Investor Relations

Welcome to Polaris Inc. NYSE PII: $90.99 +0.93 +1.03% Volume: 626,882 September 13, 2019
news-details

    Polaris Reports 2019 First Quarter Results

    04/23/2019

    Q1 2019 Highlights

    Reported and adjusted sales for the first quarter of 2019 increased 15% to $1,496 million

    Reported net income was $0.78 per diluted share, down 8% over the prior year; adjusted net income for the same period was $1.08 per diluted share, down 4% over the prior year, ahead of Company expectations

    North American retail sales decreased 3% for the quarter compared to last year; ORV N.A. retail sales were down mid-single digits percent and motorcycle sales were down high-single digits percent, both negatively impacted by weather

    Gained market share in snowmobiles for the season ending March 2019; maintained market share in Indian motorcycles in a challenging industry environment

    Dealer inventory was down 1% year-over-year for the first quarter 2019, in-line with expectations

    Polaris increased its full year 2019 earnings guidance and now expects earnings to be in the $6.05 to $6.30 per diluted share, which includes the absorption of $80 to $90 million of additional tariff costs anticipated in 2019 over 2018. Full year 2019 adjusted sales growth guidance remains unchanged at up 11% to 13% over the prior year.

    MINNEAPOLIS--(BUSINESS WIRE)-- Polaris Industries Inc. (NYSE: PII):

     

    Key Financial Data

                   
    (in thousands, except per share data)
    INCOME STATEMENT - Q1 March 31, 2019 Reported YOY % Chg. Adjusted* YOY % Chg.
    Sales $ 1,495,690 15 % $ 1,495,690 15 %
    Net income attributable to Polaris $ 48,378   (13 )% $ 66,897 (9 )%
    Diluted EPS $ 0.78   (8 )% $ 1.08 (4 )%
     
    BALANCE SHEET - Q1 March 31, 2019 Reported YOY % Chg.
    Cash and cash equivalents $ 151,439 (9 )%
    Inventories, net $ 1,148,637 24 %
    Total debt, finance lease obligations and notes payable $ 2,101,282 104 %
    Shareholders' equity $ 879,202 (10 )%
     
    CASH FLOW - YTD March 31, 2019 Reported YOY % Chg.
    Net cash used for operating activities $ (38,217 ) NM
    Purchase of property & equipment $ 70,254 26 %
    Repurchase and retirement of common shares $ 6,110 (59 )%
    Cash dividends to shareholders $ 37,144 (2 )%
     
    NM = Not meaningful
    *Note: the results and guidance in this release, including the highlights above, include references to non-GAAP operating measures, which are identified by the word “adjusted” preceding the measure. A reconciliation of GAAP / non-GAAP measures can be found at the end of this release.
     

    CEO Commentary

    "Polaris’ 65th anniversary year is off to a solid start, as we delivered sound results and finished the Quarter with strong momentum. The team executed well, providing quality products to our customers while navigating a dynamic trade environment. Retail sales results were somewhat mixed, with greater than 20 percent Snowmobile growth helping to offset modest weather-related declines in ORV, Motorcycles and Boats, although all three of these segments came on strong at the end of March. Our product lineup has never been stronger, our Boat brands fared well during the recent boat shows, dealer inventory levels are well-positioned to support the peak spring retail selling season, and our strategic sourcing program is accelerating savings and value enhancement. We remain steadfastly committed to enhancing our customer-centric culture, which amplifies our investments in innovation and operational prowess, and as we look to the balance of 2019, we are confident about gaining market share as we continue bringing innovative products to our customers and solidifying our position as the leader in Powersports."

    -- Scott Wine, Chairman and Chief Executive Officer of Polaris Industries Inc.

       

    First Quarter Performance Summary (Reported)

     
    (in thousands, except per share data) Three months ended March 31,
    2019     2018     Change
    Sales $ 1,495,690   $ 1,297,473   15 %
    Gross profit   352,448     323,481   9 %
    % of Sales 23.6 % 24.9 % -137 bpts
    Total operating expenses   289,317     261,630   11 %
    % of Sales 19.3 % 20.2 % -82 bpts
    Income from financial services   18,805     21,425   (12 )%
    % of Sales 1.3 % 1.7 % -39 bpts
    Operating income   81,936     83,276   (2 )%
    % of Sales 5.5 % 6.4 % -94 bpts
    Net income attributable to Polaris   48,378     55,714   (13 )%
    % of Sales 3.2 % 4.3 % -106 bpts
    Diluted net income per share $ 0.78   $ 0.85   (8 )%
     

    Polaris Industries Inc. (NYSE: PII) (the "Company") today released first quarter 2019 results with sales of $1,496 million on a reported and adjusted basis, up 15 percent from $1,297 million for the first quarter of 2018, including $185 million of Boat segment sales reported in the first quarter of 2019. The Company reported first quarter 2019 net income of $48 million, or $0.78 per diluted share, compared with net income of $56 million, or $0.85 per diluted share, for the 2018 first quarter. Adjusted net income for the quarter ended March 31, 2019 was $67 million, or $1.08 per diluted share compared to $74 million, or $1.13 per diluted share in the 2018 first quarter.

    Gross profit increased 9 percent to $352 million for the first quarter of 2019 from $323 million in the first quarter of 2018. Reported gross profit margin was 23.6 percent of sales for the first quarter of 2019 compared to 24.9 percent of sales for the first quarter of 2018. Gross profit for the first quarter of 2019 includes the negative impact of $7 million of restructuring and realignment costs. Excluding these costs, first quarter 2019 adjusted gross profit was $359 million, or 24.0 percent of adjusted sales. For the first quarter of 2018 adjusted gross profit of $329 million, or 25.4 percent of adjusted sales, excludes the negative impact of $6 million of restructuring and realignment costs. Gross profit margins on an adjusted basis were down 140 basis points. Higher average selling prices were more than offset by tariff costs and the addition of Boats which has lower gross profit margins.

    Operating expenses increased 11 percent for the first quarter of 2019 to $289 million, or 19.3 percent of sales, from $262 million, or 20.2 percent of sales, in the same period in 2018. Operating expenses in dollars increased primarily due to the Boat Holdings acquisition completed during the third quarter of 2018 and investments in strategic projects. Operating expenses as a percentage of sales, improved due to the addition of Boats, which has a lower operating expense to sales ratio.

    Income from financial services was $19 million for the first quarter of 2019, down 12 percent compared with $21 million for the first quarter of 2018. The decrease is primarily attributable to lower retail sales during the quarter.

     

    Non-Operating Expenses (Reported)

       
    (in thousands) Three months ended March 31,
    2019     2018     Change
    Interest expense $ 20,419 $ 8,048 154 %
    Equity in loss of other affiliates $ 606 $ 21,511 (97 )%
    Other income, net $ (3,501 ) $ (19,975 ) (82 )%
    Provision for income taxes $ 16,016 $ 17,978 (11 )%
     

    Interest expense was $20 million for the first quarter of 2019 compared to $8 million for the same period last year, primarily due to increased debt levels to finance the Boat acquisition and higher interest rates.

    Equity in loss of other affiliates was $1 million for the first quarter of 2019 compared to $22 million for the same period last year. In the first quarter 2018, the Company recorded charges totaled approximately $20 million associated with the shut down of the Eicher-Polaris joint venture in India.

    Other income, net, was $4 million in the first quarter of 2019 compared to $20 million in the first quarter of 2019 resulting from foreign currency exchange rate movements and the corresponding effects on foreign currency transactions related to the Company’s foreign subsidiaries. In the first quarter of 2018, in addition to the impact of foreign currency exchange rate movements, the Company reported a $13 million gain on the sale of the Company's investment in Brammo Inc.

    The provision for income taxes for the first quarter of 2019 was $16 million, or 24.9 percent of pretax income, compared with $18 million, or 24.4 percent of pretax income for the first quarter of 2018.

    Net income attributable to non-controlling interest of $18 thousand reported in the first quarter of 2019 relates to net income attributable to the minority owner of a joint venture between Polaris and a supplier in Vietnam to manufacturer components for the Company.

     

    Product Segment Highlights (Reported)

           
    (in thousands) Sales Gross Profit
    Q1 2019     Q1 2018     Change Q1 2019     Q1 2018     Change
    Off-Road Vehicles / Snowmobiles $ 867,447 $ 832,564 4 % $ 252,235 $ 243,561 4 %
    Motorcycles $ 117,942 $ 131,557 (10 )% $ 6,962 $ 16,568 (58 )%
    Global Adjacent Markets $ 104,956 $ 113,327 (7 )% $ 29,829 $ 31,258 (5 )%
    Aftermarket $ 220,535 $ 220,025 % $ 56,475 $ 58,452 (3 )%
    Boats $ 184,810 $ $ 36,164 $
     

    Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $867 million for the first quarter of 2019, up four percent over $833 million for the first quarter of 2018 driven by growth in side-by-side sales. PG&A sales for ORV and Snowmobiles combined increased 12 percent in the first quarter of 2019 compared to the first quarter last year. Gross profit increased four percent to $252 million in the first quarter of 2019, compared to $244 million in the first quarter of 2018. Gross profit percentage declined 20 basis points during the quarter as higher average selling prices and favorable product mix were more than offset by higher tariff costs.

    ORV wholegoodsales for the first quarter of 2019 increased 4 percent primarily driven by increased average selling prices. Polaris North American ORV retail sales decreased mid-single digits percent for the quarter with side-by-side vehicles down low-single digits percent and ATV vehicles down low-double digits percent. The North American ORV industry was down low-single digits percent compared to the first quarter last year.

    Snowmobile wholegood sales in the first quarter of 2019 were $13 million, down 28 percent compared to $18 million in the first quarter last year. Polaris snowmobile retail sales were up high-single digits percent during the first quarter of 2019 and up about 20 percent for the twelve month season ending March 2019. North American industry retail was up low-double digits percent for the first quarter and up low-single digits percent for the season ending March 2019. Polaris gained significant market share for the season.

    Motorcycles segment sales, including PG&A, totaled $118 million, down 10 percent compared to the first quarter of 2018, driven largely by declines in Slingshot sales, and to less of an extent, Indian Motorcycle sales, partly due to an ongoing challenging motorcycle market. Gross profit for the first quarter of 2019 was $7 million compared to $17 million in the first quarter of 2018. The decrease in gross profit was primarily the result of lower volume and tariff costs.

    North American consumer retail sales for the Polaris motorcycle segment, including both Indian Motorcycle and Slingshot, decreased high-single digits percent during the first quarter of 2019. Indian Motorcycle retail sales decreased mid-single digits percent. Slingshot's retail sales were down low-double digits percent during the quarter. Motorcycle industry retail sales, 900cc and above, were down mid-single digits percent in the first quarter of 2019.

    Global Adjacent Markets segment sales, including PG&A, decreased seven percent to $105 million in the 2019 first quarter compared to $113 million in the 2018 first quarter. Reported gross profit decreased five percent to $30 million in the first quarter of 2019, compared to $31 million in the first quarter of 2018. Adjusted gross profit decreased 6 percent to $30 million in the first quarter of 2019, compared to $32 million in the first quarter of 2018 due to negative product mix.

    Aftermarket segment sales of $221 million in the 2019 first quarter increased slightly compared to $220 million in the 2018 first quarter. TAP sales in the first quarter of 2019 were $197 million, which was down two percent from $201 million in the first quarter of 2018. TAP sales declined two percent due to ongoing soft wholesale sales along with lower e-commence demand while the Company's other aftermarket brands increased sales over 20 percent. Gross profit decreased to $56 million in the first quarter of 2019, compared to $58 million in the first quarter of 2018 due to negative product mix.

    Boats segment sales, which consist of the Boat Holdings acquisition which closed July 2, 2018, were $185 million in the 2019 first quarter. Gross profit was $36 million or 19.6 percent of sales in the first quarter of 2019.

    Supplemental Data :

    Parts, Garments, and Accessories (“PG&A”) sales increased eight percent for the 2019 first quarter primarily driven by growth in ORV and snowmobiles.

    International sales to customers outside of North America, including PG&A, totaled $203 million for the first quarter of 2019, down four percent, from the same period in 2018. Increased Indian Motorcycle and PG&A sales were more than offset by negative foreign exchange movements which reduced sales by seven percent for the quarter.

     

    Financial Position and Cash Flow

       
    (in thousands) Three Months ended March 31,
    2019     2018     Change
    Cash and cash equivalents $ 151,439   $ 166,357   (9 )%
    Net cash used for operating activities $ (38,217 ) $ (3,189 ) NM  
    Repurchase and retirement of common shares $ 6,110   $ 14,987   (59 )%
    Cash dividends to shareholders $ 37,144   $ 37,796   (2 )%
    Total debt, finance lease obligations and notes payable $ 2,101,282 $ 1,029,479 104 %
    Debt to Total Capital Ratio 71 % 51 %
     
    NM = Not meaningful
     

    Net cash used for operating activities was $38 million for the three months ended March 31, 2019, compared to $3 million for the same period in 2018. The increase in net cash used for operating activities for the 2019 period was the result of higher factory inventory due to timing of shipments, preparation for new product launches and additional costs related to tariffs. Total debt at March 31, 2019, including finance lease obligations and notes payable, was $2,101 million. The Company’s debt-to-total capital ratio was 71 percent at March 31, 2019 compared to 51 percent at March 31, 2018. Cash and cash equivalents were $151 million at March 31, 2019, down from $166 million at March 31, 2018.

    2019 Business Outlook

    Given the 2019 first quarter results, the Company is increasing its full year earnings guidance and now expects adjusted net income to be in the range of $6.05 to $6.30 per diluted share, compared with adjusted net income of $6.56 per diluted share for 2018. Full year 2019 sales expectation remains unchanged at up 11 to 13 percent. The full year earnings guidance is inclusive of the Company's expectations related to the negative impact of external factors such as the annualized impact of tariffs, adverse foreign exchange impacts, and higher interest rates, totaling approximately $1.50 per diluted share, on a combined basis. Absent these items, the Company is expected to generate positive earnings growth on a year-over-year basis.

    Non-GAAP Financial Measures

    This press release and our related earnings call contain certain non-GAAP financial measures, consisting of “adjusted" sales, gross profit, income before taxes, net income and net income per diluted share as measures of our operating performance. Management believes these measures may be useful in performing meaningful comparisons of past and present operating results, to understand the performance of its ongoing operations and how management views the business. Reconciliations of reported GAAP measures to adjusted non-GAAP measures are included in the financial schedules contained in this press release. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.

    Investor Conference Call

    First Quarter 2019 Earnings Conference Call and Webcast Presentation
    Today at 9:00 AM (CDT) Polaris Industries Inc. will host a conference call and webcast to discuss the 2019 first quarter results released this morning. The call will be hosted by Scott Wine, Chairman and CEO; and Mike Speetzen, Executive Vice President - Finance and CFO. The earnings presentation and link to the webcast will be posted on the Polaris Investor Relations website at ir.polaris.com. To listen to the conference call by phone, dial 1-877-883-0383 in the U.S., or 1-412-902-6506 internationally. The Conference ID is 2001345. A replay of the conference call will be available by accessing the same link on our website.

    About Polaris

    Polaris Industries Inc. (NYSE: PII) is a global powersports leader that has been fueling the passion of riders, workers and outdoor enthusiasts for more than 60 years. With annual 2018 sales of $6.1 billion, Polaris’ innovative, high-quality product line-up includes the RANGER®, RZR® and Polaris GENERAL™ side-by-side off-road vehicles; the Sportsman® and Polaris ACE® all-terrain off-road vehicles; Indian Motorcycle® mid-size and heavyweight motorcycles; Slingshot® moto-roadsters; snowmobiles; and pontoon, deck, and cruiser boats. Polaris enhances the riding experience with parts, garments and accessories, along with a growing aftermarket portfolio, including Transamerican Auto Parts. Polaris’ presence in adjacent markets globally includes military and commercial off-road vehicles, quadricycles, and electric vehicles. Proudly headquartered in Minnesota, Polaris serves more than 100 countries across the globe. Visit www.polaris.com for more information.

    Forward-looking Statements

    Except for historical information contained herein, the matters set forth in this news release, including management’s expectations regarding 2019 future sales, shipments, net income, and net income per share, operational initiatives, tariffs, currency fluctuations, interest rates, and commodity costs, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include such factors as the Company’s ability to successfully implement its manufacturing operations expansion initiatives, product offerings, promotional activities and pricing strategies by competitors; economic conditions that impact consumer spending; acquisition integration costs; product recalls, warranty expenses; impact of changes in Polaris stock price on incentive compensation plan costs; foreign currency exchange rate fluctuations; environmental and product safety regulatory activity; effects of weather; commodity costs; freight and tariff costs; changes to international trade agreements; uninsured product liability claims; uncertainty in the retail and wholesale credit markets; performance of affiliate partners; changes in tax policy; relationships with dealers and suppliers; and the general overall economic and political environment. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission. The Company does not undertake any duty to any person to provide updates to its forward-looking statements. The data source for retail sales figures included in this release is registration information provided by Polaris dealers in North America compiled by the Company or Company estimates and other industry data sources. The Company must rely on information that its dealers supply concerning retail sales, and other retail sales data sources related to Polaris and the powersports industry, and this information is subject to revision. Retail sales references to total Company retail sales includes only ORV, snowmobiles and motorcycles in North America unless otherwise noted.

    (summarized financial data follows)

     
    CONSOLIDATED STATEMENTS OF INCOME
    (In Thousands, Except Per Share Data) (Unaudited)
     
        Three months ended March 31,
    2019     2018
    Sales $ 1,495,690 $ 1,297,473
    Cost of sales   1,143,242     973,992  
    Gross profit 352,448 323,481
    Operating expenses:
    Selling and marketing 129,259 117,707
    Research and development 67,120 65,230
    General and administrative   92,938     78,693  
    Total operating expenses 289,317 261,630
    Income from financial services   18,805     21,425  
    Operating income 81,936 83,276
    Non-operating expense:
    Interest expense 20,419 8,048
    Equity in loss of other affiliates 606 21,511
    Other income, net   (3,501 )   (19,975 )
    Income before income taxes 64,412 73,692
    Provision for income taxes   16,016     17,978  
    Net income 48,396 55,714
    Net income attributable to noncontrolling interest   (18 )    
    Net income attributable to Polaris Industries Inc. $ 48,378   $ 55,714  
     
    Net income per share attributable to Polaris Industries Inc. common shareholders:
    Basic $ 0.79   $ 0.88  
    Diluted $ 0.78   $ 0.85  
    Weighted average shares outstanding:
    Basic 61,284 63,303
    Diluted 62,027 65,219
     

     
    CONSOLIDATED BALANCE SHEETS
    (In Thousands), (Unaudited)
     
        March 31, 2019     March 31, 2018
     
    Assets
    Current Assets:
    Cash and cash equivalents $ 151,439 $ 166,357
    Trade receivables, net 206,812 186,044
    Inventories, net 1,148,637 922,925
    Prepaid expenses and other 106,512 96,247
    Income taxes receivable   25,550   13,013
    Total current assets 1,638,950 1,384,586
    Property and equipment, net 868,128 759,957
    Investment in finance affiliate 99,501 95,511
    Deferred tax assets 88,489 114,881
    Goodwill and other intangible assets, net 1,506,414 777,844
    Operating lease assets 112,286
    Other long-term assets   94,949   86,828
    Total assets $ 4,408,717 $ 3,219,607
    Liabilities and Equity
    Current Liabilities:
    Current portion of debt, finance lease obligations and notes payable $ 66,512 $ 65,245
    Accounts payable 436,938 366,872
    Accrued expenses:
    Compensation 92,107 85,997
    Warranties 116,217 116,286
    Sales promotions and incentives 181,881 174,610
    Dealer holdback 112,705 107,829
    Other 201,790 191,057
    Current operating lease liabilities 34,814
    Income taxes payable   5,144   6,599
    Total current liabilities 1,248,108 1,114,495
    Long term income taxes payable 29,379 22,432
    Finance lease obligations 15,926 18,497
    Long-term debt 2,018,844 945,737
    Deferred tax liabilities 5,847 10,006
    Long-term operating lease liabilities 79,736
    Other long-term liabilities   122,654   123,680
    Total liabilities $ 3,520,494 $ 2,234,847
    Deferred compensation 8,724 11,298
    Equity:
    Total shareholders’ equity 879,202 973,462
    Noncontrolling interest   297  
    Total equity   879,499   973,462
    Total liabilities and equity $ 4,408,717 $ 3,219,607
     

     
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In Thousands), (Unaudited)
     
        Three months ended March 31,
    2019     2018
    Operating Activities:
    Net income $ 48,396 $ 55,714
    Adjustments to reconcile net income to net cash used for operating activities:
    Depreciation and amortization 54,415 52,720
    Noncash compensation 12,091 12,032
    Noncash income from financial services (7,655 ) (7,003 )
    Deferred income taxes (1,329 ) 113
    Impairment charges 18,733
    Other, net 606 (10,700 )
    Changes in operating assets and liabilities:
    Trade receivables (11,184 ) 15,587
    Inventories (180,021 ) (135,850 )
    Accounts payable 91,182 48,138
    Accrued expenses (75,662 ) (75,722 )
    Income taxes payable/receivable 12,324 14,747
    Prepaid expenses and others, net   18,620     8,302  
    Net cash used for operating activities (38,217 ) (3,189 )
     
    Investing Activities:
    Purchase of property and equipment (70,254 ) (55,558 )
    Investment in finance affiliate, net 213 256
    Investment in other affiliates, net       11,183  
    Net cash used for investing activities (70,041 ) (44,119 )
     
    Financing Activities:
    Borrowings under debt arrangements / finance lease obligations 1,010,220 694,401
    Repayments under debt arrangements / finance lease obligations (870,568 ) (578,342 )
    Repurchase and retirement of common shares (6,110 ) (14,987 )
    Cash dividends to shareholders (37,144 ) (37,796 )
    Proceeds from stock issuances under employee plans   3,207     11,905  
    Net cash provided by financing activities 99,605 75,181
    Impact of currency exchange rates on cash balances   (993 )   1,856  
     
    Net increase (decrease) in cash, cash equivalents and restricted cash (9,646 ) 29,729
    Cash, cash equivalents and restricted cash at beginning of period   193,126     161,618  
    Cash, cash equivalents and restricted cash at end of period $ 183,480   $ 191,347  
     
    The following presents the classification of cash, cash equivalents and restricted cash within the consolidated balance sheets:
    Cash and cash equivalents $ 151,439 $ 166,357
    Other long-term assets   32,041     24,990  
    Total $ 183,480   $ 191,347  
     

     
    NON-GAAP RECONCILIATION OF RESULTS
    (In Thousands, Except Per Share Data), (Unaudited)
     
        Three months ended March 31,
    2019     2018
    Sales $ 1,495,690 $ 1,297,473
    Victory wind down (1) (549 )
    Restructuring & realignment (3)     470  
    Adjusted sales 1,495,690 1,297,394
     
    Gross profit 352,448 323,481
    Victory wind down (1) 52
    Restructuring & realignment (3)   6,691   5,792  
    Adjusted gross profit 359,139 329,325
     
    Income before taxes 64,412 73,692
    Victory wind down (1) 669
    Acquisition-related costs (2) 1,130 2,080
    Restructuring & realignment (3) 6,691 6,197
    EPPL impairment (5) 19,630
    Brammo (6) (13,478 )
    Intangible amortization (7) 10,247 6,130
    Other expenses (4)   6,359    
    Adjusted income before taxes 88,839 94,920
     
    Net income 48,378 55,714
    Victory wind down (1) 510
    Acquisition-related costs (2) 861 1,585
    Restructuring & realignment (3) 5,099 4,721
    EPPL impairment (5) 19,417
    Brammo (6) (13,113 )
    Intangible amortization (7) 7,713 4,499
    Other expenses (4)   4,846   270  
    Adjusted net income (8) 66,897 73,603
     
    Diluted EPS $ 0.78 $ 0.85
    Victory wind down (1) 0.01
    Acquisition-related costs (2) 0.02 0.02
    Restructuring & realignment (3) 0.08 0.08
    EPPL impairment (5) 0.30
    Brammo (6) (0.20 )
    Intangible amortization (7) 0.12 0.07
    Other expenses (4)   0.08    
    Adjusted EPS (8) $ 1.08 $ 1.13  
     
    (1) Represents adjustments for the wind down of Victory Motorcycles, including wholegoods, accessories and apparel
    (2) Represents adjustments for integration and acquisition-related expenses and purchase accounting adjustments
    (3) Represents adjustments for corporate restructuring, network realignment costs, and supply chain transformation
    (4) Represents adjustments for non-recurring litigation expenses and the impacts of tax reform
    (5) Represents adjustments for the impairment of the Company's equity investment in Eicher-Polaris Private Limited (EPPL). This charge is included in Equity in loss of other affiliates (non-operating) on the Consolidated Statements of Income.
    (6) Represents a gain on the Company's investment in Brammo, Inc. This gain is included in Other income (non-operating) on the Consolidated Statements of Income.
    (7) Represents amortization expense for acquisition-related intangible assets
    (8) The Company used its estimated statutory tax rate of 23.8% for the non-GAAP adjustments in 2019 and 2018, except for the non-deductible items and the tax reform related changes noted in Item 4
     

     
    NON-GAAP RECONCILIATION OF SEGMENT RESULTS
    (In Thousands), (Unaudited)
     
        Three months ended March 31,

    SEGMENT SALES

    2019     2018
    ORV/Snow segment sales $ 867,447 $ 832,564
    Restructuring & realignment (2)       470  
    Adjusted ORV/Snow segment sales 867,447 833,034
     
    Motorcycles segment sales 117,942 131,557
    Victory wind down (1)       (549 )
    Adjusted Motorcycles segment sales 117,942 131,008
     
    Global Adjacent Markets (GAM) segment sales 104,956 113,327
    No adjustment        
    Adjusted GAM segment sales 104,956 113,327
     
    Aftermarket segment sales 220,535 220,025
    No adjustment        
    Adjusted Aftermarket sales 220,535 220,025
     
    Boats segment sales 184,810
    No adjustment        
    Adjusted Boats sales 184,810
     
    Total sales 1,495,690 1,297,473
    Total adjustments       (79 )
    Adjusted total sales $ 1,495,690   $ 1,297,394  
     
     
     
    Three months ended March 31,

    SEGMENT GROSS PROFIT

    2019 2018
    ORV/Snow segment gross profit $ 252,235 $ 243,561
    Restructuring & realignment (2)       470  
    Adjusted ORV/Snow segment gross profit 252,235 244,031
     
    Motorcycles segment gross profit 6,962 16,568
    Victory wind down (1)       52  
    Adjusted Motorcycles segment gross profit 6,962 16,620
     
    Global Adjacent Markets (GAM) segment gross profit 29,829 31,258
    Restructuring & realignment (2)       445  
    Adjusted GAM segment gross profit 29,829 31,703
     
    Aftermarket segment gross profit 56,475 58,452
    No adjustment        
    Adjusted Aftermarket segment gross profit 56,475 58,452
     
    Boats segment gross profit 36,164
    No adjustment        
    Boats segment gross profit 36,164
     
    Corporate segment gross profit (29,217 ) (26,358 )
    Restructuring & realignment (2)   6,691     4,877  
    Adjusted Corporate segment gross profit (22,526 ) (21,481 )
     
    Total gross profit 352,448 323,481
    Total adjustments   6,691     5,844  
    Adjusted total gross profit $ 359,139   $ 329,325  
     
    (1) Represents adjustments for the wind down of Victory Motorcycles, including wholegoods, accessories and apparel
    (2) Represents adjustments for corporate restructuring, network realignment costs, and supply chain transformation
     

    NON-GAAP ADJUSTMENTS
    2019 First Quarter Results & Full Year Guidance

    Restructuring, Realignment and Acquisition Related Costs
    Polaris announced in 2017 that it was making changes to its network to consolidate production and distribution of like products and better leverage plant capacity and embarked on a multi-phase supply chain transformation initiative to continue to leverage its supply chain as a strategic asset. Additionally, the Company has recorded acquisitions and integration related costs associated with the TAP and Boat Holdings acquisitions. For the first quarter of 2019, the Company has recorded combined costs totaling $8 million.

    Intangible amortization related to acquisitions
    As a result of the Boat Holdings acquisition, Polaris' amortization of intangible assets increased by approximately $20 million on an annual basis. Given the significant increase in non-cash amortization associated with this acquisition along with intangible amortization from prior acquisitions, the Company has moved to an adjusted net income metric, excluding intangible amortization from all acquisitions. The Company believes this treatment will provide additional transparency into the true, ongoing earnings performance of its business. For the first quarter of 2019, Polaris excluded $10 million of intangible amortization related to acquisitions.

    Eicher-Polaris Joint Venture Impairment in India
    Regulatory changes have negatively impacted the likelihood of success of the joint venture, and as a result, in late-February 2018, the Board of Directors of the joint venture approved the wind-down of the joint venture. For the full year ended December 31, 2018, Polaris has recorded charges totaling $27 million, including the impairment of the Company's equity investment in the Eicher-Polaris joint venture in India and wind down costs. No costs were recorded in the first quarter of 2019.

    2019 Adjusted Guidance
    2019 guidance excludes the pre-tax effect of acquisition integration costs of approximately $5 million to $10 million, supply chain transformation and network realignment costs of approximately $25 million to $30 million. Intangible amortization of approximately $40 million related to all acquisitions has also been excluded. The Company has not provided reconciliations of guidance for adjusted diluted net income per share, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include restructuring and realignment costs and acquisition integration costs that are difficult to predict in advance in order to include in a GAAP estimate.

    Click here to subscribe to Mobile Alerts for Polaris Industries Inc.

    Investor Contact: Richard Edwards 763-513-3477 | Media Contact: Jess Rogers 763-513-3445

    Source: Polaris Industries Inc.