail credit and GE Bank and Sheffield installment retail credit
arrangement. The volume of revolving and installment credit contracts written in calendar year 2013 was
$779.0 million, a nine percent increase from 2012.
We administer and provide extended service contracts to consumers and certain insurance contracts to dealers
and consumers through various third-party suppliers. We do not retain any warranty, insurance or financial
risk under any of these arrangements. The service fee income generated from these arrangements has been
included as a component of income from financial services in the accompanying consolidated statements of
income.
We believe that existing cash balances, cash flow to be generated from operating activities and available
borrowing capacity under the line of credit arrangement will be sufficient to fund operations, new product
development, cash dividends, share repurchases, acquisitions and capital requirements for the foreseeable
future. At this time, we are not aware of any factors that would have a material adverse impact on cash flow.
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