Polaris 2014 Annual Report Download - page 62

Product warranties. We provide a limited warranty for ORVs for a period of six months, for a period of one
year for our snowmobiles, for a period of one or two years for our motorcycles depending on brand and
model year, and two years for SVs. We provide longer warranties in certain geographical markets as
determined by local regulations and market conditions and may provide longer warranties related to certain
promotional programs. Our standard warranties require us or our dealers to repair or replace defective
products during such warranty periods at no cost to the consumers. The warranty reserve is established at the
time of sale to the dealer or distributor based on management’s best estimate using historical rates and trends.
We record these amounts as a liability in the consolidated balance sheet until they are ultimately paid. At
December 31, 2014 and 2013, the accrued warranty liability was $53.1 million and $52.8 million, respectively.
Adjustments to the warranty reserve are made from time to time based on actual claims experience in order
to properly estimate the amounts necessary to settle future and existing claims on products sold as of the
balance sheet date. While management believes that the warranty reserve is adequate and that the judgment
applied is appropriate, such amounts estimated to be due and payable could differ materially from what will
ultimately transpire in the future.
Product liability. We are subject to product liability claims in the normal course of business. In late 2012, we
purchased excess insurance coverage for catastrophic product liability claims for incidents occurring after the
policy date. We self-insure product liability claims up to the purchased catastrophic insurance coverage. The
estimated costs resulting from any uninsured losses are charged to operating expenses when it is probable a
loss has been incurred and the amount of the loss is reasonably determinable. We utilize historical trends and
actuarial analysis tools, along with an analysis of current claims, to assist in determining the appropriate loss
reserve levels. At December 31, 2014 and 2013, we had accruals of $17.3 million and $17.1 million,
respectively, for the probable payment of pending claims related to continuing operations product liability
litigation associated with our products. These accruals are included in other accrued expenses in the
consolidated balance sheets. While management believes the product liability reserves are adequate, adverse
determination of material product liability claims made against us could have a material adverse effect on our
financial condition.
New Accounting Pronouncements
See Item 8 of Part II, ‘‘Financial Statements and Supplementary Data—Note 1—Organization and Significant
Accounting Policies—New Accounting Pronouncements.’’
Liquidity and Capital Resources
Our primary source of funds has been cash provided by operating activities. Our primary uses of funds have
been for acquisitions, repurchase and retirement of common stock, capital investment, new product
development and cash dividends to shareholders.
The following table summarizes the cash flows from operating, investing and financing activities for the years
ended December 31, 2014 and 2013:
For the Years Ended
December 31,
($ in millions) 2014 2013 Change
Total cash provided by (used for):
Operating activities ............................. $529.3 $ 492.2 $ 37.1
Investing activities .............................. (246.8) (406.7) 159.9
Financing activities ............................. (222.6) (409.0) 186.4
Impact of currency exchange rates on cash balances ......... (14.5) (1.3) (13.2)
Increase (decrease) in cash and cash equivalents ........... $ 45.4 $(324.8) $370.2
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