Polaris 2014 Annual Report Download - page 94

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Note 9. Investment in Other Affiliates
The Company has certain investments in nonmarketable securities of strategic companies. As of December 31,
2014 and 2013, these investments are comprised of investments in Eicher-Polaris Private Limited (EPPL) and
Brammo, Inc. (‘‘Brammo’’), and are recorded as components of other long-term assets in the accompanying
consolidated balance sheets.
EPPL is a joint venture established in 2012 with Eicher Motors Limited (‘‘Eicher’’). Polaris and Eicher each
control 50 percent of the joint venture, which is intended to design, develop and manufacture a full range of
new vehicles for India and other emerging markets. The investment in EPPL is accounted for under the
equity method, with Polaris’ proportionate share of income or loss recorded within the consolidated financial
statements on a one month lag due to financial information not being available timely. The overall investment
is expected to be approximately $50,000,000, shared equally with Eicher over a three year period. As of
December 31, 2014 and 2013, the carrying value of the Company’s investment in EPPL was $14,601,000 and
$6,456,000, respectively. Through December 31, 2014, Polaris has invested $21,878,000 in the joint venture.
Polaris’ share of EPPL loss for the years ended December 31, 2014 and 2013 was $4,124,000 and $2,414,000,
respectively, and is included in equity in loss of other affiliates on the consolidated statements of income.
Brammo is a privately held designer and developer of electric vehicles, which Polaris has invested in since
2011. The investment in Brammo is accounted for under the cost method. Brammo is in the early stages of
designing, developing, and selling electric vehicle powertrains. As such, a risk exists that Brammo may not be
able to secure sufficient financing to reach viability through cash flow from operations. In January 2015,
Polaris acquired the electric motorcycle business from Brammo. Brammo will continue to be a designer and
developer of electric vehicle powertrains.
Polaris will impair or write off an investment and recognize a loss if and when events or circumstances
indicate there is impairment in the investment that is other-than-temporary. When necessary, Polaris evaluates
investments in nonmarketable securities for impairment, utilizing level 3 fair value inputs. During 2014 and
2013, Polaris recorded an immaterial impairment expense within other expense (income), net in the
consolidated statements of income, and reduced the Brammo investment.
Note 10. Commitments and Contingencies
Product liability. Polaris is subject to product liability claims in the normal course of business. In 2012, Polaris
purchased excess insurance coverage for catastrophic product liability claims for incidents occurring after the
policy date. Polaris self-insures product liability claims before the policy date and up to the purchased
catastrophic insurance coverage after the policy date. The estimated costs resulting from any losses are
charged to operating expenses when it is probable a loss has been incurred and the amount of the loss is
reasonably determinable. The Company utilizes 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,
the Company had an accrual of $17,327,000 for the probable payment of pending claims related to continuing
operations product liability litigation associated with Polaris products. This accrual is included as a component
of other accrued expenses in the accompanying consolidated balance sheets.
As previously disclosed, the Company was party to a lawsuit in which the plaintiff was seriously injured in a
2008 accident involving a collision between a 2001 Polaris Virage personal watercraft and a boat. On July 23,
2013, a Los Angeles County jury returned an unfavorable verdict against the Company. The jury returned a
verdict finding that the accident was caused by multiple actions, the majority of which was attributed to the
negligence of the other boat driver, with the balance attributed to the reckless behavior of the driver of the
Virage and the design of the Virage. The jury awarded approximately $21,000,000 in damages, of which
Polaris’ liability was $10,000,000. In the third quarter of 2013, the Company reported a loss from discontinued
operations, net of tax, of $3,777,000 for an additional provision to accrue Polaris’ portion of the jury award
and legal fees. The amount was fully paid in 2013. In September 2004, the Company announced its decision to
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