Sales for the second quarter of 2017 increased 21% to $1,364.9
million; adjusted sales increased 20% to $1,358.8 million.
Second quarter 2017 reported net income was $0.97 per diluted
share; adjusted net income for the same period was $1.16 per diluted
share, slightly ahead of expectations
Polaris North American ORV unit retail sales were down low-single
digits percent, a sequential improvement from the first quarter, with
increasing side-by-side retail sales somewhat offsetting lower ATV
retail sales. Indian Motorcycle® continued to
deliver strong retail sales increasing 17% for the quarter.
Total dealer inventory was down 6% year-over-year; ORV dealer
inventory was down 6%
Polaris raising full year sales guidance and narrowing its earnings
per share outlook. Adjusted net income expected to be in the
range of $4.35 to $4.50 per diluted share with adjusted sales for the
full year 2017 expected in the range of up 12% to 14%.
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 to non-GAAP measures can be found at the end of
this release.
MINNEAPOLIS--(BUSINESS WIRE)--
Polaris Industries Inc. (NYSE: PII) today reported second quarter 2017
sales of $1,364.9 million, up 21 percent, from $1,130.8 million for the
second quarter of 2016. Adjusted sales, which excludes the impact from
Victory Motorcycles® net sales for the second quarter of
2017, were $1,358.8 million compared to $1,130.8 million in the prior
year period. The Company reported second quarter 2017 net income of
$62.0 million, or $0.97 per diluted share, compared with net income of
$71.2 million, or $1.09 per diluted share, for the 2016 second quarter.
The reported net income included costs related to the wind down of
Victory Motorcycles, certain Transamerican Auto Parts ("TAP")
integration and inventory step up costs, and manufacturing network
realignment costs. Adjusted net income for the quarter ended June 30,
2017, excluding these costs, was $73.9 million, or $1.16 per diluted
share.
“Performance improved in many parts of our business during the quarter,
particularly within our international and PG&A businesses. The
powersports industry remained very competitive and headwinds persist,
but we were encouraged by the return to growth in our Side-by-Side
business and continued strength and aggressive share gains for Indian
Motorcycles. In a weak motorcycle industry, Indian continues to
demonstrate how a complementary combination of exciting new bikes,
strong dealer execution and overall brand momentum can prevail. Dealer
engagement is a corporate priority and from profitability to delivery
and communications, the consistent progress we are making is augmenting
our retail results. We still have a lot of work to do, but we are seeing
results from the strong and sustainable improvements we are making to
the fundamentals of our business, as we establish the foundation of a
renewed growth platform,” commented Scott Wine, Chairman and Chief
Executive Officer of Polaris Industries.
Wine continued, “I am proud of the hard work and progress our Polaris
team made in the first half of 2017, and our commitment to regaining our
winning momentum in powersports is deep and strong. From significant new
innovations in performance, reliability, and rider safety, to upgrading
our plants and supply chain, we have made substantial investments both
in enhancing our safety and quality practices, and in research and
development to accelerate the cadence of our new product introductions.
The fruits of this labor will be on display next week, when we unveil
our exciting new model year ORVs and Motorcycles. These vehicles will
demonstrate our capability to deliver the innovation and quality
expected from the leader in Powersports, as well as improved results and
enhanced shareholder value.”
Off-Road Vehicle (“ORV”) and Snowmobile
segment sales, including their respective PG&A related sales, were
$845.5 million for the second quarter of 2017, compared with $799.3
million for the second quarter of the prior year, representing a six
percent increase, year-over-year, driven primarily by improved ORV
shipments of side-by-sides. PG&A sales for ORV and Snowmobiles combined,
increased five percent in the 2017 second quarter compared to the second
quarter last year. Gross profit increased 16 percent to $266.2 million,
or 31.5 percent of sales, in the second quarter of 2017, compared to
$228.5 million, or 28.6 percent of sales, in the second quarter of 2016.
Gross profit percentage increased primarily due to product mix.
ORV wholegood sales for the second quarter of 2017
increased six percent as the Company began shipping RZR vehicles at a
more normalized rate. Polaris North American ORV unit retail sales for
the second quarter of 2017 were down low-single digits percent from the
2016 second quarter, which included consumer purchases for side-by-side
vehicles up low-single digits percent and ATV retail sales down
high-single digits percent. The North American ORV industry was up
mid-single digits percent compared to the second quarter last year. ORV
dealer inventory was down six percent in the 2017 second quarter
compared to the same period last year.
Snowmobile wholegood sales in the second quarter of 2017
decreased 22 percent to $6.7 million. 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 PG&A related sales in the second quarter of 2017, was
$198.0 million, a decrease of 13 percent compared to $228.4 million
reported in the second quarter of 2016, which included $6.2 million of
Victory motorcycle wholegood, accessory and apparel sales versus $54.0
million of Victory sales reported in the second quarter of 2016. Indian
motorcycle wholegood sales increased significantly in the second quarter
driven by new product introductions and increased awareness of the
brand. This increase was more than offset by significantly lower
Slingshot® sales. Gross profit for the second quarter of 2017
was $21.1 million compared to $38.9 million in the second quarter of
2016. Adjusted for the Victory wind down costs of $8.9 million,
motorcycle gross profit was $30.0 million, down from the second quarter
last year due primarily to lower Slingshot volume.
North American consumer retail demand for the Polaris motorcycle
segment, including Indian Motorcycle and Slingshot, was down low-single
digits percent during the 2017 second quarter, while the overall
motorcycle industry retail sales, 900cc and above, was down mid-single
digits percent in the 2017 second quarter. Indian Motorcycles retail
sales increased 17 percent and continued to gain market share, driven by
new model introductions and continued strong demand for the Company's
new highly customizable, split-screen Ride CommandTM
touchscreen infotainment system available on certain models. Slingshot
retail sales were down significantly due in part to tough comparables
versus the prior year period driven by increased shipments in the second
quarter of 2016 ahead of our production move from Iowa to Huntsville and
the cadence of several limited edition models introduced in the second
quarter last year.
Global Adjacent Markets segment
sales along with its PG&A related sales, increased seven percent to
$97.0 million in the 2017 second quarter compared to $91.0 million in
the 2016 second quarter. Reported gross profit decreased 11 percent to
$21.2 million, or 21.9 percent of sales, in the second quarter of 2017,
compared to $24.0 million, or 26.3 percent of sales, in the second
quarter of 2016. Adjusted gross profit, excluding the manufacturing
realignment costs, increased seven percent to $25.5 million, or 26.3%
for the second quarter 2017. Work and Transportation group wholegood
sales were up 13 percent during the second quarter of 2017 primarily due
to and an increase in direct sales to commercial customers and our
higher sales in the Company's Aixam quadricycles and Goupil
light-utility businesses.
Aftermarket segment sales
which includes Transamerican Auto Parts ("TAP"), along with the
Company's other aftermarket brands of Klim®, Kolpin®,
Pro Armor®, Trail Tech® and 509®,
increased significantly to $224.4 million in the 2017 second quarter
compared to $12.1 million in the 2016 second quarter. TAP added $209.1
million of sales in the second quarter of 2017. Gross profit increased
significantly to $59.9 million, or 26.7 percent of sales in second
quarter of 2017, compared to $3.0 million, or 24.7 percent of sales, in
the second quarter of 2016. Sales and gross profit dollars were up
primarily due to the addition of TAP acquired in the fourth quarter of
2016. TAP grew six percent in the second quarter 2017 compared to last
year on a proforma basis, had Polaris owned TAP for the full year 2016.
Supplemental Data:
Parts, Garments, and Accessories (“PG&A”) sales,
excluding Aftermarket segment sales, increased four percent for the
2017 second quarter. The increase was primarily driven by higher ORV and
Global Adjacent Markets sales during the quarter.
International sales to customers outside of North America,
including PG&A, totaled $191.2 million for the second quarter of 2017,
up twelve percent, from the same period in 2016. All regions increased
sales double digits percent in the second quarter with all segments
showing sales growth during the quarter.
Gross profit increased 23 percent to $350.4 million for the
second quarter of 2017 from $284.5 million in the second quarter of
2016. As a percentage of sales, reported gross profit margin was 25.7
percent compared with 25.2 percent of sales for the second quarter of
2016. Gross profit for the second quarter of 2017 includes the negative
impact of $8.9 million of Victory Motorcycles wind down costs, $0.1
million in purchase accounting adjustments related to the TAP
acquisition and manufacturing network realignment costs of $4.3 million.
Excluding these items, adjusted gross profit was $363.6 million, or 26.8
percent of sales. Gross margins on an adjusted basis improved due to
significant gross VIP cost savings and positive product mix, somewhat
offset by higher promotional costs.
Operating expenses increased 44 percent for the second quarter of
2017 to $270.3 million from $188.0 million in the same period in 2016,
which included $2.0 million in Victory wind down costs and $3.7 million
of TAP integration expenses. Excluding these costs, operating expenses
increased primarily due to the addition of operating expenses from TAP,
as well as increased research and development expenses for ongoing
product refinement and innovation and legal related costs.
Income from financial services was $19.1 million for the second
quarter of 2017, down six percent compared with $20.5 million for the
second quarter of 2016. The decrease is attributable to lower income
generated from both the wholesale and retail portfolio, offset somewhat
by increased income from the sale of extended service contracts.
Non-operating other expense (income), net, was $2.2
million of income for the second quarter of 2017, versus $1.8 million of
expense in the second quarter of 2016. The change primarily relates to
foreign currency exchange rate movements and the corresponding effects
on foreign currency transactions related to the Company’s foreign
subsidiaries.
The provision for income taxes for the second quarter of 2017 was
$29.9 million, compared with $38.6 million for the second quarter of
2016. The reduction in the provision for income taxes is partly due to
the benefit recognized related to the adoption of the new employee
share-based accounting standard adopted in the first quarter of 2017.
Financial Position and Cash Flow
Net cash provided by
operating activities was $264.0 million for the six months ended
June 30, 2017, compared to $348.3 million for the same period in 2016.
The decrease in net cash provided by operating activities for the 2017
period was due to the lower net income and the timing of warranty and
other accrued expense payments and higher factory inventory. Total debt
at June 30, 2017, including capital lease obligations and notes payable,
was $1,067.8 million. The Company’s debt-to-total capital ratio was 56
percent at June 30, 2017, compared to 34 percent a year ago due
primarily to the financing of the TAP acquisition. Cash and cash
equivalents were $127.4 million at June 30, 2017, down from $146.6
million for the same period in 2016.
Share Buyback Activity
During the second quarter of 2017,
the Company repurchased and retired 502,000 shares of its common stock
for $43.8 million. Year-to-date through June 30, 2017, the Company has
repurchased and retired 758,000 shares of its common stock for $65.6
million. As of June 30, 2017, the Company has authorization from its
Board of Directors to repurchase up to an additional 6.7 million shares
of Polaris common stock.
2017 Business Outlook
The Company has increased its sales
guidance and narrowed its earnings per share expected range for the full
year 2017 from previously issued guidance. The Company now expects
adjusted net income to be in the range of $4.35 to $4.50 per diluted
share, compared with adjusted net income of $3.48 per diluted share for
2016. Full year 2017 adjusted sales are anticipated to increase in the
range of 12 percent to 14 percent over 2016 sales of $4,516.6 million.
Wind Down of Victory Motorcycles
Polaris announced on
January 9, 2017 its intention to wind down its Victory Motorcycles
operations. The decision is expected to improve the long-term
profitability of Polaris and its global motorcycle business, while
materially improving the Company’s competitive position in the industry.
The Company will record costs, anticipated to be in the range of $80.0
million to $90.0 million, associated with supporting Victory dealers in
selling their remaining inventory, the disposal of factory inventory,
tooling, and other physical assets, and the cancellation of various
supplier arrangements. Beginning in the first quarter of 2017, these
costs are recorded in the 2017 income statement within respective sales,
gross profit and operating expenses. These costs are excluded from
Polaris’ 2017 sales and earnings guidance on a non-GAAP basis.
Manufacturing Network Realignment
Polaris announced on April
24, 2017 that it was making changes to its network to consolidate
production of like products and better leverage plant capacity. Changes
include discontinuing manufacturing at its plant in Milford, Iowa, and
transferring Milford production to existing Polaris facilities in
Huntsville, Ala.; Roseau, Minn.; and Anaheim, Calif. Additionally, the
Company plans to transfer fabrication operations for its Pro Armor
aftermarket products from its facility in Riverside, Calif., to its
recently acquired Transamerican Auto Parts facility in Chula Vista,
Calif. Beginning in the second quarter of 2017, costs associated with
the manufacturing realignment, anticipated to be in the range of $10.0
million to $15.0 million, are recorded in the income statement within
the respective gross profit and operating expenses. These costs are
excluded from Polaris’ 2017 sales and earnings guidance on a non-GAAP
basis.
Use of Non-GAAP Financial Information
This press release and
our related earnings call contain certain non-GAAP financial measures,
consisting of “adjusted" sales, gross profits, operating expenses, 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 adjusted non-GAAP
measures to reported 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.
Second Quarter 2017 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 2017 second 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. 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 478-219-0273 internationally. The Conference ID is
45016084.
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 Las
Vegas, Nevada in conjunction with its annual dealer meeting. The meeting
will be held on Tuesday, July 26, 2017 from 7:30 AM to 11:00 AM PDT.
Management will be discussing its plans to improve execution and drive
profitable growth, including a first look at several exciting new model
year 2018 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 or peggy.james@polaris.com.
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 2016 sales of $4.5 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® 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, 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.
Except for historical information contained herein, the matters set
forth in this news release, including management’s expectations
regarding 2017 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, 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; 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,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Sales
|
|
|
$
|
1,364,920
|
|
|
|
$
|
1,130,777
|
|
|
|
$
|
2,518,702
|
|
|
|
$
|
2,113,773
|
|
Cost of sales
|
|
|
1,014,534
|
|
|
|
846,274
|
|
|
|
1,925,825
|
|
|
|
1,581,692
|
|
Gross profit
|
|
|
350,386
|
|
|
|
284,503
|
|
|
|
592,877
|
|
|
|
532,081
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
|
|
|
118,531
|
|
|
|
77,820
|
|
|
|
232,844
|
|
|
|
155,061
|
|
Research and development
|
|
|
60,753
|
|
|
|
45,579
|
|
|
|
112,758
|
|
|
|
88,688
|
|
General and administrative
|
|
|
91,063
|
|
|
|
64,566
|
|
|
|
166,577
|
|
|
|
134,146
|
|
Total operating expenses
|
|
|
270,347
|
|
|
|
187,965
|
|
|
|
512,179
|
|
|
|
377,895
|
|
Income from financial services
|
|
|
19,143
|
|
|
|
20,464
|
|
|
|
39,573
|
|
|
|
39,960
|
|
Operating income
|
|
|
99,182
|
|
|
|
117,002
|
|
|
|
120,271
|
|
|
|
194,146
|
|
Non-operating expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
8,032
|
|
|
|
3,802
|
|
|
|
15,946
|
|
|
|
6,667
|
|
Equity in loss of other affiliates
|
|
|
1,336
|
|
|
|
1,583
|
|
|
|
3,236
|
|
|
|
3,641
|
|
Other expense (income), net
|
|
|
(2,152
|
)
|
|
|
1,805
|
|
|
|
9,456
|
|
|
|
1,886
|
|
Income before income taxes
|
|
|
91,966
|
|
|
|
109,812
|
|
|
|
91,633
|
|
|
|
181,952
|
|
Provision for income taxes
|
|
|
29,925
|
|
|
|
38,646
|
|
|
|
32,503
|
|
|
|
63,897
|
|
Net income
|
|
|
$
|
62,041
|
|
|
|
$
|
71,166
|
|
|
|
$
|
59,130
|
|
|
|
$
|
118,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.99
|
|
|
|
$
|
1.10
|
|
|
|
$
|
0.94
|
|
|
|
$
|
1.82
|
|
Diluted
|
|
|
$
|
0.97
|
|
|
|
$
|
1.09
|
|
|
|
$
|
0.92
|
|
|
|
$
|
1.80
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
62,895
|
|
|
|
64,406
|
|
|
|
63,012
|
|
|
|
64,726
|
|
Diluted
|
|
|
63,807
|
|
|
|
65,297
|
|
|
|
63,970
|
|
|
|
65,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(In Thousands, Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
127,378
|
|
|
|
$
|
146,633
|
|
Trade receivables, net
|
|
|
169,314
|
|
|
|
142,434
|
|
Inventories, net
|
|
|
815,990
|
|
|
|
692,272
|
|
Prepaid expenses and other
|
|
|
85,221
|
|
|
|
64,201
|
|
Income taxes receivable
|
|
|
18,976
|
|
|
|
20,013
|
|
Total current assets
|
|
|
1,216,879
|
|
|
|
1,065,553
|
|
Property and equipment, net
|
|
|
736,866
|
|
|
|
696,241
|
|
Investment in finance affiliate
|
|
|
86,552
|
|
|
|
93,870
|
|
Deferred tax assets
|
|
|
192,167
|
|
|
|
170,955
|
|
Goodwill and other intangible assets, net
|
|
|
786,935
|
|
|
|
273,896
|
|
Other long-term assets
|
|
|
95,573
|
|
|
|
95,129
|
|
Total assets
|
|
|
$
|
3,114,972
|
|
|
|
$
|
2,395,644
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
Current portion of debt, capital lease obligations and notes payable
|
|
|
$
|
2,831
|
|
|
|
$
|
4,821
|
|
Accounts payable
|
|
|
352,538
|
|
|
|
348,376
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
Compensation
|
|
|
116,341
|
|
|
|
80,348
|
|
Warranties
|
|
|
108,403
|
|
|
|
76,873
|
|
Sales promotions and incentives
|
|
|
176,978
|
|
|
|
138,679
|
|
Dealer holdback
|
|
|
116,804
|
|
|
|
119,833
|
|
Other
|
|
|
164,486
|
|
|
|
103,211
|
|
Income taxes payable
|
|
|
9,725
|
|
|
|
9,728
|
|
Total current liabilities
|
|
|
1,048,106
|
|
|
|
881,869
|
|
Long term income taxes payable
|
|
|
27,764
|
|
|
|
23,864
|
|
Capital lease obligations
|
|
|
18,245
|
|
|
|
19,178
|
|
Long-term debt
|
|
|
1,046,721
|
|
|
|
444,126
|
|
Deferred tax liabilities
|
|
|
9,009
|
|
|
|
12,887
|
|
Other long-term liabilities
|
|
|
100,625
|
|
|
|
78,511
|
|
Total liabilities
|
|
|
$
|
2,250,470
|
|
|
|
$
|
1,460,435
|
|
Deferred compensation
|
|
|
10,725
|
|
|
|
11,027
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
853,777
|
|
|
|
924,182
|
|
Total liabilities and shareholders’ equity
|
|
|
$
|
3,114,972
|
|
|
|
$
|
2,395,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In Thousands, Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
Operating Activities:
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
59,130
|
|
|
|
$
|
118,055
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
91,124
|
|
|
|
78,109
|
|
|
Noncash compensation
|
|
|
31,416
|
|
|
|
38,382
|
|
|
Noncash income from financial services
|
|
|
(13,328
|
)
|
|
|
(14,828
|
)
|
|
Deferred income taxes
|
|
|
(4,083
|
)
|
|
|
(4,876
|
)
|
|
Impairment charges
|
|
|
18,760
|
|
|
|
—
|
|
|
Other, net
|
|
|
3,236
|
|
|
|
3,641
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Trade receivables
|
|
|
12,370
|
|
|
|
14,744
|
|
|
Inventories
|
|
|
(59,421
|
)
|
|
|
27,605
|
|
|
Accounts payable
|
|
|
75,576
|
|
|
|
45,598
|
|
|
Accrued expenses
|
|
|
6,406
|
|
|
|
4,910
|
|
|
Income taxes payable/receivable
|
|
|
40,727
|
|
|
|
28,527
|
|
|
Prepaid expenses and others, net
|
|
|
2,136
|
|
|
|
8,416
|
|
|
Net cash provided by operating activities
|
|
|
264,049
|
|
|
|
348,283
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(81,803
|
)
|
|
|
(117,628
|
)
|
|
Investment in finance affiliate, net
|
|
|
20,785
|
|
|
|
20,030
|
|
|
Investment in other affiliates
|
|
|
(1,814
|
)
|
|
|
(6,861
|
)
|
|
Acquisition and disposal of businesses, net of cash acquired
|
|
|
1,645
|
|
|
|
(54,830
|
)
|
|
Net cash used for investing activities
|
|
|
(61,187
|
)
|
|
|
(159,289
|
)
|
|
Financing Activities:
|
|
|
|
|
|
|
|
Borrowings under debt arrangements / capital lease obligations
|
|
|
932,317
|
|
|
|
1,202,652
|
|
|
Repayments under debt arrangements / capital lease obligations
|
|
|
(1,010,870
|
)
|
|
|
(1,198,337
|
)
|
|
Repurchase and retirement of common shares
|
|
|
(65,622
|
)
|
|
|
(143,876
|
)
|
|
Cash dividends to shareholders
|
|
|
(72,612
|
)
|
|
|
(70,583
|
)
|
|
Proceeds from stock issuances under employee plans
|
|
|
7,027
|
|
|
|
11,758
|
|
|
Net cash used for financing activities
|
|
|
(209,760
|
)
|
|
|
(198,386
|
)
|
|
Impact of currency exchange rates on cash balances
|
|
|
6,951
|
|
|
|
676
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
53
|
|
|
|
(8,716
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
|
127,325
|
|
|
|
155,349
|
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
127,378
|
|
|
|
$
|
146,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
RECONCILIATION OF GAAP "REPORTED" TO NON-GAAP "ADJUSTED" RESULTS
|
|
THREE MONTHS ENDED JUNE 30, 2017
|
|
(In Thousands, Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported GAAP Measures
|
|
|
2017 Adjustments(4)
|
|
|
Adjusted Measures
|
|
|
|
|
Three months ended June 30,
|
|
|
Three months ended June 30, 2017
|
|
|
Three months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
|
Wind Down(1)
|
|
|
TAP(2)
|
|
|
Realignment(3)
|
|
|
Total
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORV/Snowmobiles
|
|
|
$
|
845,508
|
|
|
|
$
|
799,332
|
|
|
|
6
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
845,508
|
|
|
|
$
|
799,332
|
|
|
|
6
|
%
|
|
Motorcycles
|
|
|
|
197,997
|
|
|
|
|
228,392
|
|
|
|
(13
|
)%
|
|
|
$
|
(6,157
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
$
|
(6,157
|
)
|
|
|
|
191,840
|
|
|
|
|
228,392
|
|
|
|
(16
|
)%
|
|
Global Adj. Markets
|
|
|
|
97,022
|
|
|
|
|
90,959
|
|
|
|
7
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
97,022
|
|
|
|
|
90,959
|
|
|
|
7
|
%
|
|
Aftermarket
|
|
|
|
224,393
|
|
|
|
|
12,094
|
|
|
|
1,755
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
224,393
|
|
|
|
|
12,094
|
|
|
|
1,755
|
%
|
|
Total sales
|
|
|
|
1,364,920
|
|
|
|
|
1,130,777
|
|
|
|
21
|
%
|
|
|
|
(6,157
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(6,157
|
)
|
|
|
|
1,358,763
|
|
|
|
|
1,130,777
|
|
|
|
20
|
%
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORV/Snowmobiles
|
|
|
|
266,150
|
|
|
|
|
228,494
|
|
|
|
16
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
266,150
|
|
|
|
|
228,494
|
|
|
|
16
|
%
|
|
% of sales
|
|
|
|
31.5
|
%
|
|
|
|
28.6
|
%
|
|
|
+289 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.5
|
%
|
|
|
|
28.6
|
%
|
|
|
+289 bps
|
|
Motorcycles
|
|
|
|
21,116
|
|
|
|
|
38,915
|
|
|
|
(46
|
)%
|
|
|
|
8,852
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
8,852
|
|
|
|
|
29,968
|
|
|
|
|
38,915
|
|
|
|
(23
|
)%
|
|
% of sales
|
|
|
|
10.7
|
%
|
|
|
|
17.0
|
%
|
|
|
-637 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.6
|
%
|
|
|
|
17.0
|
%
|
|
|
-142 bps
|
|
Global Adj. Markets
|
|
|
|
21,216
|
|
|
|
|
23,952
|
|
|
|
(11
|
)%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
4,303
|
|
|
|
4,303
|
|
|
|
|
25,519
|
|
|
|
|
23,952
|
|
|
|
7
|
%
|
|
% of sales
|
|
|
|
21.9
|
%
|
|
|
|
26.3
|
%
|
|
|
-447 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.3
|
%
|
|
|
|
26.3
|
%
|
|
|
-3 bps
|
|
Aftermarket
|
|
|
|
59,918
|
|
|
|
|
2,982
|
|
|
|
1,909
|
%
|
|
|
|
—
|
|
|
|
|
53
|
|
|
|
|
—
|
|
|
|
53
|
|
|
|
|
59,971
|
|
|
|
|
2,982
|
|
|
|
1,911
|
%
|
|
% of sales
|
|
|
|
26.7
|
%
|
|
|
|
24.7
|
%
|
|
|
+205 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.7
|
%
|
|
|
|
24.7
|
%
|
|
|
+207 bps
|
|
Corporate
|
|
|
|
(18,014
|
)
|
|
|
|
(9,840
|
)
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(18,014
|
)
|
|
|
|
(9,840
|
)
|
|
|
|
|
Total gross profit
|
|
|
|
350,386
|
|
|
|
|
284,503
|
|
|
|
23
|
%
|
|
|
|
8,852
|
|
|
|
|
53
|
|
|
|
|
4,303
|
|
|
|
13,208
|
|
|
|
|
363,595
|
|
|
|
|
284,503
|
|
|
|
28
|
%
|
|
Gross profit %
|
|
|
|
25.7
|
%
|
|
|
|
25.2
|
%
|
|
|
+51 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.8
|
%
|
|
|
|
25.2
|
%
|
|
|
+160 bps
|
|
Operating expenses
|
|
|
|
270,347
|
|
|
|
|
187,965
|
|
|
|
44
|
%
|
|
|
|
(1,999
|
)
|
|
|
|
(3,714
|
)
|
|
|
|
—
|
|
|
|
(5,713
|
)
|
|
|
|
264,634
|
|
|
|
|
187,965
|
|
|
|
41
|
%
|
|
Other expense, net
|
|
|
|
(2,152
|
)
|
|
|
|
1,805
|
|
|
|
NM
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(2,152
|
)
|
|
|
|
1,805
|
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
62,041
|
|
|
|
$
|
71,166
|
|
|
|
(13
|
)%
|
|
|
$
|
6,820
|
|
|
|
$
|
2,368
|
|
|
|
$
|
2,705
|
|
|
$
|
11,893
|
|
|
|
$
|
73,934
|
|
|
|
$
|
71,166
|
|
|
|
4
|
%
|
|
Diluted EPS
|
|
|
$
|
0.97
|
|
|
|
$
|
1.09
|
|
|
|
(11
|
)%
|
|
|
$
|
0.11
|
|
|
|
$
|
0.04
|
|
|
|
$
|
0.04
|
|
|
$
|
0.19
|
|
|
|
$
|
1.16
|
|
|
|
$
|
1.09
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents adjustments for the wind down of Victory
Motorcycles, including wholegoods, accessories and apparel
|
|
(2) Represents adjustments for TAP acquisition inventory
step-up and TAP integration expenses
|
|
(3) Represents adjustments for manufacturing network
realignment costs
|
|
(4) The Company used its estimated statutory tax rate of
37.1% for the non-GAAP adjustments, except for the non-deductible
items
|
|
2016 Reclassified Results: 2016 sales and gross profit results for
ORV/Snowmobiles, Motorcycles and Aftermarket are reclassified for
the new Aftermarket reporting segment.
|
|
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
RECONCILIATION OF GAAP "REPORTED" TO NON-GAAP "ADJUSTED" RESULTS
|
|
SIX MONTHS ENDED JUNE 30, 2017
|
|
(In Thousands, Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported GAAP Measures
|
|
|
2017 Adjustments(3)
|
|
|
Adjusted Measures
|
|
|
|
|
Six months ended June 30,
|
|
|
Six months ended June 30, 2017
|
|
|
Six months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
|
Wind Down(1)
|
|
|
TAP(2)
|
|
|
Realignment(3)
|
|
|
Total
|
|
|
2017
|
|
|
2016
|
|
|
% Change
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORV/Snowmobiles
|
|
|
$
|
1,569,611
|
|
|
|
$
|
1,507,435
|
|
|
|
4
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
1,569,611
|
|
|
|
$
|
1,507,435
|
|
|
|
4
|
%
|
|
Motorcycles
|
|
|
|
318,286
|
|
|
|
|
413,659
|
|
|
|
(23
|
)%
|
|
|
$
|
(1,053
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
$
|
(1,053
|
)
|
|
|
|
317,233
|
|
|
|
|
413,659
|
|
|
|
(23
|
)%
|
|
Global Adj. Markets
|
|
|
|
188,577
|
|
|
|
|
165,068
|
|
|
|
14
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
188,577
|
|
|
|
|
165,068
|
|
|
|
14
|
%
|
|
Aftermarket
|
|
|
|
442,228
|
|
|
|
|
27,611
|
|
|
|
1,502
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
442,228
|
|
|
|
|
27,611
|
|
|
|
1,502
|
%
|
|
Total sales
|
|
|
|
2,518,702
|
|
|
|
|
2,113,773
|
|
|
|
19
|
%
|
|
|
|
(1,053
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(1,053
|
)
|
|
|
|
2,517,649
|
|
|
|
|
2,113,773
|
|
|
|
19
|
%
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORV/Snowmobiles
|
|
|
|
479,109
|
|
|
|
|
434,481
|
|
|
|
10
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
479,109
|
|
|
|
|
434,481
|
|
|
|
10
|
%
|
|
% of sales
|
|
|
|
30.5
|
%
|
|
|
|
28.8
|
%
|
|
|
+170 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30.5
|
%
|
|
|
|
28.8
|
%
|
|
|
+170 bps
|
|
Motorcycles
|
|
|
|
1,235
|
|
|
|
|
66,174
|
|
|
|
(98
|
)%
|
|
|
|
47,415
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
47,415
|
|
|
|
|
48,650
|
|
|
|
|
66,174
|
|
|
|
(26
|
)%
|
|
% of sales
|
|
|
|
0.4
|
%
|
|
|
|
16.0
|
%
|
|
|
-1,561 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.3
|
%
|
|
|
|
16.0
|
%
|
|
|
-66 bps
|
|
Global Adj. Markets
|
|
|
|
49,314
|
|
|
|
|
44,335
|
|
|
|
11
|
%
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
4,303
|
|
|
|
4,303
|
|
|
|
|
53,617
|
|
|
|
|
44,335
|
|
|
|
21
|
%
|
|
% of sales
|
|
|
|
26.2
|
%
|
|
|
|
26.9
|
%
|
|
|
-71 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28.4
|
%
|
|
|
|
26.9
|
%
|
|
|
+157 bps
|
|
Aftermarket
|
|
|
|
101,482
|
|
|
|
|
7,681
|
|
|
|
1,221
|
%
|
|
|
|
—
|
|
|
|
|
12,950
|
|
|
|
|
—
|
|
|
|
12,950
|
|
|
|
|
114,432
|
|
|
|
|
7,681
|
|
|
|
1,390
|
%
|
|
% of sales
|
|
|
|
22.9
|
%
|
|
|
|
27.8
|
%
|
|
|
-487 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.9
|
%
|
|
|
|
27.8
|
%
|
|
|
-194 bps
|
|
Corporate
|
|
|
|
(38,263
|
)
|
|
|
|
(20,590
|
)
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(38,263
|
)
|
|
|
|
(20,590
|
)
|
|
|
|
|
Total gross profit
|
|
|
|
592,877
|
|
|
|
|
532,081
|
|
|
|
11
|
%
|
|
|
|
47,415
|
|
|
|
|
12,950
|
|
|
|
|
4,303
|
|
|
|
64,668
|
|
|
|
|
657,545
|
|
|
|
|
532,081
|
|
|
|
24
|
%
|
|
Gross profit %
|
|
|
|
23.5
|
%
|
|
|
|
25.2
|
%
|
|
|
-163 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.1
|
%
|
|
|
|
25.2
|
%
|
|
|
+95 bps
|
|
Operating expenses
|
|
|
|
512,179
|
|
|
|
|
377,895
|
|
|
|
36
|
%
|
|
|
|
(8,016
|
)
|
|
|
|
(7,017
|
)
|
|
|
|
—
|
|
|
|
(15,033
|
)
|
|
|
|
497,146
|
|
|
|
|
377,895
|
|
|
|
32
|
%
|
|
Other expense, net
|
|
|
|
9,456
|
|
|
|
|
1,886
|
|
|
|
401
|
%
|
|
|
|
(13,000
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(13,000
|
)
|
|
|
|
(3,544
|
)
|
|
|
|
1,886
|
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
59,130
|
|
|
|
$
|
118,055
|
|
|
|
(50
|
)%
|
|
|
$
|
47,841
|
|
|
|
$
|
12,551
|
|
|
|
$
|
2,705
|
|
|
$
|
63,097
|
|
|
|
$
|
122,227
|
|
|
|
$
|
118,055
|
|
|
|
4
|
%
|
|
Diluted EPS
|
|
|
$
|
0.92
|
|
|
|
$
|
1.80
|
|
|
|
(49
|
)%
|
|
|
$
|
0.75
|
|
|
|
$
|
0.20
|
|
|
|
$
|
0.04
|
|
|
$
|
0.99
|
|
|
|
$
|
1.91
|
|
|
|
$
|
1.80
|
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents adjustments for the wind down of Victory
Motorcycles, including wholegoods, accessories and apparel
|
|
(2) Represents adjustments for TAP acquisition inventory
step-up and TAP integration expenses
|
|
(3) Represents adjustments for manufacturing network
realignment costs
|
|
(4) The Company used its estimated statutory tax rate of
37.1% for the non-GAAP adjustments, except for the non-deductible
items
|
|
2016 Reclassified Results: 2016 sales and gross profit results for
ORV/Snowmobiles, Motorcycles and Aftermarket are reclassified for
the new Aftermarket reporting segment.
|
|
|
POLARIS INDUSTRIES INC.
NON-GAAP ADJUSTMENTS TO FULL YEAR 2017 GUIDANCE
2017 Adjusted Guidance: 2017 guidance excludes the pre-tax effect
of TAP inventory step-up purchase accounting of approx. $15 million,
acquisition integration costs of approx. $15 million, manufacturing
network realignment costs of approx. $10 million to $15 million and the
impacts associated with the Victory wind down which is estimated to be
in the range of $80 million to $90 million. 2017 adjusted sales guidance
excludes any Victory wholegood, accessories and apparel sales and
corresponding promotional costs as the Company is in the process of
exiting the brand. 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 costs associated with the
Victory wind down that are difficult to predict in advance in order to
include in a GAAP estimate.
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Source: Polaris Industries Inc.