Q3 2019 Highlights
Reported and adjusted sales for the third quarter of 2019
increased 7% to $1,772 million
Reported net income was $1.42 per diluted share; adjusted
net income for the same period was $1.68 per diluted share
North American side-by-side retail sales were up
low-single digits compared to last year with both RANGER and RZR
retail sales up during the quarter
Gross profit margin for the third quarter was
24.6%, up 30 basis points over prior year. Adjusted gross profit
margin was 24.9%, up 10 basis points versus last year due to
positive product mix, despite the absorption of approximately 140
basis points of tariff costs and negative foreign exchange
impact
Polaris narrowed its full year 2019 earnings guidance by
maintaining the upper end of the net income range and increasing
the lower end of the range and now expects earnings to be in
the $6.20 to $6.30 per diluted share range. Full year 2019 adjusted
sales growth guidance is expected to be up approximately 12% over
the prior year.
Polaris Industries Inc. (NYSE: PII):
Key Financial Data
(in thousands, except per share data)
INCOME STATEMENT - Q3 September 30,
2019
Reported
YOY % Chg.
Adjusted*
YOY % Chg.
Sales
$
1,771,647
7%
$
1,771,647
7%
Net income attributable to Polaris
$
88,388
(7)%
$
104,466
(11)%
Diluted EPS
$
1.42
(5)%
$
1.68
(10)%
BALANCE SHEET - Q3 September 30,
2019
Reported
YOY % Chg.
Cash and cash equivalents
$
122,216
(33)%
Inventories, net
$
1,270,110
25%
Total debt, finance lease obligations and
notes payable
$
1,783,623
(4)%
Shareholders' equity
$
1,013,043
13%
CASH FLOW - YTD September 30,
2019
Reported
YOY % Chg.
Net cash provided by operating
activities
$
436,131
23%
Purchase of property & equipment
$
189,336
20%
Repurchase and retirement of common
shares
$
6,997
(97)%
Cash dividends to shareholders
$
111,722
(1)%
*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
"Through the strength of our brand portfolio and solid execution
from our team, Polaris delivered 7 percent revenue growth and
modest margin expansion amid mounting macroeconomic ambiguity. We
augmented our industry-leading Off-Road Vehicle lineup with the
introduction of our Model Year ’20 products, and continued to
improve dealer satisfaction and engagement. We also launched our
evolved Polaris brand and Think Outside tagline. This more modern
compass appeals to broader demographics - as seen in Polaris
Adventures bringing 90 percent new customers to the brand or the
uptick in millennial purchases of the RZR and RANGER. Indeed, our
RANGER/GENERAL and RZR brands continue to perform well, driving
growth in side-by-sides despite an increasingly competitive market.
We converted this growth into increased profitability, as our
strategic supply chain investments, which are driving
organization-wide value enhancement, began realizing cost savings
in the quarter. Our commitment to being a customer-centric, highly
efficient growth company remains steadfast, and coupled with
industry-leading innovation, it will further solidify our position
as the global leader in Powersports.”
-- Scott Wine, Chairman and Chief Executive
Officer of Polaris Inc.
Third Quarter Performance Summary
(Reported)
(in thousands, except per share data)
Three months ended September
30,
2019
2018
Change
Sales
$
1,771,647
$
1,651,415
7
%
Gross profit
436,542
401,270
9
%
% of Sales
24.6
%
24.3
%
+34 bpts
Total operating expenses
327,890
283,749
16
%
% of Sales
18.5
%
17.2
%
+133 bpts
Income from financial services
21,602
21,348
1
%
% of Sales
1.2
%
1.3
%
-7 bpts
Operating income
130,254
138,869
(6
)%
% of Sales
7.4
%
8.4
%
-106 bpts
Net income attributable to
Polaris
88,388
95,529
(7
)%
% of Sales
5.0
%
5.8
%
-80 bpts
Diluted net income per share
$
1.42
$
1.50
(5
)%
Polaris Inc. (NYSE: PII) (the "Company") today released third
quarter 2019 results with sales of $1,772 million on a reported and
adjusted basis, up 7 percent from reported and adjusted sales of
$1,651 million and $1,653 million for the third quarter of 2018,
respectively. The Company reported third quarter 2019 net income of
$88 million, or 1.42 per diluted share, compared with net income of
$96 million, or 1.50 per diluted share, for the 2018 third quarter.
Adjusted net income for the quarter ended September 30, 2019 was
$104 million, or $1.68 per diluted share compared to $118 million,
or $1.86 per diluted share in the 2018 third quarter.
Gross profit increased 9 percent to $437 million for the
third quarter of 2019 from $401 million in the third quarter of
2018. Reported gross profit margin was 24.6 percent of sales for
the third quarter of 2019, up 30 basis points compared to 24.3
percent of sales for the third quarter of 2018. Adjusted gross
profit for the third quarter 2019 was $441 million, or 24.9 percent
of adjusted sales compared to the third quarter of 2018 adjusted
gross profit of $410 million, or 24.8 percent of adjusted sales.
Adjusted gross profit margins were up 10 basis points during the
quarter. Adjusted gross profit for the third quarter of 2019
excludes the negative impact of $5 million of restructuring and
realignment costs, and adjusted gross profit for the third quarter
of 2018 excludes the negative impact of $4 million of restructuring
and realignment costs, $3 million of acquisition-related costs, and
$1 million of Victory Motorcycles® wind-down costs.
Operating expenses increased 16 percent for the third
quarter of 2019 to $328 million, or 18.5 percent of sales, from
$284 million, or 17.2 percent of sales, in the same period in 2018.
Operating expenses in dollars and as a percent of sales, increased
primarily due to the addition of the new multi-brand distribution
center in Nevada, the costs associated with the 65th anniversary
celebration and summer dealer meeting and ongoing investment in
research and development.
Income from financial services was $22 million for the
third quarter of 2019, up 1 percent compared with $21 million for
the third quarter of 2018. Wholesale credit income increased due to
higher dealer inventory levels while retail credit income declined
due to slightly lower penetration rates during the quarter.
Non-Operating Expenses
(Reported)
(in thousands)
Three months ended September
30,
2019
2018
Change
Interest expense
$
19,733
$
19,823
0
%
Equity in loss of other affiliates
$
4,072
$
111
NM
Other income, net
$
(1,711
)
$
(4,124
)
(59
)%
Provision for income taxes
$
19,772
$
27,530
(28
)%
Interest expense was $20 million for both 2019 and 2018
third quarters.
Equity in loss of other affiliates was $4 million for the
third quarter of 2019 compared to $111 thousand for the same period
last year primarily due to the write-down of certain investments
during the quarter.
Other income, net, was $2 million in the third quarter of
2019 compared to $4 million in the third quarter of 2018. Other
income is the result of 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 third quarter of
2019 was $20 million, or 18.3 percent of pretax income, compared
with $28 million, or 22.4 percent of pretax income for the third
quarter of 2018. The decrease in the effective income tax rate is
primarily due to additional Section 199 benefits realized from the
filing of amended tax returns in the third quarter of 2019 as
compared to the third quarter of 2018.
Product Segment Highlights
(Reported)
(in thousands)
Sales
Gross Profit
Q3 2019
Q3 2018
Change
Q3 2019
Q3 2018
Change
Off-Road Vehicles / Snowmobiles
$
1,152,405
$
1,035,554
11
%
$
323,940
$
290,631
11
%
Motorcycles
$
149,900
$
155,316
(3
)%
$
11,940
$
19,577
(39
)%
Global Adjacent Markets
$
114,003
$
96,251
18
%
$
31,138
$
24,155
29
%
Aftermarket
$
236,261
$
229,973
3
%
$
61,794
$
66,092
(7
)%
Boats
$
119,078
$
134,321
(11
)%
$
22,335
$
20,253
10
%
Off-Road Vehicles (“ORV”) and
Snowmobiles segment sales, including PG&A, totaled
$1,152 million for the third quarter of 2019, up eleven percent
over $1,036 million for the third quarter of 2018 driven by growth
in side-by-side sales and timing of snowmobile shipments. PG&A
sales for ORV and Snowmobiles combined increased 10 percent in the
third quarter of 2019 compared to the third quarter last year.
Gross profit increased 11 percent to $324 million in the third
quarter of 2019, compared to $291 million in the third quarter of
2018. Gross profit percentage increased four basis points during
the 2019 third quarter.
ORV wholegood sales for the third
quarter of 2019 increased eight percent primarily driven by
increased price and mix. Polaris North American ORV retail sales
were flat for the quarter with side-by-side vehicles up low-single
digits percent and ATV vehicles down mid-single digits percent. The
North American ORV industry was up mid-single digits percent
compared to the third quarter last year.
Snowmobile wholegood sales in the
third quarter of 2019 were $106 million, up 53 percent compared to
$69 million in the third quarter last year. Snowmobile sales were
favorably impacted by the timing of shipments for the Company's
pre-season snowmobile orders.
Motorcycles segment sales,
including PG&A, totaled $150 million, down three percent
compared to the third quarter of 2018. Both Indian and Slingshot
reported sales decline during the quarter. Gross profit for the
third quarter of 2019 was $12 million compared to $20 million in
the third quarter of 2018. The decrease in gross profit was
primarily due to tariff costs and negative mix.
North American consumer retail sales for Polaris Indian
motorcycles decreased mid-teens percent during the third quarter of
2019 primarily due to the weak mid to heavy-weight two-wheel
motorcycle industry that was down high-single digits percent and
retail pressure from heavy competitive promotional spending. North
American consumer retail sales for Polaris' motorcycle segment,
including both Indian Motorcycles and Slingshot, decreased
low-double digit percent during the third quarter of 2019, while
the North American Motorcycle industry retail sales for mid to
heavy-weight motorcycles including three-wheel vehicles, was down
low-single digits percent in the third quarter of 2019.
Global Adjacent Markets
segment sales, including PG&A, increased 18 percent to $114
million in the 2019 third quarter compared to $96 million in the
2018 third quarter primarily due to strong commercial, government
and defense sales, and growth in Polaris Adventures. Gross profit
increased 29 percent to $31 million or 27.3 percent of sales in the
third quarter of 2019, compared to $24 million or 25.1 percent of
sales in the third quarter of 2018, due to increased volume and
favorable product mix.
Aftermarket segment sales of
$236 million in the 2019 third quarter increased three percent
compared to $230 million in the 2018 third quarter. TAP sales of
$193 million in the third quarter of 2019 increased two percent
compared to $189 million in the third quarter of 2018. The
Company's other aftermarket brands increased sales by five percent.
Gross profit decreased to $62 million in the third quarter of 2019,
compared to $66 million in the third quarter of 2018 primarily due
to higher tariff costs.
Boats segment sales
decreased 11 percent to $119 million in the 2019 third quarter
compared to $134 million in the 2018 third quarter primarily due to
a slowing marine industry. Gross profit increased 10 percent to $22
million or 18.8 percent of sales in the third quarter of 2019,
compared to $20 million or 15.1 percent of sales in the third
quarter of 2018 due to favorable product mix.
Supplemental Data:
Parts, Garments, and Accessories
(“PG&A”) sales increased 11 percent for the 2019 third
quarter primarily driven by growth in all segments and
categories.
International sales to customers
outside of North America, including PG&A, totaled $187 million
for the third quarter of 2019, up eight percent from the same
period in 2018. The increase in sales is attributable to growth in
ORV, motorcycles and Global Adjacent markets.
Financial Position and Cash
Flow
(in thousands)
Nine months ended September
30,
2019
2018
Change
Cash and cash equivalents
$
122,216
$
183,411
(33
)%
Net cash provided by operating
activities
$
436,131
$
354,138
23
%
Repurchase and retirement of common
shares
$
6,997
$
246,931
(97
)%
Cash dividends to shareholders
$
111,722
$
112,748
(1
)%
Acquisition of businesses
$
1,800
$
729,925
NM
Total debt, finance lease obligations and
notes payable
$
1,783,623
$
1,864,327
(4
)%
Debt to Total Capital Ratio
64
%
67
%
NM = Not meaningful
Net cash provided by operating activities was $436
million for the nine months ended September 30, 2019, compared to
$354 million for the same period in 2018. Total debt at September
30, 2019, including finance lease obligations and notes payable,
was $1,784 million. The Company’s debt-to-total capital ratio was
64 percent at September 30, 2019 compared to 67 percent at
September 30, 2018. Cash and cash equivalents were $122 million at
September 30, 2019, down from $183 million at September 30,
2018.
2019 Business Outlook
Taking into account its year-to-date performance, the Company is
narrowing its earnings guidance range for the full year 2019 by
increasing the lower end to $6.20 per diluted share and maintaining
the upper end of the range at $6.30 per diluted share. Sales are
expected to increase approximately 12 percent for the full year
2019 compare to the prior year.
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.
Third Quarter 2019 Earnings Conference Call and
Webcast
Today at 9:00 AM (CDT) Polaris Inc. will host a conference call
and webcast to discuss the 2019 third 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 7682873. A
replay of the conference call will be available by accessing the
same link on our website.
About Polaris
As the global leader in Powersports, Polaris Inc. (NYSE: PII)
pioneers product breakthroughs and enriching experiences and
services that have invited people to discover the joy of being
outdoors since our founding in 1954. With annual 2018 sales of $6.1
billion, Polaris’ high-quality product line-up includes the Polaris
RANGER®, RZR® and Polaris GENERAL™ side-by-side off-road vehicles;
Sportsman® all-terrain off-road vehicles; Indian Motorcycle®
mid-size and heavyweight motorcycles; Slingshot® moto-roadsters;
snowmobiles; and deck, cruiser and pontoon boats, including
industry-leading Bennington pontoons. 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 includes military and
commercial off-road vehicles, quadricycles, and electric vehicles.
Proudly headquartered in Minnesota, Polaris serves more than 100
countries across the globe. www.polaris.com
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, future cash flows and capital requirements, 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 and supply chain initiatives, product offerings,
promotional activities and pricing strategies by competitors;
economic conditions that impact consumer spending; disruptions in
manufacturing facilities; 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 (tariff relief or ability to mitigate tariffs);
changes to international trade policies and 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.
CONSOLIDATED STATEMENTS OF
INCOME
(In Thousands, Except Per Share
Data) (Unaudited)
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
Sales
$
1,771,647
$
1,651,415
$
5,046,652
$
4,451,420
Cost of sales
1,335,105
1,250,145
3,821,214
3,341,493
Gross profit
436,542
401,270
1,225,438
1,109,927
Operating expenses:
Selling and marketing
149,759
128,929
419,621
369,495
Research and development
77,337
64,181
220,836
197,741
General and administrative
100,794
90,639
297,822
262,206
Total operating expenses
327,890
283,749
938,279
829,442
Income from financial services
21,602
21,348
60,153
64,117
Operating income
130,254
138,869
347,312
344,602
Non-operating expense:
Interest expense
19,733
19,823
60,772
37,087
Equity in loss of other affiliates
4,072
111
5,133
25,576
Other income, net
(1,711
)
(4,124
)
(5,483
)
(27,660
)
Income before income taxes
108,160
123,059
286,890
309,599
Provision for income taxes
19,772
27,530
61,961
65,816
Net income
88,388
95,529
224,929
243,783
Net loss attributable to noncontrolling
interest
—
—
100
—
Net income attributable to Polaris
Inc.
$
88,388
$
95,529
$
225,029
$
243,783
Net income per share attributable to
Polaris Inc. common shareholders:
Basic
$
1.44
$
1.54
$
3.67
$
3.88
Diluted
$
1.42
$
1.50
$
3.62
$
3.78
Weighted average shares outstanding:
Basic
61,480
62,207
61,394
62,894
Diluted
62,265
63,546
62,152
64,550
CONSOLIDATED BALANCE
SHEETS
(In Thousands), (Unaudited)
September 30, 2019
September 30, 2018
Assets
Current Assets:
Cash and cash equivalents
$
122,216
$
183,411
Trade receivables, net
217,231
217,694
Inventories, net
1,270,110
1,019,517
Prepaid expenses and other
118,623
105,066
Income taxes receivable
14,958
5,865
Total current assets
1,743,138
1,531,553
Property and equipment, net
887,644
807,511
Investment in finance affiliate
104,060
88,790
Deferred tax assets
95,189
116,447
Goodwill and other intangible assets,
net
1,494,646
1,515,431
Operating lease assets
107,906
—
Other long-term assets
94,839
88,299
Total assets
$
4,527,422
$
4,148,031
Liabilities and Equity
Current Liabilities:
Current portion of debt, finance lease
obligations and notes payable
$
66,664
$
66,595
Accounts payable
584,506
436,401
Accrued expenses:
Compensation
169,989
160,033
Warranties
137,114
122,544
Sales promotions and incentives
198,566
187,307
Dealer holdback
136,437
124,259
Other
214,038
179,738
Current operating lease liabilities
34,179
—
Income taxes payable
4,632
8,963
Total current liabilities
1,546,125
1,285,840
Long term income taxes payable
26,639
26,805
Finance lease obligations
14,840
16,712
Long-term debt
1,702,119
1,781,020
Deferred tax liabilities
4,741
7,054
Long-term operating lease liabilities
76,390
—
Other long-term liabilities
131,731
122,728
Total liabilities
$
3,502,585
$
3,240,159
Deferred compensation
11,615
9,620
Equity:
Total shareholders’ equity
1,013,043
897,973
Noncontrolling interest
179
279
Total equity
1,013,222
898,252
Total liabilities and equity
$
4,527,422
$
4,148,031
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands), (Unaudited)
Nine months ended September
30,
2019
2018
Operating Activities:
Net income
$
224,929
$
243,783
Adjustments to reconcile net income to net
cash used for operating activities:
Depreciation and amortization
173,003
155,910
Noncash compensation
56,559
43,219
Noncash income from financial services
(23,704
)
(22,232
)
Deferred income taxes
(9,134
)
(4,171
)
Impairment charges
3,558
21,716
Other, net
1,575
(9,618
)
Changes in operating assets and
liabilities:
Trade receivables
(23,613
)
(991
)
Inventories
(304,261
)
(201,229
)
Accounts payable
239,226
90,842
Accrued expenses
75,293
1,620
Income taxes payable/receivable
19,680
28,715
Prepaid expenses and others, net
3,020
6,574
Net cash provided by operating
activities
436,131
354,138
Investing Activities:
Purchase of property and equipment
(189,336
)
(157,763
)
Investment in finance affiliate, net
11,703
22,207
Investment in other affiliates, net
—
7,366
Acquisition of businesses, net of cash
acquired
(1,800
)
(729,925
)
Net cash used for investing activities
(179,433
)
(858,115
)
Financing Activities:
Borrowings under debt arrangements /
finance lease obligations
2,654,218
2,845,688
Repayments under debt arrangements /
finance lease obligations
(2,831,666
)
(1,970,701
)
Repurchase and retirement of common
shares
(6,997
)
(246,931
)
Cash dividends to shareholders
(111,722
)
(112,748
)
Proceeds from stock issuances under
employee plans
8,165
47,158
Net cash used for financing activities
(288,002
)
562,466
Impact of currency exchange rates on cash
balances
(3,092
)
(5,904
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
(34,396
)
52,585
Cash, cash equivalents and restricted cash
at beginning of period
193,126
161,618
Cash, cash equivalents and restricted
cash at end of period
$
158,730
$
214,203
The following presents the classification
of cash, cash equivalents and restricted cash within the
consolidated balance sheets:
Cash and cash equivalents
$
122,216
$
183,411
Other long-term assets
36,514
30,792
Total
$
158,730
$
214,203
NON-GAAP RECONCILIATION OF
RESULTS
(In Thousands, Except Per Share
Data), (Unaudited)
Three months ended September
30,
Nine months ended September
30,
2019
2018
2019
2018
Sales
$
1,771,647
$
1,651,415
$
5,046,652
$
4,451,420
Victory wind down (1)
—
1,055
—
1,304
Restructuring & realignment (3)
—
660
—
2,789
Adjusted sales
1,771,647
1,653,130
5,046,652
4,455,513
Gross profit
436,542
401,270
1,225,438
1,109,927
Victory wind down (1)
—
1,239
—
417
Acquisition-related costs (2)
—
3,130
—
3,130
Restructuring & realignment (3)
4,765
4,128
18,048
15,965
Adjusted gross profit
441,307
409,767
1,243,486
1,129,439
Income before taxes
108,160
123,059
286,890
309,599
Victory wind down (1)
—
1,514
—
1,757
Acquisition-related costs (2)
1,838
8,989
5,319
16,798
Restructuring & realignment (3)
4,765
4,671
18,048
22,564
EPPL impairment (5)
—
—
—
23,447
Brammo (6)
—
—
—
(13,478
)
Intangible amortization (7)
10,428
10,403
30,925
22,591
Other expenses (4)
4,189
3,288
16,699
5,010
Adjusted income before taxes
129,380
151,924
357,881
388,288
Net income attributable to PII
88,388
95,529
225,029
243,783
Victory wind down (1)
—
1,154
—
1,339
Acquisition-related costs (2)
1,401
6,848
4,054
12,799
Restructuring & realignment (3)
3,632
3,559
13,753
17,192
EPPL impairment (5)
—
—
—
22,325
Brammo (6)
—
—
—
(13,113
)
Intangible amortization (7)
7,853
7,763
23,283
16,708
Other expenses (4)
3,192
3,073
12,724
5,110
Adjusted net income attributable to PII
(8)
104,466
117,926
278,843
306,143
Diluted EPS attributable to PII
$
1.42
$
1.50
$
3.62
$
3.78
Victory wind down (1)
—
0.02
—
0.02
Acquisition-related costs (2)
0.02
0.11
0.07
0.20
Restructuring & realignment (3)
0.06
0.06
0.22
0.26
EPPL impairment (5)
—
—
—
0.34
Brammo (6)
—
—
—
(0.20
)
Intangible amortization (7)
0.13
0.12
0.37
0.26
Other expenses (4)
0.05
0.05
0.21
0.08
Adjusted EPS attributable to PII
(8)
$
1.68
$
1.86
$
4.49
$
4.74
(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 class
action litigation-related 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 September
30,
Nine months ended September
30,
SEGMENT
SALES
2019
2018
2019
2018
ORV/Snow segment sales
$
1,152,405
$
1,035,554
$
3,069,173
$
2,858,959
Restructuring & realignment (3)
—
660
—
2,789
Adjusted ORV/Snow segment sales
1,152,405
1,036,214
3,069,173
2,861,748
Motorcycles segment sales
149,900
155,316
464,615
458,285
Victory wind down (1)
—
1,055
—
1,304
Adjusted Motorcycles segment sales
149,900
156,371
464,615
459,589
Global Adjacent Markets (GAM) segment
sales
114,003
96,251
340,883
322,996
No adjustment
—
—
—
—
Adjusted GAM segment sales
114,003
96,251
340,883
322,996
Aftermarket segment sales
236,261
229,973
685,668
676,859
No adjustment
—
—
—
—
Adjusted Aftermarket sales
236,261
229,973
685,668
676,859
Boats segment sales
119,078
134,321
486,313
134,321
No adjustment
—
—
—
—
Adjusted Boats sales
119,078
134,321
486,313
134,321
Total sales
1,771,647
1,651,415
5,046,652
4,451,420
Total adjustments
—
1,715
—
4,093
Adjusted total sales
$
1,771,647
$
1,653,130
$
5,046,652
$
4,455,513
Three months ended September
30,
Nine months ended September
30,
SEGMENT GROSS PROFIT
2019
2018
2019
2018
ORV/Snow segment gross profit
$
323,940
$
290,631
$
888,864
$
831,413
Restructuring & realignment (3)
—
660
—
2,789
Adjusted ORV/Snow segment gross profit
323,940
291,291
888,864
834,202
Motorcycles segment gross
profit
11,940
19,577
45,704
60,817
Victory wind down (1)
—
1,239
—
417
Restructuring & realignment (3)
—
—
—
1,185
Adjusted Motorcycles segment gross
profit
11,940
20,816
45,704
62,419
Global Adjacent Markets (GAM) segment
gross profit
31,138
24,155
94,851
83,520
Restructuring & realignment (3)
—
45
—
479
Adjusted GAM segment gross profit
31,138
24,200
94,851
83,999
Aftermarket segment gross
profit
61,794
66,092
173,483
182,291
No adjustment
—
—
—
—
Adjusted Aftermarket segment gross
profit
61,794
66,092
173,483
182,291
Boats segment gross profit
22,335
20,253
98,976
20,253
Acquisition-related costs (2)
—
3,130
—
3,130
Boats segment gross profit
22,335
23,383
98,976
23,383
Corporate segment gross profit
(14,605
)
(19,438
)
(76,440
)
(68,367
)
Restructuring & realignment (3)
4,765
3,423
18,048
11,512
Adjusted Corporate segment gross
profit
(9,840
)
(16,015
)
(58,392
)
(56,855
)
Total gross profit
436,542
401,270
1,225,438
1,109,927
Total adjustments
4,765
8,497
18,048
19,512
Adjusted total gross profit
$
441,307
$
409,767
$
1,243,486
$
1,129,439
(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
NON-GAAP ADJUSTMENTS 2019 Third
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 third quarter of 2019, the
Company has recorded combined costs totaling $7 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 third 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 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, and
approximately $17 million to $20 million for class action
litigation-related expenses. 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.
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Investor Contact: Richard Edwards 763-513-3477
Media Contact: Jess Rogers 763-513-3445
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