v2.4.0.6

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Before Income Taxes

Polaris’ Income before income taxes was generated from its United States and foreign operations as follows (in thousands):

		For the Years Ended December 31,
		2012				2011				2010
United States		$	458,635			$	329,060			$	210,155
Foreign			21,208				17,566				8,386
Income before income taxes		$	479,843			$	346,626			$	218,541

Components of Provision for Income Taxes

Components of Polaris’ Provision for income taxes are as follows (in thousands):

		For the Years Ended December 31,
		2012				2011				2010
Current:
Federal		$	169,833			$	113,406			$	73,597
State			15,366				10,629				7,381
Foreign			8,593				6,374				6,783
Deferred			(26,259	)			(11,358	)			(16,358	)
Total		$	167,533			$	119,051			$	71,403

Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate

Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:

		For the Years Ended December 31,
		2012				2011				2010
Federal statutory rate			35.0	%			35.0	%			35.0	%
State income taxes, net of federal benefit			1.8				1.8				1.8
Domestic manufacturing deduction			(1.5	)			(1.9	)			(1.8	)
Research tax credit			0.0				(0.8	)			(1.2	)
Valuation allowance for foreign subsidiaries net operating losses			0.0				0.5				0.4
Other permanent differences			(0.4	)			(0.3	)			(1.5	)
Effective income tax rate			34.9	%			34.3	%			32.7	%

Net Deferred Income Taxes

The net deferred income taxes consist of the following (in thousands):

		December 31,
		2012				2011
Current deferred income taxes:
Inventories		$	7,277			$	5,968
Accrued expenses			78,164				73,171
Derivative instruments			851				(1,474	)
Total current			86,292				77,665
Noncurrent net deferred income taxes:
Cost in excess of net assets of business acquired			5,193				2,139
Property and equipment			(21,656	)			(21,627	)
Compensation payable in common stock			40,329				31,274
Net unrealized gains in other comprehensive income			(1,698	)			(1,516	)
Net operating loss carryforwards			4,744				4,243
Valuation allowance			(4,523	)			(3,912	)
Total noncurrent			22,389				10,601
Total		$	108,681			$	88,266

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

		For the Years Ended December 31,
		2012				2011
Balance at January 1,		$	7,837			$	5,509
Gross increases for tax positions of prior years			83				483
Gross decreases for tax positions of prior years			—				—
Gross increases for tax positions of current year			1,137				1,956
Decreases due to settlements			(1,994	)			—
Decreases for lapse of statute of limitations			—				(111	)
Balance at December 31,		$	7,063			$	7,837

X

- Definition

Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.

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- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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