Polaris 2014 Annual Report Download - page 43

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snowmobiles, and motorcycles as required by the EPA and CARB. Although we employ quality control
procedures, sometimes a product is distributed that needs repair or replacement. Our standard warranties
require us or our dealers to repair or replace defective products during such warranty periods at no cost to
the consumer. Historically, product recalls have been administered through our dealers and distributors. The
repair and replacement costs we could incur in connection with a recall could adversely affect our business. In
addition, product recalls could harm our reputation and cause us to lose customers, particularly if recalls
cause consumers to question the safety or reliability of our products.
Changing weather conditions may reduce demand and negatively impact net sales and production of certain of our
products.
Lack of snowfall in any year in any particular geographic region may adversely affect snowmobile retail sales
and related PG&A sales in that region. Additionally, to the extent that unfavorable weather conditions are
exacerbated by global climate change or otherwise, our sales may be affected to a greater degree than we have
previously experienced. There is no assurance that weather conditions or natural disasters could not have a
material effect on our sales, production capability or component supply continuity for any of our products.
We face intense competition in all product lines, including from some competitors that have greater financial and
marketing resources. Failure to compete effectively against competitors would negatively impact our business and
operating results.
The snowmobile, off-road vehicle, motorcycle and small vehicle markets are highly competitive. Competition
in such markets is based upon a number of factors, including price, quality, reliability, styling, product features
and warranties. At the dealer level, competition is based on a number of factors, including sales and
marketing support programs (such as financing and cooperative advertising). Certain of our competitors are
more diversified and have financial and marketing resources that are substantially greater than ours, which
allow these competitors to invest more heavily in intellectual property, product development and advertising.
If we are not able to compete with new products or models of our competitors, our future business
performance may be materially and adversely affected. Internationally, our products typically face more
competition where certain foreign competitors manufacture and market products in their respective countries.
This allows those competitors to sell products at lower prices, which could adversely affect our
competitiveness. In addition, our products compete with many other recreational products for the
discretionary spending of consumers and, to a lesser extent, with other vehicles designed for utility
applications. A failure to effectively compete with these other competitors could have a material adverse effect
on our performance.
Termination or interruption of informal supply arrangements could have a material adverse effect on our business
or results of operations.
We have informal supply arrangements with many of our suppliers. In the event of a termination of the supply
arrangement, there can be no assurance that alternate supply arrangements will be made on satisfactory terms.
If we need to enter into supply arrangements on unsatisfactory terms, or if there are any delays to our supply
arrangements, it could adversely affect our business and operating results.
Fluctuations in foreign currency exchange rates could result in declines in our reported sales and net earnings.
The changing relationships of primarily the United States dollar to the Canadian dollar, Australian dollar, the
Euro, the Swiss Franc, the Mexican peso, the Japanese yen and certain other foreign currencies have from
time to time had a negative impact on our results of operations. Fluctuations in the value of the United States
dollar relative to these foreign currencies can adversely affect the price of our products in foreign markets, the
costs we incur to import certain components for our products, and the translation of our foreign balance
sheets. While we actively manage our exposure to fluctuating foreign currency exchange rates by entering into
foreign exchange hedging contracts from time to time, these contracts hedge foreign currency denominated
transactions and any change in the fair value of the contracts would be offset by changes in the underlying
value of the transactions being hedged.
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