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.
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 FlowNet 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 ActivityDuring 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 OutlookThe 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 MotorcyclesPolaris 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 RealignmentPolaris 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 InformationThis 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
PresentationToday 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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Polaris Industries Inc.Richard Edwards, 763-542-0500
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