Polaris 2015 Annual Report Download - page 27

PART I
Item 1. Business
Polaris Industries Inc., a Minnesota corporation, was formed in 1994 and is the successor to Polaris Industries
Partners LP. The terms ‘‘Polaris,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’ and ‘‘our’’ as used herein refer to the business
and operations of Polaris Industries Inc., its subsidiaries and its predecessors, which began doing business in
the early 1950’s. We design, engineer and manufacture Off-Road Vehicles (ORV), including All-Terrain
Vehicles (ATV) and side-by-side vehicles for recreational and utility use, Snowmobiles, Motorcycles and
Global Adjacent Markets vehicles, together with the related Parts, Garments and Accessories (PG&A). These
products are sold through dealers and distributors principally located in the United States, Canada, Western
Europe, Australia and Mexico. Sales of our ORV/Snowmobiles, Motorcycles and Global Adjacent Markets
reporting segments accounted for the following approximate percentages of our sales for the years ended
December 31:
ORV / Global Adjacent
Snowmobiles Motorcycles Markets
2015 ......................................... 78% 15% 7%
2014 ......................................... 84% 9% 7%
2013 ......................................... 86% 7% 7%
Industry Background
Off-Road Vehicles. Our ORVs include Sportsman↧ ATVs, Polaris ACE↧, RANGER↧, RZR↧ and Polaris
GENERAL↩side-by-side vehicles. ATVs and Polaris ACE are four-wheel vehicles with balloon style tires
designed for off-road use and traversing rough terrain, swamps and marshland. Side-by-side vehicles are multi-
passenger off-road, all-terrain vehicles that can carry up to six passengers in addition to cargo. ORVs are used
for recreation, in such sports as fishing and hunting and for trail and dune riding, and for utility purposes on
farms, ranches, and construction sites.
ATVs were introduced to the North American market in 1971 by Honda Motor Co., Ltd. (‘‘Honda’’). Other
Japanese motorcycle manufacturers, including Yamaha Motor Corporation (‘‘Yamaha’’), Kawasaki Motors
Corp. (‘‘Kawasaki’’), and Suzuki Motor Corporation (‘‘Suzuki’’), entered the North American ATV market in
the late 1970’s and early 1980’s. We entered the ATV market in 1985, Arctic Cat Inc. (‘‘Arctic Cat’’) entered
in 1995 and Bombardier Recreational Products Inc. (‘‘BRP’’) entered in 1998 with their Can-Am product line.
In addition, numerous Chinese and Taiwanese manufacturers of youth and small ATVs exist for which limited
industry sales data is available. By 1985, the number of three- and four-wheel ATVs sold in North America
had grown to approximately 650,000 units per year, then dropped dramatically to a low of 148,000 in 1989.
The ATV industry then grew each year in North America from 1990 until 2005, but declined between 2005
and 2011, primarily due to weak overall economic conditions and a move to side-by-side vehicles, until
returning to modest low single digit percentage growth in 2012 through 2014. The North American ATV
industry was approximately flat in 2015. Internationally, ATVs are also sold primarily in Western European
countries by similar manufacturers as in North America. We estimate that during 2015 world-wide industry
sales decreased two percent from 2014 levels with an estimated 412,000 ATVs sold worldwide.
We estimate that worldwide side-by-side vehicle market sales increased approximately four percent during
2015 over 2014 levels with an estimated 439,000 side-by-side vehicles sold. The side-by-side market has
increased consistently over the past several years primarily due to continued innovation by existing and new
manufacturers. The main competitors for our RANGER, RZR and Polaris GENERAL side-by-side vehicles are
Deere & Company (‘‘Deere’’), Kawasaki, Yamaha, Arctic Cat, Kubota Tractor Corporation (‘‘Kubota’’),
Honda and BRP’s Can-Am product line.
We estimate that total worldwide off-road vehicle industry sales for 2015, which includes core ATVs and
side-by-side vehicles, increased two percent from 2014 levels with an estimated 851,000 units sold.
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