Second Quarter 2016 Highlights:
Motorcycle sales increased 23% during the quarter. Global
Adjacent Markets sales increased 14%. ORV/Snowmobiles sales were
down 6%, slightly better than expectations.
ORV dealer inventory was down 8%, year-over-year. Total dealer
inventory was up 1% due to normalized motorcycle shipments.
Second quarter results included expenses totaling approximately $25
million for increased warranty, legal and other costs associated with
the product recalls and protecting the brand.
Repurchased 652,000 shares of Polaris common stock during the second
quarter.
Operating cash flow year-to-date increased 287% to $348 million.
Lowering and narrowing guidance range for full year 2016 earnings to
$6.00 to $6.30 per diluted share, on total Company sales in the range of
down 2% to flat for the full year 2016.
MINNEAPOLIS--(BUSINESS WIRE)--
Polaris Industries Inc. (NYSE:PII) today reported second quarter net
income of $71.2 million, or $1.09 per diluted share, for the quarter
ended June 30, 2016 compared to $100.9 million, or $1.49 per diluted
share reported in the second quarter of 2015. Sales for the second
quarter of 2016 totaled $1,130.8 million, up one percent from last
year’s second quarter sales of $1,124.3 million.
“Our team’s diligent and methodical execution drove a modest increase in
second quarter sales despite a strong year-over-year sales comparison, a
weaker retail sales environment, and product recalls. Our all-out
assault on costs continued to make progress during the quarter,
generating earnings that finished in-line with our updated guidance. As
we move into the second half of the year, and we are redoubling our
commitment to providing our consumers with the safest and most reliable
vehicles in the industry while building a platform to return to
profitable growth,” commented Scott Wine, Polaris’ Chairman and Chief
Executive Officer.
“I am proud of how our employees and dealers have dedicated themselves
to working through the current difficult environment, from the recall
announcements to weaker industry trends. Dealer inventories are in-line
with expectations. Our new Huntsville, Alabama plant began producing RANGERS
at the beginning of June and Slingshots in early July, and our growing
lean capabilities are driving factory inventory reductions and increased
cash flow, while our customer excellence initiatives are enhancing our
capabilities to deliver world-class sales and service to our consumers,”
continued Wine.
“Commensurate with our commitment to industry-leading innovation, we
have a number of model year 2017 products that will be introduced next
week at our annual dealer meeting, which include vehicles that will
significantly strengthen our line-up in areas where the competition has
been the most intense.”
Second Quarter 2016 Segment Results (in
thousands)
Includes respective parts, garments and accessories (“PG&A”)
related sales
|
|
|
Three Months ended June 30,
|
|
Sales
|
|
2016
|
|
2015
|
|
Change
|
|
Off-Road Vehicles/Snowmobiles
|
|
$
|
808,494
|
|
|
$
|
857,146
|
|
|
(6
|
%)
|
|
Motorcycles
|
|
|
231,324
|
|
|
|
187,541
|
|
|
23
|
%
|
|
Global Adjacent Markets
|
|
|
90,959
|
|
|
|
79,640
|
|
|
14
|
%
|
|
Total Sales
|
|
$
|
1,130,777
|
|
|
$
|
1,124,327
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
|
Off-Road Vehicles/Snowmobiles
|
|
$
|
230,554
|
|
|
$
|
278,938
|
|
|
(17
|
%)
|
|
% of sales
|
|
|
28.5
|
%
|
|
|
32.5
|
%
|
|
-478 bps
|
|
Motorcycles
|
|
|
39,837
|
|
|
|
24,505
|
|
|
63
|
%
|
|
% of sales
|
|
|
17.2
|
%
|
|
|
13.1
|
%
|
|
+415 bps
|
|
Global Adjacent Markets
|
|
|
23,952
|
|
|
|
22,639
|
|
|
6
|
%
|
|
% of sales
|
|
|
26.3
|
%
|
|
|
28.4
|
%
|
|
-210 bps
|
|
Corporate
|
|
|
(9,840
|
)
|
|
|
(6,668
|
)
|
|
|
|
Total gross profit
|
|
$
|
284,503
|
|
|
$
|
319,414
|
|
|
(11
|
%)
|
|
% of sales
|
|
|
25.2
|
%
|
|
|
28.4
|
%
|
|
-325 bps
|
Off-Road Vehicle (“ORV”) and Snowmobile
segment sales, including its respective PG&A sales, decreased six
percent from the second quarter of 2015 to $808.5 million. Gross profit
decreased 17 percent to $230.6 million or 28.5 percent of sales in the
second quarter of 2016, compared to $278.9 million or 32.5 percent of
sales in the second quarter of 2015.
ORV wholegood sales decreased six
percent to $645.4 million reflecting ongoing softness in retail sales in
North American oil markets and tough comparables from the second quarter
of last year. Polaris North American ORV unit retail sales were down low
double-digits percent compared to the 2015 second quarter, with consumer
purchases of side-by-side vehicles down high-single digits percent and
ATV retail sales down mid-teens percent compared to the prior year. The
North American ORV industry was down mid-single digits percent compared
to the second quarter last year. ORV dealer inventory was down eight
percent in the 2016 second quarter compared to the same period last year.
Snowmobile wholegood sales decreased 55
percent to $8.6 million due to the timing of shipments year-over-year.
Snowmobile sales in the Company’s second quarter are routinely low as it
is the off-season for snowmobile retail sales and shipments.
Motorcycle segment sales,
including its respective PG&A sales, increased 23 percent in the 2016
second quarter to $231.3 million. All brands grew sales during the
quarter. Gross profit increased 63 percent to $39.8 million or 17.2
percent of sales in the second quarter of 2016, compared to $24.5
million or 13.1 percent of sales in the second quarter of 2015.
North American consumer retail demand for the Polaris motorcycle
segment, including Victory®, Indian Motorcycle®
and Slingshot®, was up mid-teens percent during the 2016
second quarter while overall motorcycle industry retail sales 900cc and
above were down mid-single digits percent in the 2016 second quarter.
Product availability for all three motorcycle brands remained adequate
throughout the quarter as year-over-year paint capacity at the Company’s
Spirit Lake, Iowa motorcycle plant has significantly improved.
Global Adjacent Markets segment
sales along with its respective PG&A sales, increased 14 percent to
$91.0 million in the 2016 second quarter compared to the 2015 second
quarter. Gross profit increased six percent to $24.0 million or 26.3
percent of sales in the second quarter of 2016, compared to $22.6
million or 28.4 percent of sales in the second quarter of 2015.
Work and Transportation group wholegood sales were up 10 percent during
the second quarter of 2016 primarily due to growth in the Aixam business.
Supplemental Data:
Parts, Garments, and Accessories (“PG&A”) sales,
which are included in each of the three respective reporting
segments, increased five percent during the 2016 second quarter driven
by increases for all reportable segments.
International sales to customers outside of North America
totaled $170.5 million for the second quarter of 2016, including PG&A,
an increase of five percent from the same period in 2015. International
sales on a constant currency basis were up seven percent in the 2016
second quarter.
Gross profit for the total Company decreased 11 percent to $284.5
million in the second quarter of 2016, compared to $319.4 million in the
second quarter of 2015. As a percentage of sales, gross profit declined
325 basis points to 25.2 percent of sales for the second quarter of
2016, compared to 28.4 percent of sales for the same period last year.
Negative currency movements along with increased warranty and
promotional costs and negative product mix, were partially offset by
lower commodity costs and product cost reduction efforts.
Operating expenses increased nine percent to $188.0 million or
16.6 percent of sales for the second quarter of 2016, compared to $173.1
million or 15.4 percent of sales for the second quarter of 2015. The
change was driven by increased research and development expense for
ongoing product innovation and higher general and administrative expense
due to increased legal expenses and other costs related to the product
recall notices. These costs were partially offset by ongoing operating
cost control initiatives.
Income from financial services was $20.5 million during the
second quarter 2016, an increase of 16 percent compared to $17.6 million
in the second quarter of 2015. The increase is attributable to a higher
penetration rate for retail financing programs in the 2016 second
quarter.
Financial Position and Cash Flow
Net cash provided by operating activities was $348.3 million for the six
months ended June 30, 2016, compared to $89.9 million for the same
period in 2015. The significant increase in net cash provided by
operating activities for the 2016 period was due to decreased working
capital. Total debt for the quarter, including capital lease obligations
and notes payable, was $468.1 million. The Company’s debt-to-total
capital ratio was 34 percent at June 30, 2016, compared to 31 percent a
year ago. Cash and cash equivalents were $146.6 million at June 30,
2016, up from $118.8 million for the same period in 2015.
Share Buyback Activity
During the second quarter 2016, the Company repurchased and retired
652,000 shares of its common stock for $58.9 million. As of June 30,
2016, the Company currently has authorization from its Board of
Directors to repurchase up to an additional 8.7 million shares of
Polaris stock.
2016 Business Outlook
For the full year 2016, the Company is revising its earnings guidance
range to $6.00 to $6.30 per diluted share with sales expected in the
range of down 2 percent to flat compared to 2015. Sales expectations by
segment for the full year 2016 are as follows: ORV/Snowmobile sales
expected down mid-single digits percent; Motorcycle sales up
double-digits percent; and Global Adjacent Market sales up mid-teens
percent.
Non-GAAP Measure - Constant Currency Reporting
This release and our related earnings call include a discussion of the
Company’s 2016 second quarter results and 2016 expectations on a
constant currency basis, which is a non-GAAP measure, as well as on a
GAAP basis. For purpose of comparison, the results on a constant
currency basis uses the respective prior year exchange rates for the
comparative period to enhance the visibility of the underlying business
trends, excluding the impact of translation arising from foreign
currency exchange rate fluctuations.
Second Quarter Conference Call and Webcast Presentation
Today at 8:00 AM (CT) Polaris Industries Inc. will host a conference
call and webcast to discuss the second quarter 2016 results released
this morning. The call will be hosted by Scott Wine, Chairman and CEO;
Ken Pucel, Executive Vice President – Operations, Engineering and Lean;
and Mike Speetzen, Executive Vice President – Finance and CFO. A
slide 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 877-706-7543 in the U.S.
and Canada, or 973-200-3967 internationally. The Conference ID is #
95425216.
A replay of the conference call will be available approximately two
hours after the call for a one-week period by accessing the same link on
our website, or by dialing 855-859-2056 in the U.S. and Canada, or
404-537-3406 internationally.
Polaris Industries Inc. to Host and Webcast Analyst & Investor Meeting
Polaris Industries Inc. also announced today that the executive
management team of Polaris will host an Analyst/Investor Meeting in
Nashville, Tennessee in conjunction with its annual dealer meeting. The
meeting will be held on Tuesday, July 26, 2016 from 8:00 AM to 12:00 PM
CDT. Management will be discussing its plans to improve execution and
drive profitable growth, including a first look at several exciting new
model year 2017 Polaris products.
Presenters at the Analyst/Investor meeting will include Scott Wine,
Chairman and CEO; Ken Pucel, Executive Vice President – Operations,
Engineering and Lean; and Mike Speetzen, Executive Vice President –
Finance and CFO along with other members of the Polaris executive team.
The meeting agenda will be posted on the Polaris Investor Relations
website at ir.polaris.com
on the Events & Presentations page.
A live webcast of the meeting including audio and a slide presentation
will be available by accessing the Polaris Investor Relations website at ir.polaris.com.
A replay of the webcast will be available for one week following the
event and will be accessible on the same website link.
For more information about the Analyst/Investor Meeting, please contact
Peggy James at 763-542-0502.
About Polaris
Polaris Industries Inc. (NYSE: PII) is a global powersports leader with
annual 2015 sales of $4.7 billion. Polaris fuels the passion of riders,
workers and outdoor enthusiasts with our RANGER®, RZR®
and Polaris GENERAL™ side-by-side off-road vehicles; our Sportsman®
and Polaris ACE® all-terrain off-road vehicles; Victory®
and Indian Motorcycle® midsize and heavyweight motorcycles;
Slingshot® moto-roadsters; and Polaris RMK®, INDY®,
Switchback® and RUSH® snowmobiles. Polaris
enhances the riding experience with parts, garments and accessories sold
under multiple recognizable brands, and has a growing presence in
adjacent markets globally with products including military and
commercial off-road vehicles, quadricycles, and electric vehicles. www.polaris.com
Except for historical information contained herein, the matters set
forth in this news release, including management’s expectations
regarding 2016 and future sales, shipments, net income, and net income
per share and operational initiatives 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, cost reduction initiatives, product offerings, promotional
activities and pricing strategies against competitors; economic
conditions that impact consumer spending; acquisition integration costs;
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; uninsured product liability claims;
uncertainty in the retail and wholesale credit markets; performance of
affiliate partners; changes in tax policy and overall economic
conditions, including inflation, consumer confidence and spending and
relationships with dealers and suppliers. 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.
(summarized financial data follows)
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
(In Thousands, Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Sales
|
|
$
|
1,130,777
|
|
|
$
|
1,124,327
|
|
|
$
|
2,113,773
|
|
|
$
|
2,157,672
|
|
Cost of sales
|
|
846,274
|
|
|
804,913
|
|
|
1,581,692
|
|
|
1,544,527
|
|
Gross profit
|
|
284,503
|
|
|
319,414
|
|
|
532,081
|
|
|
613,145
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
77,820
|
|
|
79,656
|
|
|
155,061
|
|
|
149,341
|
|
Research and development
|
|
45,579
|
|
|
41,431
|
|
|
88,688
|
|
|
80,294
|
|
General and administrative
|
|
64,566
|
|
|
51,948
|
|
|
134,146
|
|
|
101,487
|
|
Total operating expenses
|
|
187,965
|
|
|
173,035
|
|
|
377,895
|
|
|
331,122
|
|
Income from financial services
|
|
20,464
|
|
|
17,638
|
|
|
39,960
|
|
|
32,280
|
|
Operating income
|
|
117,002
|
|
|
164,017
|
|
|
194,146
|
|
|
314,303
|
|
Non-operating expense:
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
3,802
|
|
|
2,972
|
|
|
6,667
|
|
|
5,882
|
|
Equity in loss of other affiliates
|
|
1,583
|
|
|
1,748
|
|
|
3,641
|
|
|
3,371
|
|
Other expense, net
|
|
1,805
|
|
|
2,681
|
|
|
1,886
|
|
|
10,121
|
|
Income before income taxes
|
|
109,812
|
|
|
156,616
|
|
|
181,952
|
|
|
294,929
|
|
Provision for income taxes
|
|
38,646
|
|
|
55,673
|
|
|
63,897
|
|
|
105,423
|
|
Net income
|
|
$
|
71,166
|
|
|
$
|
100,943
|
|
|
$
|
118,055
|
|
|
$
|
189,506
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
1.10
|
|
|
$
|
1.52
|
|
|
$
|
1.82
|
|
|
$
|
2.86
|
|
Diluted net income per share
|
|
$
|
1.09
|
|
|
$
|
1.49
|
|
|
$
|
1.80
|
|
|
$
|
2.79
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
64,406
|
|
|
66,324
|
|
|
64,726
|
|
|
66,376
|
|
Diluted
|
|
65,297
|
|
|
67,829
|
|
|
65,639
|
|
|
67,987
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(In Thousands)
|
|
(Unaudited)
|
|
|
|
|
|
June 30, 2016
|
|
June 30, 2015
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
146,633
|
|
|
$
|
118,819
|
|
Trade receivables, net
|
|
142,434
|
|
|
151,495
|
|
Inventories, net
|
|
692,272
|
|
|
708,269
|
|
Prepaid expenses and other
|
|
64,201
|
|
|
64,426
|
|
Income taxes receivable
|
|
20,013
|
|
|
15,183
|
|
Deferred tax assets
|
|
—
|
|
|
113,656
|
|
Total current assets
|
|
1,065,553
|
|
|
1,171,848
|
|
Property and equipment, net
|
|
696,241
|
|
|
569,126
|
|
Investment in finance affiliate
|
|
93,870
|
|
|
87,625
|
|
Deferred tax assets
|
|
170,955
|
|
|
40,528
|
|
Goodwill and other intangible assets, net
|
|
273,896
|
|
|
235,030
|
|
Other long-term assets
|
|
95,129
|
|
|
75,326
|
|
Total assets
|
|
$
|
2,395,644
|
|
|
$
|
2,179,483
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Current portion of debt, capital lease obligations and notes payable
|
|
$
|
4,821
|
|
|
$
|
4,948
|
|
Accounts payable
|
|
348,376
|
|
|
300,639
|
|
Accrued expenses:
|
|
|
|
|
|
Compensation
|
|
80,348
|
|
|
68,246
|
|
Warranties
|
|
76,873
|
|
|
45,099
|
|
Sales promotions and incentives
|
|
138,679
|
|
|
130,158
|
|
Dealer holdback
|
|
119,833
|
|
|
120,258
|
|
Other
|
|
103,211
|
|
|
72,758
|
|
Income taxes payable
|
|
9,728
|
|
|
9,553
|
|
Total current liabilities
|
|
881,869
|
|
|
751,659
|
|
Long term income taxes payable
|
|
23,864
|
|
|
10,429
|
|
Capital lease obligations
|
|
19,178
|
|
|
20,814
|
|
Long-term debt
|
|
444,126
|
|
|
375,649
|
|
Deferred tax liabilities
|
|
12,887
|
|
|
16,446
|
|
Other long-term liabilities
|
|
78,511
|
|
|
102,997
|
|
Total liabilities
|
|
$
|
1,460,435
|
|
|
$
|
1,277,994
|
|
Deferred compensation
|
|
11,027
|
|
|
16,743
|
|
Shareholders’ equity:
|
|
|
|
|
|
Total shareholders’ equity
|
|
924,182
|
|
|
884,746
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,395,644
|
|
|
$
|
2,179,483
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In Thousands)
|
|
(Unaudited)
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
2016
|
|
2015
|
|
Operating Activities:
|
|
|
|
|
|
Net income
|
|
$
|
118,055
|
|
|
$
|
189,506
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
78,109
|
|
|
72,372
|
|
|
Noncash compensation
|
|
38,382
|
|
|
34,452
|
|
|
Noncash income from financial services
|
|
(14,828
|
)
|
|
(13,757
|
)
|
|
Deferred income taxes
|
|
(4,876
|
)
|
|
(507
|
)
|
|
Excess tax benefits from share-based compensation
|
|
—
|
|
|
(32,863
|
)
|
|
Other, net
|
|
3,641
|
|
|
3,371
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Trade receivables
|
|
14,744
|
|
|
50,521
|
|
|
Inventories
|
|
27,605
|
|
|
(137,362
|
)
|
|
Accounts payable
|
|
45,598
|
|
|
(46,766
|
)
|
|
Accrued expenses
|
|
4,910
|
|
|
(45,769
|
)
|
|
Income taxes payable/receivable
|
|
28,527
|
|
|
18,821
|
|
|
Prepaid expenses and others, net
|
|
8,416
|
|
|
(2,110
|
)
|
|
Net cash provided by operating activities
|
|
348,283
|
|
|
89,909
|
|
|
Investing Activities:
|
|
|
|
|
|
Purchase of property and equipment
|
|
(117,628
|
)
|
|
(88,663
|
)
|
|
Investment in finance affiliate, net
|
|
20,030
|
|
|
15,239
|
|
|
Investment in other affiliates
|
|
(6,861
|
)
|
|
(10,050
|
)
|
|
Acquisition of businesses, net of cash acquired
|
|
(54,830
|
)
|
|
(27,019
|
)
|
|
Net cash used for investing activities
|
|
(159,289
|
)
|
|
(110,493
|
)
|
|
Financing Activities:
|
|
|
|
|
|
Borrowings under debt arrangements / capital lease obligations
|
|
1,202,652
|
|
|
1,481,655
|
|
|
Repayments under debt arrangements / capital lease obligations
|
|
(1,198,337
|
)
|
|
(1,303,098
|
)
|
|
Repurchase and retirement of common shares
|
|
(143,876
|
)
|
|
(157,739
|
)
|
|
Cash dividends to shareholders
|
|
(70,583
|
)
|
|
(70,061
|
)
|
|
Proceeds from stock issuances under employee plans
|
|
11,758
|
|
|
25,133
|
|
|
Excess tax benefits from share-based compensation
|
|
—
|
|
|
32,863
|
|
|
Net cash provided by (used for) financing activities
|
|
(198,386
|
)
|
|
8,753
|
|
|
Impact of currency exchange rates on cash balances
|
|
676
|
|
|
(6,950
|
)
|
|
Net decrease in cash and cash equivalents
|
|
(8,716
|
)
|
|
(18,781
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
155,349
|
|
|
137,600
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
146,633
|
|
|
$
|
118,819
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160720005349/en/
Source: Polaris Industries Inc.