2017-10-24 6:00:00 AM

POLARIS REPORTS 2017 THIRD QUARTER RESULTS


 

Sales for the third quarter of 2017 increased 25% to a record $1,478.7 million; adjusted sales were $1,480.3 million, up 25%, about half from organic growth 

Third quarter 2017 reported net income was $1.28 per diluted share; adjusted net income for the same period was $1.46 per diluted share, ahead of expectations and up 192% over the prior year

Polaris North American unit retail sales were up 13 percent with ORV retail sales up mid-teens percent and Indian Motorcycles unit retail sales up 16 percent.  Retail sales were also up modestly versus the 2015 third quarter

Total dealer inventory was down 7% year-over-year; ORV dealer inventory was down 12%

Third quarter gross profit margin was 24.6%, up 261 basis points over prior year.  Adjusted gross profit margin was 25.5%, up 351 basis points versus last year primarily due to positive product mix, increased VIP savings and lower warranty costs

Polaris is raising full year sales and earnings per share guidance.  Adjusted net income is expected to be in the range of $4.75 to $4.85 per diluted share with adjusted sales for the full year 2017 expected in the range of up 18% to 19%

 

Note: the results and guidance in this release, including the highlights above, include references to non-GAAP operating measures, which are identified by the word “adjusted” preceding the measure.  A reconciliation of GAAP to non-GAAP measures can be found at the end of this release.

 

Minneapolis, MN (October 24, 2017) - Polaris Industries Inc. (NYSE: PII) today reported third quarter 2017 sales of $1,478.7 million, up 25 percent from $1,185.1 million for the third quarter of 2016.  Adjusted sales, which excludes the impact from Victory Motorcycles® net sales for the third quarter of 2017, were $1,480.3 million for the 2017 third quarter, up 25 percent.  The Company reported third quarter 2017 net income of $81.9 million, or $1.28 per diluted share, compared with net income of $32.3 million, or $0.50 per diluted share, for the 2016 third quarter.  The reported net income includes costs related to the wind down of Victory Motorcycles, certain Transamerican Auto Parts ("TAP") integration costs, and manufacturing network realignment costs.  Adjusted net income for the quarter ended September 30, 2017, excluding these costs, was $93.5 million, or $1.46 per diluted share.

 

“Our emphatic return to profitable growth in the third quarter was a testament to the power of the Polaris brand, the strength of our dealer network and the competitive drive of the Polaris team. During the quarter, strong retail growth in both North America and nearly all of our International markets drove record sales and highlighted our ongoing product innovation, improving product quality and sharpened execution. We delivered North American unit retail sales growth of 13 percent and overall Company sales growth of 25 percent, about half of which was organic, while lowering North American dealer inventory seven percent year-over-year.  Results were strong throughout our portfolio, led by Indian Motorcycles’ exceptional performance as they accelerated share gains and outpaced a declining North American motorcycle market while also delivering strong growth in Europe, Australia and Asia.  I am particularly proud of the improved performance from our Off-Road Vehicle business, which was fueled by a well-planned and executed Factory Authorized Clearance sale and the strong reception of our model year 2018 introductions.  Encouragingly, RZR retail sales were especially strong in the quarter, and we had our best ATV retail quarter in two years. Delivering such strong results, while also launching the all new RANGER XP 1000, the best utility side-by-side ever built, is a fitting way for Matt Homan to wrap up his influential 15 year run with Polaris. I want to thank Matt for his significant contribution and wish him continued success in his career.  Welcoming Chris Musso earlier this month was also a major victory and we are excited to have him grab the reins of our industry-leading ORV business,” commented Scott Wine, Chairman and Chief Executive Officer of Polaris Industries.

 

  “Most importantly, strong total Company sales growth translated to bottom-line improvement.  Despite higher than expected costs for warranty and re-work and complications from Hurricanes Harvey and Irma, we delivered significant operating profit growth and earnings per share expansion for the quarter.  With strong growth in revenue, profitability and cash flow I feel very good about the performance of the Polaris team and our improved outlook for the fourth Quarter and beyond,” said Wine.

 

Off-Road Vehicle (“ORV”) and Snowmobile segment sales, including their respective PG&A related sales, were $1,007.4 million for the third quarter of 2017, up 12 percent over $895.6 million for the third quarter of the prior year driven primarily by improved side-by-sides shipments. PG&A sales for ORV and Snowmobiles combined, increased five percent in the 2017 third quarter compared to the third quarter last year. Gross profit increased 34 percent to $296.9 million, or 29.5 percent of sales, in the third quarter of 2017, compared to $221.6 million, or 24.7 percent of sales, in the third quarter of 2016.  Gross profit percentage increased primarily due to product mix as well as lower year over year warranty costs.

 

ORV wholegoodsales for the third quarter of 2017 increased 13 percent primarily driven by strong RZR shipments.  Polaris North American ORV unit retail sales for the third quarter of 2017 were up mid-teens percent from the 2016 third quarter, with both side-by-side vehicles and ATVs up mid-teens percent.  The North American ORV industry was up high-single digits percent compared to the third quarter last year.  ORV dealer inventory was down 12 percent in the 2017 third quarter compared to the same period last year.

 

Snowmobile wholegood sales in the third quarter of 2017 increased 20 percent to $144.2 million due to timing of shipments year-over-year, as the Company manufactured and shipped its snowmobiles later in 2016.

 

Motorcycle segment sales, including PG&A, totaled $155.1 million, a decrease of 14 percent compared to $181.2 million reported in the third quarter of 2016 which included $39.4 million of Victory Motorcycle wholegood, accessory and apparel sales. Indian motorcycle wholegood sales increased in the low twenty percent range in the third quarter driven by new product introductions and improving brand awareness. This increase somewhat offset lower Slingshot® sales.  Gross profit for the third quarter of 2017 was $10.4 million compared to $20.3 million in the third quarter of 2016.  Adjusted for the Victory Motorcycles wind down costs of $7.6 million, motorcycle gross profit was $17.9 million, down from the third 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 up mid-single digits percent during the 2017 third quarter.  Indian Motorcycles increased retail sales 16 percent, partly driven by new model introductions including the new Chieftain Elite and Limited models and Roadmaster Classic. Indian Motorcycle market share surpassed the ten percent mark in September.  Slingshot's retail sales were down although the rate of decline decelerated during the quarter.  Motorcycle industry retail sales, 900cc and above, were down high-single digits percent in the 2017 third quarter.

 

Global Adjacent Markets segment sales along with its PG&A related sales, increased 17 percent to $91.6 million in the 2017 third quarter compared to $78.5 million in the 2016 third quarter.  Reported gross profit decreased 27 percent to $16.0 million, or 17.5 percent of sales, in the third quarter of 2017, compared to $21.8 million, or 27.8 percent of sales, in the third quarter of 2016.  Adjusted gross profit, excluding the manufacturing realignment costs, increased 2 percent to $22.2 million, or 24.2 percent of sales for the third quarter 2017.  Work and Transportation group wholegood sales were up 17 percent during the third quarter of 2017 primarily due to an increase in sales in the Company's Aixam quadricycles and Goupil light-utility businesses.

 

Aftermarket segment sales, which include Transamerican Auto Parts ("TAP"), along with the Company's other aftermarket brands of Klim®, Kolpin®, Pro Armor®, Trail Tech® and 509®, increased significantly to $224.7 million in the 2017 third quarter compared to $29.9 million in the 2016 third quarter. TAP added $190.6 million of sales in the third quarter of 2017.  Gross profit increased significantly to $63.2 million, or 28.1 percent of sales in third quarter of 2017, compared to $10.6 million, or 35.5 percent of sales, in the third 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 sales grew four percent in the third quarter of 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 seven percent for the 2017 third quarter.  All segments and categories increased sales during the quarter.    

International sales to customers outside of North America, including PG&A, totaled $156.8 million for the third quarter of 2017, up 11 percent, from the same period in 2016. Sales in EMEA and Asia Pacific increased low-double digits percent in the third quarter with Latin America growing sales mid-single digits during the quarter. 

 

Gross profit increased 40 percent to $364.0 million for the third quarter of 2017 from $260.8 million in the third quarter of 2016.   As a percentage of sales, reported gross profit margin was 24.6 percent compared with 22.0 percent of sales for the third quarter of 2016.   Gross profit for the third quarter of 2017 includes the negative impact of $7.6 million of Victory Motorcycles wind down costs and manufacturing network realignment costs of $6.2 million.  Excluding these items, adjusted gross profit was $377.7 million, or 25.5 percent of sales.  Gross profit margins on an adjusted basis improved due to increased volume, lower warranty, significant gross VIP cost savings and positive product mix, somewhat offset by higher promotional costs. Sequentially, adjusted gross profit margins were 130 basis points lower than the 2017 second quarter primarily due to higher warranty and the added costs from a combination of supply chain and natural disaster related headwinds during the quarter.

 

Operating expenses increased 19 percent for the third quarter of 2017 to $265.2 million from $222.6 million in the same period in 2016, which included $1.3 million in Victory wind down costs and $3.5 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 and increased selling and marketing costs related to the introduction of new products, offset somewhat by lower legal related expenses. 

 

Income from financial services was $18.1 million for the third quarter of 2017, down six percent compared with $19.2 million for the third quarter of 2016.  The decrease is attributable to lower income generated from the wholesale portfolio due to the lower dealer inventory levels. 

 

Non-operating other expense (income), net,was $2.4 million of income for the third quarter of 2017, versus $5.7 million of expense in the third 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 third quarter of 2017 was $27.3 million or 25.0 percent of pretax income compared with $13.5 million or 29.5 percent of pretax income for the third quarter of 2016.   The decrease in the provision for income taxes as a percent of pretax income is primarily due to the benefit recognized from certain favorable outcomes of federal tax audits in the 2017 third quarter and the adoption of the new employee share-based accounting standard adopted in the first quarter of 2017.

 

Financial Position and Cash Flow

Net cash provided by operating activities was $494.5 million for the nine months ended September 30, 2017, compared to $426.2 million for the same period in 2016. The increase in net cash provided by operating activities for the 2017 period was due to the timing of accounts payable and accrued expense payments, as well as collection of tax receivables, somewhat offset by lower net income and higher factory inventory. Total debt at September 30, 2017, including capital lease obligations and notes payable, was $920.0 million. The Company’s debt-to-total capital ratio was 51 percent at September 30, 2017, compared to 32 percent a year ago due primarily to the financing of the TAP acquisition.  Cash and cash equivalents were $132.3 million at September 30, 2017, up from $122.7 million for the same period in 2016. 

 

Share Buyback Activity

During the third quarter of 2017, the Company repurchased and retired 257,000 shares of its common stock for $23.3 million. Year-to-date through September 30, 2017, the Company has repurchased and retired 1,015,000 shares of its common stock for $88.9 million. As of September 30, 2017, the Company has authorization from its Board of Directors to repurchase up to an additional 6.4 million shares of Polaris common stock. 

 

2017 Business Outlook

The Company has increased its sales guidance and expected earnings per share range for the full year 2017 from previously issued guidance.  The Company now expects adjusted net income to be in the range of $4.75 to $4.85 per diluted share, compared with adjusted net income of $3.48 per diluted share for 2016.  Full year 2017 adjusted sales are now anticipated to increase in the range of 18 percent to 19 percent over 2016 sales of $4,516.6 million.

 

Wind Down of Victory Motorcycles

Polaris announced on January 9, 2017 its intention to wind down its Victory Motorcycles operations. The decision is expected to improve the long-term profitability of Polaris and its global motorcycle business, while materially improving the Company’s competitive position in the industry. The Company will record costs, anticipated to be in the range of $80.0 million to $90.0 million, associated with supporting Victory dealers in selling their remaining inventory, the disposal of factory inventory, tooling, and other physical assets, and the cancellation of various supplier arrangements.  Beginning in the first quarter of 2017, these costs are recorded in the 2017 income statement within respective sales, gross profit and operating expenses. These costs are excluded from Polaris’ 2017 sales and earnings guidance on a non-GAAP basis.

 

Manufacturing Network Realignment

Polaris announced on April 24, 2017 that it was making changes to its network to consolidate production of like products and better leverage plant capacity. Changes include discontinuing manufacturing at its plant in Milford, Iowa, and transferring Milford production to existing Polaris facilities in Huntsville, Ala.; Roseau, Minn.; and Anaheim, Calif.   Additionally, the Company plans to transfer fabrication operations for its Pro Armor aftermarket products from its facility in Riverside, Calif., to its recently acquired Transamerican Auto Parts facility in Chula Vista, Calif.  Beginning in the second quarter of 2017, costs associated with the manufacturing realignment, anticipated to be in the range of $10.0 million to $15.0 million, are recorded in the income statement within the respective gross profit and operating expenses. These costs are excluded from Polaris’ 2017 sales and earnings guidance on a non-GAAP basis.

 

Use of Non-GAAP Financial Information

This press release and our related earnings call contain certain non-GAAP financial measures, consisting of “adjusted" sales, gross profits, operating expenses, net income and net income per diluted share as measures of our operating performance. Management believes these measures may be useful in performing meaningful comparisons of past and present operating results, to understand the performance of its ongoing operations and how management views the business. Reconciliations of adjusted non-GAAP measures to reported GAAP measures are included in the financial schedules contained in this press release. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP.

 

Third Quarter 2017 Earnings Conference Call and Webcast Presentation

Today at 9:00 AM (CDT) Polaris Industries Inc. will host a conference call and webcast to discuss the 2017 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.  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 45016317.

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.

 

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 September 30,

 

Nine months ended September 30,

 

2017

 

2016

 

2017

 

2016

Sales

$

1,478,726

 

 

$

1,185,067

 

 

$

3,997,428

 

 

$

3,298,840

 

Cost of sales

1,114,764

 

 

924,297

 

 

3,040,589

 

 

2,505,989

 

Gross profit

363,962

 

 

260,770

 

 

956,839

 

 

792,851

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing

122,642

 

 

89,751

 

 

355,486

 

 

244,812

 

Research and development

63,129

 

 

47,568

 

 

175,887

 

 

136,256

 

General and administrative

79,421

 

 

85,257

 

 

245,998

 

 

219,403

 

Total operating expenses

265,192

 

 

222,576

 

 

777,371

 

 

600,471

 

Income from financial services

18,138

 

 

19,195

 

 

57,711

 

 

59,155

 

Operating income

116,908

 

 

57,389

 

 

237,179

 

 

251,535

 

Non-operating expense:

 

 

 

 

 

 

 

Interest expense

8,492

 

 

4,051

 

 

24,438

 

 

10,718

 

Equity in loss of other affiliates

1,603

 

 

1,798

 

 

4,839

 

 

5,439

 

Other expense (income), net

(2,368

)

 

5,700

 

 

7,088

 

 

7,586

 

Income before income taxes

109,181

 

 

45,840

 

 

200,814

 

 

227,792

 

Provision for income taxes

27,293

 

 

13,528

 

 

59,796

 

 

77,425

 

Net income

$

81,888

 

 

$

32,312

 

 

$

141,018

 

 

$

150,367

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

1.31

 

 

$

0.50

 

 

$

2.24

 

 

$

2.33

 

Diluted

$

1.28

 

 

$

0.50

 

 

$

2.21

 

 

$

2.30

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

62,646

 

 

64,151

 

 

62,890

 

 

64,535

 

Diluted

63,885

 

 

65,027

 

 

63,942

 

 

65,435

 

 

 

 

 

POLARIS INDUSTRIES INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Per Share Data)

(Unaudited)

 

September 30, 2017

 

September 30, 2016

 

 

 

 

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

132,260

 

 

$

122,696

 

Trade receivables, net

184,074

 

 

152,342

 

Inventories, net

841,922

 

 

755,943

 

Prepaid expenses and other

80,859

 

 

63,594

 

Income taxes receivable

9,535

 

 

55,096

 

Total current assets

1,248,650

 

 

1,149,671

 

Property and equipment, net

735,441

 

 

687,697

 

Investment in finance affiliate

70,910

 

 

92,203

 

Deferred tax assets

191,287

 

 

173,741

 

Goodwill and other intangible assets, net

784,616

 

 

271,419

 

Other long-term assets

102,162

 

 

95,594

 

Total assets

$

3,133,066

 

 

$

2,470,325

 

Liabilities and Shareholders’ Equity

 

 

 

Current Liabilities:

 

 

 

Current portion of debt, capital lease obligations and notes payable

$

27,835

 

 

$

4,746

 

Accounts payable

385,858

 

 

308,971

 

Accrued expenses:

 

 

 

Compensation

148,280

 

 

112,025

 

Warranties

112,085

 

 

130,054

 

Sales promotions and incentives

192,568

 

 

162,853

 

Dealer holdback

117,934

 

 

116,386

 

Other

183,030

 

 

139,145

 

Income taxes payable

27,448

 

 

11,898

 

Total current liabilities

1,195,038

 

 

986,078

 

Long term income taxes payable

22,036

 

 

25,241

 

Capital lease obligations

18,451

 

 

19,122

 

Long-term debt

873,698

 

 

412,844

 

Deferred tax liabilities

9,366

 

 

12,574

 

Other long-term liabilities

107,182

 

 

77,025

 

Total liabilities

$

2,225,771

 

 

$

1,532,884

 

Deferred compensation

11,331

 

 

9,110

 

Shareholders’ equity:

 

 

 

Total shareholders’ equity

895,964

 

 

928,331

 

Total liabilities and shareholders’ equity

$

3,133,066

 

 

$

2,470,325

 

 

 

 

 

 

 

 

 

POLARIS INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands, Except Per Share Data)

(Unaudited)

 

Nine months ended September 30,

 

2017

 

2016

Operating Activities:

 

 

 

Net income

$

141,018

 

 

$

150,367

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

138,105

 

 

121,903

 

Noncash compensation

34,249

 

 

43,137

 

Noncash income from financial services

(20,131

)

 

(22,354

)

Deferred income taxes

(2,703

)

 

(8,134

)

Excess tax benefits from share-based compensation

 

 

(1,408

)

Impairment charges

25,395

 

 

 

Other, net

4,839

 

 

12,027

 

Changes in operating assets and liabilities:

 

 

 

Trade receivables

(447

)

 

5,686

 

Inventories

(83,621

)

 

(33,804

)

Accounts payable

108,198

 

 

5,702

 

Accrued expenses

80,949

 

 

145,207

 

Income taxes payable/receivable

62,336

 

 

(278

)

Prepaid expenses and others, net

6,277

 

 

8,193

 

Net cash provided by operating activities

494,464

 

 

426,244

 

Investing Activities:

 

 

 

Purchase of property and equipment

(126,647

)

 

(155,360

)

Investment in finance affiliate, net

43,230

 

 

29,223

 

Investment in other affiliates

(7,110

)

 

(6,861

)

Acquisition and disposal of businesses, net of cash acquired

1,645

 

 

(54,830

)

Net cash used for investing activities

(88,882

)

 

(187,828

)

Financing Activities:

 

 

 

Borrowings under debt arrangements / capital lease obligations

1,623,577

 

 

1,767,272

 

Repayments under debt arrangements / capital lease obligations

(1,850,247

)

 

(1,795,316

)

Repurchase and retirement of common shares

(88,877

)

 

(154,381

)

Cash dividends to shareholders

(108,923

)

 

(105,732

)

Proceeds from stock issuances under employee plans

14,226

 

 

15,651

 

Excess tax benefits from share-based compensation

 

 

1,408

 

Net cash used for financing activities

(410,244

)

 

(271,098

)

Impact of currency exchange rates on cash balances

9,597

 

 

29

 

Net increase (decrease) in cash and cash equivalents

4,935

 

 

(32,653

)

Cash and cash equivalents at beginning of period

127,325

 

 

155,349

 

Cash and cash equivalents at end of period

$

132,260

 

 

$

122,696

 

 

 

 

 

 

POLARIS INDUSTRIES INC.

RECONCILIATION OF GAAP "REPORTED" TO NON-GAAP "ADJUSTED" RESULTS

THREE MONTHS ENDED SEPTEMBER 30, 2017

(In Thousands, Except Per Share Data)

(Unaudited)

 

Reported GAAP Measures

2017 Adjustments(4)

Adjusted Measures

 

Three months ended September 30,

 

Three months ended September 30, 2017

 

Three months ended September 30,

 

 

2017

2016

 

% Change

 

Victory
Wind Down
(1)

TAP(2)

Realignment(3)

Total

 

2017

2016

% Change

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ORV/Snowmobiles

$

1,007,392

 

$

895,550

 

 

12

%

 

 

 

 

 

 

$

1,007,392

 

$

895,550

 

12

%

 

Motorcycles

155,059

 

181,181

 

 

(14

)%

 

$

1,560

 

 

 

$

1,560

 

 

156,619

 

181,181

 

(14

)%

 

Global Adj. Markets

91,575

 

78,485

 

 

17

%

 

 

 

 

 

 

91,575

 

78,485

 

17

%

 

Aftermarket

224,700

 

29,851

 

 

653

%

 

 

 

 

 

 

224,700

 

29,851

 

653

%

 

Total sales

1,478,726

 

1,185,067

 

 

25

%

 

1,560

 

 

 

1,560

 

 

1,480,286

 

1,185,067

 

25

%

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ORV/Snowmobiles

296,904

 

221,595

 

 

34

%

 

 

 

 

 

 

296,904

 

221,595

 

34

%

 

% of sales

29.5

%

24.7

%

 

+473 bps

 

 

 

 

 

 

29.5

%

24.7

%

+473 bps

 

Motorcycles

10,354

 

20,301

 

 

(49

)%

 

7,555

 

 

 

7,555

 

 

17,909

 

20,301

 

(12

)%

 

% of sales

6.7

%

11.2

%

 

-453 bps

 

 

 

 

 

 

11.4

%

11.2

%

+23 bps

 

Global Adj. Markets

15,983

 

21,828

 

 

(27

)%

 

 

 

6,214

 

6,214

 

 

22,197

 

21,828

 

2

%

 

% of sales

17.5

%

27.8

%

 

-1,036 bps

 

 

 

 

 

 

24.2

%

27.8

%

-357 bps

 

Aftermarket

63,239

 

10,591

 

 

497

%

 

 

 

 

 

 

63,239

 

10,591

 

497

%

 

% of sales

28.1

%

35.5

%

 

-734 bps

 

 

 

 

 

 

28.1

%

35.5

%

-734 bps

 

Corporate

(22,518

)

(13,545

)

 

 

 

 

 

 

 

 

(22,518

)

(13,545

)

 

 

Total gross profit

363,962

 

260,770

 

 

40

%

 

7,555

 

 

6,214

 

13,769

 

 

377,731

 

260,770

 

45

%

 

Gross profit %

24.6

%

22.0

%

 

+261 bps

 

 

 

 

 

 

25.5

%

22.0

%

+351 bps

 

Operating expenses

265,192

 

222,576

 

 

19

%

 

(1,254

)

(3,492

)

 

(4,746

)

 

260,446

 

222,576

 

17

%

 

Other expense (income), net

(2,368

)

5,700

 

 

NM

 

 

 

 

 

 

(2,368

)

5,700

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

81,888

 

$

32,312

 

 

153

%

 

$

5,537

 

$

2,195

 

$

3,906

 

$

11,638

 

 

$

93,526

 

$

32,312

 

189

%

 

Diluted EPS

$

1.28

 

$

0.50

 

 

156

%

 

$

0.09

 

$

0.03

 

$

0.06

 

$

0.18

 

 

$

1.46

 

$

0.50

 

192

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Represents adjustments for the wind down of Victory Motorcycles, including wholegoods, accessories and apparel

(2) Represents adjustments for 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

NINE MONTHS ENDED SEPTEMBER 30, 2017

(In Thousands, Except Per Share Data)

(Unaudited)

 

Reported GAAP Measures

2017 Adjustments(4)

Adjusted Measures

 

Nine months ended September 30,

 

Nine months ended September 30, 2017

 

Nine months ended September 30,

 

 

2017

2016

% Change

 

Victory
Wind Down
(1)

TAP(2)

Realignment(3)

Total

 

2017

2016

% Change

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

ORV/Snowmobiles

$

2,577,003

 

$

2,402,985

 

7

%

 

 

 

 

 

 

$

2,577,003

 

$

2,402,985

 

7

%

 

Motorcycles

473,345

 

594,840

 

(20

)%

 

$

507

 

 

 

$

507

 

 

473,852

 

594,840

 

(20

)%

 

Global Adj. Markets

280,152

 

243,553

 

15

%

 

 

 

 

 

 

280,152

 

243,553

 

15

%

 

Aftermarket

666,928

 

57,462

 

1,061

%

 

 

 

 

 

 

666,928

 

57,462

 

1,061

%

 

Total sales

3,997,428

 

3,298,840

 

21

%

 

507

 

 

 

507

 

 

3,997,935

 

3,298,840

 

21

%

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

 

ORV/Snowmobiles

776,013

 

656,076

 

18

%

 

 

 

 

 

 

776,013

 

656,076

 

18

%

 

% of sales

30.1

%

27.3

%

+281 bps

 

 

 

 

 

 

30.1

%

27.3

%

+281 bps

 

Motorcycles

11,589

 

86,475

 

(87

)%

 

54,970

 

 

 

54,970

 

 

66,559

 

86,475

 

(23

)%

 

% of sales

2.4

%

14.5

%

-1,209 bps

 

 

 

 

 

 

14.0

%

14.5

%

-49 bps

 

Global Adj. Markets

65,297

 

66,163

 

(1

)%

 

 

 

10,517

 

10,517

 

 

75,814

 

66,163

 

15

%

 

% of sales

23.3

%

27.2

%

-386 bps

 

 

 

 

 

 

27.1

%

27.2

%

-10 bps

 

Aftermarket

164,721

 

18,272

 

801

%

 

 

12,950

 

 

12,950

 

 

177,671

 

18,272

 

872

%

 

% of sales

24.7

%

31.8

%

-710 bps

 

 

 

 

 

 

26.6

%

31.8

%

-516 bps

 

Corporate

(60,781

)

(34,135

)

 

 

 

 

 

 

 

(60,781

)

(34,135

)

 

 

Total gross profit

956,839

 

792,851

 

21

%

 

54,970

 

12,950

 

10,517

 

78,437

 

 

1,035,276

 

792,851

 

31

%

 

Gross profit %

23.9

%

24.0

%

-10 bps

 

 

 

 

 

 

25.9

%

24.0

%

+186 bps

 

Operating expenses

777,371

 

600,471

 

29

%

 

(9,270

)

(10,509

)

 

(19,779

)

 

757,592

 

600,471

 

26

%

 

Other expense (income), net

7,088

 

7,586

 

(7

)%

 

(13,000

)

 

 

(13,000

)

 

(5,912

)

7,586

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

141,018

 

$

150,367

 

(6

)%

 

$

53,378

 

$

14,746

 

$

6,611

 

$

74,735

 

 

$

215,753

 

$

150,367

 

43

%

 

Diluted EPS

$

2.21

 

$

2.30

 

(4

)%

 

$

0.83

 

$

0.23

 

$

0.10

 

$

1.16

 

 

$

3.37

 

$

2.30

 

47

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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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