Polaris 2014 Annual Report Download - page 46

Our reliance upon patents, trademark laws, and contractual provisions to protect our proprietary rights may not be
sufficient to protect our intellectual property from others who may sell similar products and may lead to costly
litigation.
We hold patents and trademarks relating to various aspects of our products, such as our patented ‘‘on
demand’’ all-wheel drive, and believe that proprietary technical know-how is important to our business.
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.
Fifteen 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, Poland 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, Mexico 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. Our total sales outside North
America were 15 percent, 16 percent, and 14 percent of our total sales for fiscal 2014, 2013, and 2012,
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 2014, we completed construction of a manufacturing facility in Poland.
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
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