Polaris 2013 Annual Report Download - page 93

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Leases: Polaris leases buildings and equipment under non-cancelable operating leases. Total rent expense
under all operating lease agreements was $10,656,000, $10,349,000, and $9,184,000 for 2013, 2012 and 2011,
respectively.
In 2013, Polaris entered into a property lease agreement for a plant in Opole, Poland. Polaris is expected to
begin occupying the facility in early 2014, which will commence the lease. The Opole, Poland property lease
will be accounted for as a capital lease upon commencement of the lease agreement. Additionally, in 2013,
Polaris acquired the land and manufacturing facility in Monterrey, Mexico, which had been previously leased.
The Monterrey, Mexico, property lease had been accounted for as an operating lease.
Including the signed but not commenced lease agreement for the facility in Poland, future minimum annual
lease payments under capital and operating leases with noncancelable terms in excess of one year as of
December 31, 2013, are as follows (in thousands):
Capital Operating
Leases Leases
2014 .......................................... $ 4,257 $ 6,367
2015 .......................................... 3,927 4,202
2016 .......................................... 3,345 3,037
2017 .......................................... 3,024 1,647
2018 .......................................... 2,429 751
Thereafter ...................................... 25,130 1,691
Total future minimum lease obligation .................. $42,112 $17,695
Note 11. Derivative Instruments and Hedging Activities
The Company is exposed to certain risks relating to its ongoing business operations. From time to time, the
primary risks managed by using derivative instruments are foreign currency risk, interest rate risk and
commodity price fluctuations. Derivative contracts on various currencies are entered into in order to manage
foreign currency exposures associated with certain product sourcing activities and intercompany cash flows.
Interest rate swaps are entered into in order to manage interest rate risk associated with the Company’s
variable-rate borrowings. Commodity hedging contracts are entered into in order to manage fluctuating
market prices of certain purchased commodities and raw materials that are integrated into the Company’s end
products.
The Company’s foreign currency management objective is to mitigate the potential impact of currency
fluctuations on the value of its U.S. dollar cash flows and to reduce the variability of certain cash flows at the
subsidiary level. The Company actively manages certain forecasted foreign currency exposures and uses a
centralized currency management operation to take advantage of potential opportunities to naturally offset
foreign currency exposures against each other. The decision of whether and when to execute derivative
instruments, along with the duration of the instrument, can vary from period to period depending on market
conditions, the relative costs of the instruments and capacity to hedge. The duration is linked to the timing of
the underlying exposure, with the connection between the two being regularly monitored. Polaris does not use
any financial contracts for trading purposes.
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