Fourth Quarter & Full Year 2019 Highlights
Fourth quarter reported and adjusted sales increased 7%
to $1,736 million
Fourth quarter reported net income was $1.58 per diluted
share; adjusted net income for the same period was $1.83 per
diluted share
Full year reported and adjusted sales increased 12% to
$6,783 million
Full year 2019 reported net income was $5.20 per diluted
share; adjusted net income for the same period was $6.32 per
diluted share, exceeding the high-end of previously issued
guidance
North American retail sales increased 2% for the quarter
compared to last year; ORV N.A. retail sales were up low-single
digits percent, Indian motorcycles retail sales were up low-single
digits percent
Polaris announced full year 2020 sales and adjusted earnings
guidance with full year sales growth in the range of 2%
to 4% over the prior year and full year adjusted
earnings in the range of $6.80 to $7.05 per diluted
share.
Polaris Industries Inc. (NYSE: PII):
Key Financial Data
(in thousands, except per share data)
INCOME STATEMENT - Q4 December 31,
2019
Reported
YOY % Chg.
Adjusted*
YOY % Chg.
Sales
$
1,735,866
7%
$
1,735,866
7%
Net income attributable to Polaris
$
98,931
8%
$
114,858
1%
Diluted EPS
$
1.58
7%
$
1.83
—%
BALANCE SHEET - December 31,
2019
Reported
YOY % Chg.
Cash and cash equivalents
$
157,064
(3)%
Inventories, net
$
1,121,111
16%
Total debt, finance lease obligations and
notes payable
$
1,693,509
(14)%
Shareholders' equity
$
1,107,999
28%
CASH FLOW - YTD December 31,
2019
Reported
YOY % Chg.
Net cash provided by operating
activities
$
655,036
37%
Purchase of property & equipment
$
251,374
12%
Repurchase and retirement of common
shares
$
8,378
(98)%
Cash dividends to shareholders
$
149,101
—%
*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
"We ended the year with positive fourth quarter retail momentum
in both Off-Road Vehicles and Motorcycles, supporting strong full
year, broad-based sales growth of 12 percent. While TAP grew
modestly in the fourth quarter, non-TAP Parts, Garments and
Accessories (PG&A) and aftermarket sales stole the show,
eclipsing $1 billion for the first time in 2019. Our recent
leadership changes were made to spur both tactical and strategic
growth, and the 37 percent increase in Indian Motorcycle sales in
the fourth quarter, driven largely by the Indian Challenger,
demonstrates what is possible as Mike Dougherty takes over that
important segment. Steve Menneto is aggressively moving to
accelerate retail performance in Off-Road Vehicles and Snowmobiles,
building off a strong year of financial performance in our largest
business. In 2019, we delivered strong operational performance
across Polaris, especially productivity and delivery, and we expect
further gains to create value for customers and shareholders in the
year ahead. Our commitment to being a customer-centric highly
profitable growth company is unwavering, and I am extremely
confident in this Polaris team to deliver on that promise."
-- Scott Wine, Chairman and Chief Executive
Officer of Polaris Inc.
Fourth Quarter Performance Summary
(Reported)
(in thousands, except per share data)
Three months ended December
31,
2019
2018
Change
Sales
$
1,735,866
$
1,627,120
7
%
Gross profit
423,344
391,273
8
%
% of Sales
24.4
%
24.0
%
+34 bpts
Total operating expenses
307,693
271,776
13
%
% of Sales
17.7
%
16.7
%
+102 bpts
Income from financial services
20,708
23,313
(11
)%
% of Sales
1.2
%
1.4
%
-24 bpts
Operating income
136,359
142,810
(5
)%
% of Sales
7.9
%
8.8
%
-92 bpts
Net income attributable to
Polaris
98,931
91,474
8
%
% of Sales
5.7
%
5.6
%
+8 bpts
Diluted net income per share
$
1.58
$
1.47
7
%
Polaris Inc. (NYSE: PII) (the "Company") today released fourth
quarter 2019 results with sales of $1,736 million on a reported and
adjusted basis, up seven percent from reported and adjusted sales
of $1,627 million for the fourth quarter of 2018. The Company
reported fourth quarter 2019 net income of $99 million, or 1.58 per
diluted share, compared with net income of $91 million, or 1.47 per
diluted share, for the 2018 fourth quarter. Adjusted net income for
the quarter ended December 31, 2019 was $115 million, or $1.83 per
diluted share compared to $113 million, or $1.83 per diluted share
in the 2018 fourth quarter.
Gross profit increased eight percent to $423 million for
the fourth quarter of 2019 from $391 million in the fourth quarter
of 2018. Reported gross profit margin was 24.4 percent of sales for
the fourth quarter of 2019, up 34 basis points compared to 24.0
percent of sales for the fourth quarter of 2018. Adjusted gross
profit for the fourth quarter 2019 was $428 million, or 24.7
percent of adjusted sales compared to the fourth quarter of 2018
adjusted gross profit of $394 million, or 24.2 percent of adjusted
sales. Adjusted gross profit margins were up 42 basis points during
the quarter. Adjusted gross profit for the fourth quarter of 2019
excludes the negative impact of $5 million of restructuring and
realignment costs, and adjusted gross profit for the fourth quarter
of 2018 excludes the negative impact of $3 million of restructuring
and realignment costs.
Operating expenses increased 13 percent for the fourth
quarter of 2019 to $308 million, or 17.7 percent of sales, from
$272 million, or 16.7 percent of sales, in the same period in 2018.
Operating expenses in dollars and as a percent of sales increased
primarily due to ongoing investment in research and development and
strategic projects.
Income from financial services was $21 million for the
fourth quarter of 2019, down 11 percent compared with $23 million
for the fourth quarter of 2018. The decrease was driven by lower
retail credit income.
Non-Operating Expenses
(Reported)
(in thousands)
Three months ended December
31,
2019
2018
Change
Interest expense
$
16,817
$
19,880
(15
)%
Equity in loss of other affiliates
$
—
$
3,676
NM
Other income, net
$
(1,368
)
$
(396
)
245
%
Provision for income taxes
$
21,955
$
28,176
(22
)%
NM = Not meaningful
Interest expense was $17 million for the fourth quarter
of 2019 compared to $20 million for the same period last year due
to lower debt levels.
Equity in loss of other affiliates was $0 for the fourth
quarter of 2019 compared to $4 million for the same period last
year due to the write-down of certain investments during the fourth
quarter of 2018.
Other income, net, was $1 million in the fourth quarter
of 2019 compared to $396 thousand in the fourth 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 fourth quarter of
2019 was $22 million, or 18.2 percent of pretax income, compared
with $28 million, or 23.5 percent of pretax income for the fourth
quarter of 2018. The decrease in the effective income tax rate is
primarily due to favorable adjustments taken on the 2018 federal
income tax return related to foreign tax credits, as well as,
favorable adjustments related to the 2018 state research and
development credit carryforwards.
Product Segment Highlights
(Reported)
(in thousands)
Sales
Gross Profit (Loss)
Q4 2019
Q4 2018
Change
Q4 2019
Q4 2018
Change
Off-Road Vehicles / Snowmobiles
$
1,139,890
$
1,060,458
7
%
$
315,424
$
282,495
12
%
Motorcycles
$
119,481
$
87,361
37
%
$
(1,639
)
$
2,228
NM
Global Adjacent Markets
$
120,372
$
121,648
(1
)%
$
35,088
$
33,063
6
%
Aftermarket
$
221,083
$
212,318
4
%
$
49,229
$
52,074
(5
)%
Boats
$
135,040
$
145,335
(7
)%
$
25,637
$
25,999
(1
)%
NM = Not meaningful
Off-Road Vehicles (“ORV”) and
Snowmobiles segment sales, including PG&A, totaled
$1,140 million for the fourth quarter of 2019, up seven percent
over $1,060 million for the fourth quarter of 2018 driven by growth
in side-by-side sales. PG&A sales for ORV and Snowmobiles
combined increased seven percent in the fourth quarter of 2019
compared to the fourth quarter last year. Gross profit increased 12
percent to $315 million in the fourth quarter of 2019, compared to
$282 million in the fourth quarter of 2018. Gross profit percentage
increased 103 basis points during the 2019 fourth quarter due to
favorable product mix.
ORV wholegood sales for the fourth
quarter of 2019 increased 13 percent, primarily driven by positive
mix. Polaris North American ORV retail sales were up low-single
digits percent for the quarter with side-by-side vehicles up
low-single digits percent and ATV vehicles up mid-single digits
percent. The North American ORV industry was up mid-single digits
percent compared to the fourth quarter last year.
Snowmobile wholegood sales in the
fourth quarter of 2019 were down 10 percent compared to the fourth
quarter last year. Snowmobile sales growth was pressured by a
challenging comparable in the prior year period, due to the timing
of pre-season SnowCheck order shipments.
Motorcycles segment sales,
including PG&A, totaled $119 million, up 37 percent compared to
the fourth quarter of 2018, led by strong sales of Indian
Motorcycles. Slingshot reported a sales decline during the quarter.
Gross profit for the fourth quarter of 2019 was negative $2 million
compared to $2 million in the fourth quarter of 2018. The decrease
in gross profit was primarily due to increased promotions and
higher warranty costs.
North American consumer retail sales for Polaris Indian
motorcycles increased low-single digits percent during the fourth
quarter of 2019 in a weak mid to heavy-weight two-wheel motorcycle
industry that was down high-single digits percent. North American
consumer retail sales for Polaris' motorcycle segment, including
both Indian Motorcycles and Slingshot, decreased low-single digit
percent during the fourth quarter of 2019, while the North American
Motorcycle industry retail sales for mid to heavy-weight
motorcycles including three-wheel vehicles, was down mid-single
digits percent in the fourth quarter of 2019.
Global Adjacent Markets
segment sales, including PG&A, decreased one percent to $120
million in the 2019 fourth quarter compared to $122 million in the
2018 fourth quarter primarily due to lower sales in the commercial,
government and defense business. Gross profit increased six percent
to $35 million or 29.1 percent of sales in the fourth quarter of
2019, compared to $33 million or 27.2 percent of sales in the
fourth quarter of 2018, due to improved operational efficiency.
Aftermarket segment sales of
$221 million in the 2019 fourth quarter increased four percent
compared to $212 million in the 2018 fourth quarter. Transamerican
Auto Parts (TAP) sales of $185 million in the fourth quarter of
2019 increased one percent compared to $183 million in the fourth
quarter of 2018. The Company's other aftermarket brands increased
sales by 22 percent. Gross profit decreased to $49 million in the
fourth quarter of 2019, compared to $52 million in the fourth
quarter of 2018 due to higher tariff costs.
Boats segment sales
decreased seven percent to $135 million in the 2019 fourth quarter
compared to $145 million in the 2018 fourth quarter primarily due
to negative product mix and planned dealer inventory reductions.
Gross profit decreased one percent to $26 million or 19.0 percent
of sales in the fourth quarter of 2019, compared to $26 million or
17.9 percent of sales in the fourth quarter of 2018.
Supplemental Data:
Parts, Garments, and Accessories
(“PG&A”) sales increased seven percent for the 2019 fourth
quarter driven primarily by growth in ORV, snowmobiles and global
adjacent markets.
International sales to customers
outside of North America, including PG&A, totaled $215 million
for the fourth quarter of 2019, down one percent from the same
period in 2018. The decrease was driven by negative currency
rates.
Financial Position and Cash
Flow
(in thousands)
Twelve months ended December
31,
2019
2018
Change
Cash and cash equivalents
$
157,064
$
161,164
(3
)%
Net cash provided by operating
activities
$
655,036
$
477,112
37
%
Repurchase and retirement of common
shares
$
8,378
$
348,663
(98
)%
Cash dividends to shareholders
$
149,101
$
149,032
—
%
Acquisition of businesses
$
1,800
$
759,801
NM
Total debt, finance lease obligations and
notes payable
$
1,693,509
$
1,962,570
(14
)%
Debt to Total Capital Ratio
60
%
69
%
NM = Not meaningful
Net cash provided by operating activities was $655
million for the twelve months ended December 31, 2019, compared to
$477 million for the same period in 2018. Total debt at December
31, 2019, including finance lease obligations and notes payable,
was $1,694 million. The Company’s debt-to-total capital ratio was
60 percent at December 31, 2019 compared to 69 percent at December
31, 2018. Cash and cash equivalents were $157 million at December
31, 2019, down from $161 million at December 31, 2018.
2020 Business Outlook
The Company announced its sales and adjusted earnings guidance
for the full year 2020. Sales are expected to increase in the range
of 2 percent to 4 percent over 2019 adjusted sales of $6,783
million and adjusted net income is expected to be in the range of
$6.80 to $7.05 per diluted share for the full year 2020 compared to
adjusted net income of $6.32 per diluted share for 2019. While the
negative impact of tariffs remains a significant headwind on an
annualized basis, the year-over-year impact is expected to be
minimal to the Company’s 2020 full year earnings guidance.
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.
Earnings Conference Call and Webcast
Today at 9:00 AM (CT) Polaris Inc. will host a conference call
and webcast to discuss the 2019 fourth quarter results released
this morning. The call will be hosted by Scott Wine, Chairman and
CEO; and Mike Speetzen, Executive Vice President 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 1424755. 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 2019 sales of $6.8
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 2020 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.
(summarized financial data follows)
CONSOLIDATED STATEMENTS OF
INCOME
(In Thousands, Except Per Share
Data) (Unaudited)
Three months ended December
31,
Twelve months ended December
31,
2019
2018
2019
2018
Sales
$
1,735,866
$
1,627,120
$
6,782,518
$
6,078,540
Cost of sales
1,312,522
1,235,847
5,133,736
4,577,340
Gross profit
423,344
391,273
1,648,782
1,501,200
Operating expenses:
Selling and marketing
139,486
122,278
559,107
491,773
Research and development
72,099
61,941
292,935
259,682
General and administrative
96,108
87,557
393,930
349,763
Total operating expenses
307,693
271,776
1,245,972
1,101,218
Income from financial services
20,708
23,313
80,861
87,430
Operating income
136,359
142,810
483,671
487,412
Non-operating expense:
Interest expense
16,817
19,880
77,589
56,967
Equity in loss of other affiliates
—
3,676
5,133
29,252
Other income, net
(1,368
)
(396
)
(6,851
)
(28,056
)
Income before income taxes
120,910
119,650
407,800
429,249
Provision for income taxes
21,955
28,176
83,916
93,992
Net income
98,955
91,474
323,884
335,257
Net (income) loss attributable to
noncontrolling interest
(24
)
—
76
—
Net income attributable to Polaris
Inc.
$
98,931
$
91,474
$
323,960
$
335,257
Net income per share attributable to
Polaris Inc. common shareholders:
Basic
$
1.61
$
1.49
$
5.27
$
5.36
Diluted
$
1.58
$
1.47
$
5.20
$
5.24
Weighted average shares outstanding:
Basic
61,564
61,370
61,437
62,513
Diluted
62,714
62,146
62,292
63,949
CONSOLIDATED BALANCE
SHEETS
(In Thousands), (Unaudited)
December 31, 2019
December 31, 2018
Assets
Current Assets:
Cash and cash equivalents
$
157,064
$
161,164
Trade receivables, net
190,430
197,082
Inventories, net
1,121,111
969,511
Prepaid expenses and other
125,908
121,472
Income taxes receivable
32,447
36,474
Total current assets
1,626,960
1,485,703
Property and equipment, net
899,809
843,122
Investment in finance affiliate
110,641
92,059
Deferred tax assets
93,282
87,474
Goodwill and other intangible assets,
net
1,490,235
1,517,594
Operating lease assets
110,153
—
Other long-term assets
99,449
98,963
Total assets
$
4,430,529
$
4,124,915
Liabilities and Equity
Current Liabilities:
Current portion of debt, finance lease
obligations and notes payable
$
166,695
$
66,543
Accounts payable
450,228
346,294
Accrued expenses:
Compensation
184,514
167,857
Warranties
136,184
121,824
Sales promotions and incentives
189,883
167,621
Dealer holdback
145,823
125,003
Other
213,892
197,687
Current operating lease liabilities
34,904
—
Income taxes payable
5,867
4,545
Total current liabilities
1,527,990
1,197,374
Long term income taxes payable
28,092
28,602
Finance lease obligations
14,814
16,140
Long-term debt
1,512,000
1,879,887
Deferred tax liabilities
3,952
6,490
Long-term operating lease liabilities
77,926
—
Other long-term liabilities
143,955
122,570
Total liabilities
$
3,308,729
$
3,251,063
Deferred compensation
13,598
6,837
Equity:
Total shareholders’ equity
1,107,999
866,736
Noncontrolling interest
203
279
Total equity
1,108,202
867,015
Total liabilities and equity
$
4,430,529
$
4,124,915
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In Thousands), (Unaudited)
Twelve months ended December
31,
2019
2018
Operating Activities:
Net income
$
323,884
$
335,257
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
234,513
211,036
Noncash compensation
74,962
63,966
Noncash income from financial services
(32,469
)
(30,130
)
Deferred income taxes
(9,484
)
23,440
Impairment charges
3,558
24,263
Other, net
1,575
(8,489
)
Changes in operating assets and
liabilities:
Trade receivables
6,812
20,686
Inventories
(149,872
)
(149,701
)
Accounts payable
103,766
(984
)
Accrued expenses
98,965
7,170
Income taxes payable/receivable
4,860
(4,490
)
Prepaid expenses and other, net
(6,034
)
(14,912
)
Net cash provided by operating
activities
655,036
477,112
Investing Activities:
Purchase of property and equipment
(251,374
)
(225,414
)
Investment in finance affiliate, net
13,887
26,836
Investment in other affiliates, net
—
(1,113
)
Acquisition of businesses, net of cash
acquired
(1,800
)
(759,801
)
Net cash used for investing activities
(239,287
)
(959,492
)
Financing Activities:
Borrowings under debt arrangements /
finance lease obligations
3,368,853
3,553,237
Repayments under debt arrangements /
finance lease obligations
(3,638,864
)
(2,579,495
)
Repurchase and retirement of common
shares
(8,378
)
(348,663
)
Cash dividends to shareholders
(149,101
)
(149,032
)
Proceeds from stock issuances under
employee plans
15,660
47,371
Net cash (used for) provided by financing
activities
(411,830
)
523,418
Impact of currency exchange rates on cash
balances
(759
)
(9,530
)
Net increase in cash, cash equivalents
and restricted cash
3,160
31,508
Cash, cash equivalents and restricted cash
at beginning of period
193,126
161,618
Cash, cash equivalents and restricted
cash at end of period
$
196,286
$
193,126
The following presents the classification
of cash, cash equivalents and restricted cash within the
consolidated balance sheets:
Cash and cash equivalents
$
157,064
$
161,164
Other long-term assets
39,222
31,962
Total
$
196,286
$
193,126
NON-GAAP RECONCILIATION OF
RESULTS
(In Thousands, Except Per Share
Data), (Unaudited)
Three months ended December
31,
Twelve months ended December
31,
2019
2018
2019
2018
Sales
$
1,735,866
$
1,627,120
$
6,782,518
$
6,078,540
Victory wind down (1)
—
(490
)
—
823
Restructuring & realignment (3)
—
397
—
3,177
Adjusted sales
1,735,866
1,627,027
6,782,518
6,082,540
Gross profit
423,344
391,273
1,648,782
1,501,200
Victory wind down (1)
—
(377
)
—
40
Acquisition-related costs (2)
—
—
—
3,130
Restructuring & realignment (3)
4,693
3,410
22,741
19,375
Adjusted gross profit
428,037
394,306
1,671,523
1,523,745
Income before taxes
120,910
119,650
407,800
429,249
Victory wind down (1)
—
626
—
2,383
Acquisition-related costs (2)
2,447
5,939
7,766
22,737
Restructuring & realignment (3)
5,054
3,448
23,102
26,012
EPPL impairment (5)
—
3,601
—
27,048
Brammo (6)
—
—
—
(13,478
)
Intangible amortization (7)
10,206
10,341
41,131
32,932
Other expenses (4)
3,317
2,529
20,016
7,539
Adjusted income before taxes
141,934
146,134
499,815
534,422
Net income attributable to PII
98,931
91,474
323,960
335,257
Victory wind down (1)
—
476
—
1,815
Acquisition-related costs (2)
1,864
4,528
5,918
17,327
Restructuring & realignment (3)
3,851
2,627
17,604
19,819
EPPL impairment (5)
—
2,744
—
25,069
Brammo (6)
—
—
—
(13,113
)
Intangible amortization (7)
7,684
7,729
30,967
24,437
Other expenses (4)
2,528
3,850
15,252
8,960
Adjusted net income attributable to PII
(8)
114,858
113,428
393,701
419,571
Diluted EPS attributable to PII
$
1.58
$
1.47
$
5.20
$
5.24
Victory wind down (1)
—
0.01
—
0.03
Acquisition-related costs (2)
0.03
0.07
0.10
0.27
Restructuring & realignment (3)
0.06
0.05
0.28
0.31
EPPL impairment (5)
—
0.05
—
0.39
Brammo (6)
—
—
—
(0.20
)
Intangible amortization (7)
0.12
0.12
0.50
0.38
Other expenses (4)
0.04
0.06
0.24
0.14
Adjusted EPS attributable to PII
(8)
$
1.83
$
1.83
$
6.32
$
6.56
(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 December
31,
Twelve months ended December
31,
SEGMENT
SALES
2019
2018
2019
2018
ORV/Snow segment sales
$
1,139,890
$
1,060,458
$
4,209,063
$
3,919,417
Restructuring & realignment (3)
—
397
—
3,177
Adjusted ORV/Snow segment sales
1,139,890
1,060,855
4,209,063
3,922,594
Motorcycles segment sales
119,481
87,361
584,096
545,646
Victory wind down (1)
—
(490
)
—
823
Adjusted Motorcycles segment sales
119,481
86,871
584,096
546,469
Global Adjacent Markets (GAM) segment
sales
120,372
121,648
461,255
444,644
No adjustment
—
—
—
—
Adjusted GAM segment sales
120,372
121,648
461,255
444,644
Aftermarket segment sales
221,083
212,318
906,751
889,177
No adjustment
—
—
—
—
Adjusted Aftermarket sales
221,083
212,318
906,751
889,177
Boats segment sales
135,040
145,335
621,353
279,656
No adjustment
—
—
—
—
Adjusted Boats sales
135,040
145,335
621,353
279,656
Total sales
1,735,866
1,627,120
6,782,518
6,078,540
Total adjustments
—
(93
)
—
4,000
Adjusted total sales
$
1,735,866
$
1,627,027
$
6,782,518
$
6,082,540
Three months ended December
31,
Twelve months ended December
31,
SEGMENT GROSS
PROFIT (LOSS)
2019
2018
2019
2018
ORV/Snow segment gross profit
$
315,424
$
282,495
$
1,204,288
$
1,113,908
Restructuring & realignment (3)
—
397
—
3,177
Adjusted ORV/Snow segment gross profit
315,424
282,892
1,204,288
1,117,085
Motorcycles segment gross
profit
(1,639
)
2,228
44,065
63,045
Victory wind down (1)
—
(377
)
—
40
Restructuring & realignment (3)
(469
)
45
(469
)
1,220
Adjusted Motorcycles segment gross
profit
(2,108
)
1,896
43,596
64,305
Global Adjacent Markets (GAM) segment
gross profit
35,088
33,063
129,939
116,583
Restructuring & realignment (3)
—
10
—
490
Adjusted GAM segment gross profit
35,088
33,073
129,939
117,073
Aftermarket segment gross
profit
49,229
52,074
222,712
234,365
No adjustment
—
—
—
—
Adjusted Aftermarket segment gross
profit
49,229
52,074
222,712
234,365
Boats segment gross profit
25,637
25,999
124,613
46,252
Acquisition-related costs (2)
—
—
—
3,130
Boats segment gross profit
25,637
25,999
124,613
49,382
Corporate segment gross profit
(395
)
(4,586
)
(76,835
)
(72,953
)
Restructuring & realignment (3)
5,162
2,958
23,210
14,488
Adjusted Corporate segment gross
profit
4,767
(1,628
)
(53,625
)
(58,465
)
Total gross profit
423,344
391,273
1,648,782
1,501,200
Total adjustments
4,693
3,033
22,741
22,545
Adjusted total gross profit
$
428,037
$
394,306
$
1,671,523
$
1,523,745
(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 Fourth Quarter &
Full Year 2019 Results & 2020 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 fourth quarter of
2019, the Company has recorded combined costs totaling $8 million
which was included as a NON-GAAP adjustment.
Intangible amortization related to acquisitions
As a result of the Boat Holdings acquisition, Polaris'
amortization of intangible assets increased significantly 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 fourth quarter of 2019, Polaris included
$10 million of intangible amortization related to acquisitions as a
NON-GAAP adjustment.
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 as a
NON-GAAP adjustment. No costs were recorded in 2019.
2020 Adjusted Guidance
2020 guidance excludes the pre-tax effect of supply chain
transformation, restructuring and network realignment costs of
approximately $25 million to $30 million, and approximately $25
million to $30 million for class action litigation-related
expenses. Intangible amortization of approximately $35 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200128005206/en/
Investor Contact: Richard Edwards 763-513-3477
Media Contact: Jess Rogers 763-513-3445
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