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2019 Second Quarter Earnings Release Image

Polaris Reports 2019 Second Quarter Results

Click here if you want to download this article: POLARIS REPORTS 2019 SECOND QUARTER RESULTS

 

 

Q2 2019 Highlights

 

Reported and adjusted sales for the second quarter of 2019 increased 18% to $1,776 million

Reported net income was $1.42 per diluted share, down 1% over the prior year; adjusted net income for the same period was $1.73 per diluted share, down 2% over the prior year

North American Side-by-side retail sales increased low-single digits percent for the quarter compared to last year; Indian retail sales were down high-single digits percent, outperforming the industry and gaining share in an extremely challenging market

Dealer inventory was up 1% year-over-year for the second quarter 2019, slightly below targeted inventory levels

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 $6.10 to $6.30 per diluted share range, which takes into account the China 301 list 3 tariff increasing from 10% to 25%. Full year 2019 adjusted sales growth guidance was also narrowed to up 12% to 13% over the prior year.

 

 

Key Financial Data

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

INCOME STATEMENT - Q1 March 31, 2019

Reported

 

YOY % Chg.

 

 

Adjusted*

 

YOY % Chg.

Sales........................................................................................

$

1,779,315

 

 

18%

 

 

$

1,779,315

 

 

18%

Net income attributable to Polaris.................................................................................

$

88,263

 

 

(5)%

 

 

$

107,480

 

 

(6)%

Diluted EPS................................................................................

$

1.42

 

 

(1)%

 

 

$

1.73

 

 

(2)%

 

 

 

 

 

 

 

 

 

BALANCE SHEET - Q2 June 30, 2019

Reported

 

YOY % Chg.

 

 

 

 

 

Cash and cash equivalents..................................................................................

$

96,081

 

 

(47)%

 

 

 

 

 

Inventories, net.............................................................................

$

1,130,264

 

 

22%

 

 

 

 

 

Total debt, capital lease obligations and notes payable.....................................................................................

$

1,898,068

 

 

71%

 

 

 

 

 

Shareholders' equity.......................................................................

$

951,909

 

 

(8)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW - YTD June 30, 2019

Reported

 

YOY % Chg.

 

 

 

 

 

Net cash used for operating activities....................................................................................

$

202,852

 

 

23%

 

 

 

 

 

Purchase of property & equipment...................................................................................

$

137,203

 

 

31%

 

 

 

 

 

Repurchase and retirement of common shares ......................................................................................

$

6,537

 

 

(97)%

 

 

 

 

 

Cash dividends to shareholders................................................................................

$

74,430

 

 

(2)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*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

 

“Our second quarter results reflect the deft leadership and disciplined execution of our Polaris team. We worked diligently to overcome the impacts of tariffs, a very wet spring and an aggressive promotional environment, delivering financial results slightly favorable to expectations but trailing our long-term performance goals. The strength of our industry-leading brands and vehicles enabled us to gain share in Indian Motorcycles and drive growth in Side-by-Sides with RANGER and RZR, although our decision to assume price leadership did impact volume, specifically in our lower margin youth and value segments. We are encouraged by our market share gains and year-to-date growth in Boats, as well as the continued improvement at TAP, where retail store sales growth was up nicely. Our operational and dealer fundamentals are in good shape as we head into the critically important model year 2020 product introductions, and we anticipate improved retail performance during the second half of the year. We are excited to host our unrivaled dealer network at our 65th Anniversary dealer show later this month, and look forward to demonstrating how we will continue to be the global leader in Powersports with our unwavering commitment to be a customer-centric, highly efficient growth company.”

 

-- Scott Wine, Chairman and Chief Executive Officer of Polaris Industries Inc.

 

 

Second Quarter Performance Summary (Reported)

 

(in thousands, except per share data)

Three months ended June 30,

 

2019

 

2018

 

Change

Sales.......................................................................................................

$

1,779,315

 

 

$

1,502,532

 

 

18

%

Gross profit..............................................................................................

436,448

 

 

385,176

 

 

13

%

  % of Sales................................................................................................

24.5

%

 

25.6

%

 

-111 bpts

Total operating expenses...................................................................................................

321,072

 

 

284,063

 

 

13

%

  % of Sales................................................................................................

18.0

%

 

18.9

%

 

-86 bpts

Income from financial services....................................................................................................

19,746

 

 

21,344

 

 

(7)

%

  % of Sales................................................................................................

1.1

%

 

1.4

%

 

-31 bpts

Operating income.......................................................................................

135,122

 

 

122,457

 

 

10

%

  % of Sales................................................................................................

7.6

%

 

8.2

%

 

-56 bpts

Net income attributable to Polaris................................................................................................

88,263

 

 

92,540

 

 

(5)

%

  % of Sales................................................................................................

5.0

%

 

6.2

%

 

-120 bpts

Diluted net income per share.......................................................................................................

$

1.42

 

 

$

1.43

 

 

(1)

%

 

 

Minneapolis, MN (July 23, 2019) Polaris Industries Inc. (NYSE: PII) (the "Company") today released second quarter 2019 results with sales of $1,779 million on a reported and adjusted basis, up 18 percent from reported and adjusted sales of $1,503 million and $1,505 million for the second quarter of 2018, respectively, including $182 million of Boat segment sales reported in the second quarter of 2019. The Company reported second quarter 2019 net income of $88 million, or 1.42 per diluted share, compared with net income of $93 million, or 1.43 per diluted share, for the 2018 second quarter. Adjusted net income for the quarter ended June 30, 2019 was $107 million, or $1.73 per diluted share compared to $115 million, or $1.77 per diluted share in the 2018 second quarter.

 

Gross profit increased 13 percent to $436 million for the second quarter of 2019 from $385 million in the second quarter of 2018. Reported gross profit margin was 24.5 percent of sales for the second quarter of 2019 compared to 25.6 percent of sales for the second quarter of 2018. Gross profit for the second quarter of 2019 includes the negative impact of $7 million of restructuring and realignment costs. Excluding these costs, second quarter 2019 adjusted gross profit was $443 million, or 24.9 percent of adjusted sales. For the second quarter of 2018 adjusted gross profit of $390 million, or 25.9 percent of adjusted sales, excludes the negative impact of $6 million of restructuring and realignment costs. Gross profit margins on an adjusted basis were down 104 basis points reflecting tariff costs and the addition of Boats which has a lower gross profit margin, partially offset by increased productivity and higher average selling prices.

 

Operating expenses increased 13 percent for the second quarter of 2019 to $321 million, or 18.0 percent of sales, from $284 million, or 18.9 percent of sales, in the same period in 2018. Operating expenses in dollars increased primarily due to the Boat Holdings acquisition completed during the third quarter of 2018 and investments in strategic projects. Operating expenses as a percentage of sales, improved as the Boat segment has a lower operating expense to sales ratio compared to the legacy Polaris business.

 

Income from financial services was $20 million for the second quarter of 2019, down 7 percent compared with $21 million for the second quarter of 2018. The decrease is primarily attributable to lower retail sales and lower penetration rates during the quarter.

 

 

Non-Operating Expenses (Reported)

 

(in thousands)

Three months ended June 30,

 

2019

 

2018

 

Change

Interest expense

$

20,620

 

 

$

9,216

 

 

124

%

Equity in loss of other affiliates

$

455

 

 

$

3,954

 

 

(88)

%

Other expense (income), net

$

(271

)

 

$

(3,561

)

 

(92)

%

Provision for income taxes

$

26,173

 

 

$

20,308

 

 

29

%

 

 

Interest expense was $21 million for the second quarter of 2019 compared to $9 million for the same period last year, primarily due to increased debt levels to finance the Boats acquisition and higher interest rates.

 

Equity in loss of other affiliates was $455 thousand for the second quarter of 2019 compared to $4 million for the same period last year. In the second quarter 2018, the Company recorded charges of approximately $4 million associated with the shut down of the Eicher-Polaris joint venture in India.

 

Other income, net, was $271 thousand in the second quarter of 2019 compared to $4 million in the second 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 second quarter of 2019 was $26 million, or 22.9 percent of pretax income, compared with $20 million, or 18.0 percent of pretax income for the second quarter of 2018. The increase in the effective income tax rate is primarily due to a decrease in excess tax benefits related to stock-based compensation.

 

 

 

Product Segment Highlights (Reported)

 

(in thousands)

Sales

 

Gross Profit

 

Q2 2019

 

Q2 2018

 

Change

 

Q2 2019

 

Q2 2018

 

Change

Off-Road Vehicles / Snowmobiles

$

1,049,321

 

 

$

990,841

 

 

6

%

 

$

312,689

 

 

$

297,221

 

 

5

%

Motorcycles

$

196,773

 

 

$

171,412

 

 

15

%

 

$

26,802

 

 

$

24,672

 

 

9

%

Global Adjacent Markets

$

121,924

 

 

$

113,418

 

 

7

%

 

$

33,884

 

 

$

28,107

 

 

21

%

Aftermarket

$

228,872

 

 

$

226,861

 

 

1

%

 

$

55,214

 

 

$

57,747

 

 

(4)

%

Boats

$

182,425

 

 

$

 

 

 

 

$

40,477

 

 

$

 

 

 

 

Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $1,049 million for the second quarter of 2019, up six percent over $991 million for the second quarter of 2018 driven by increased average selling prices, particularly in side-by-side's, and growth in PG&A. PG&A sales for ORV and Snowmobiles combined increased 9 percent in the second quarter of 2019 compared to the second quarter last year. Gross profit increased five percent to $313 million in the second quarter of 2019, compared to $297 million in the second quarter of 2018. Gross profit percentage declined 20 basis points during the quarter as higher average selling prices and increased productivity were more than offset by higher promotions and tariff costs.

 

  • ORV wholegood sales for the second quarter of 2019 increased 4 percent primarily driven by increased average selling prices. Polaris North American ORV retail sales decreased low-single digits percent for the quarter with side-by-side vehicles up low-single digits percent and ATV vehicles down high-single digits percent. Shipment unit volume was down during the quarter, in-line with retail sales declines as the Company's retail flow management process (RFM) performed as designed. The North American ORV industry was up high-single digits percent compared to the second quarter last year partly driven by new competitive product not in the market a year ago.

 

  • Snowmobile wholegood sales in the second quarter of 2019 were $16 million compared to $4 million in the second quarter last year. Snowmobile sales in the Company’s second quarter are routinely low as it is the off-season for snowmobile retail sales and shipments.

 

Motorcycles segment sales, including PG&A, totaled $197 million, up 15 percent compared to the second quarter of 2018, driven by strength in Indian sales, particularly the new FTR1200 motorcycle which began shipping globally in the second quarter, offset by declines in Slingshot sales. Gross profit for the second quarter of 2019 was $27 million compared to $25 million in the second quarter of 2018. The increase in gross profit was primarily the result of higher volume mostly offset by increased tariff costs.

 

North American consumer retail sales for the Polaris Indian motorcycles decreased high-single digits percent during the second quarter of 2019 in a weak mid to heavy-weight two-wheel motorcycle industry that was down low double digits percent. Indian outperformed the market with modest market share gains in North American during the quarter driven by retail sales of our new mid-size bike, the race inspired FTR1200, which has experienced strong initial demand both in North America and Internationally. North American consumer retail sales for Polaris' motorcycle segment, including both Indian Motorcycles and Slingshot, decreased mid-teens percent during the second 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 second quarter of 2019.

 

Global Adjacent Markets segment sales, including PG&A, increased seven percent to $122 million in the 2019 second quarter compared to $113 million in the 2018 second quarter. Gross profit increased 21 percent to $34 million or 27.8 percent of sales in the second quarter of 2019, compared to $28 million or 24.8 percent of sales in the second quarter of 2018, due to increased volume and favorable product mix.

 

Aftermarket segment sales of $229 million in the 2019 second quarter increased one percent compared to $227 million in the 2018 second quarter. TAP sales in the second quarter of 2019 were $210 million, which was flat compared to the second quarter of 2018. The Company's other aftermarket brands increased sales by 12 percent. Gross profit decreased to $55 million in the second quarter of 2019, compared to $58 million in the second quarter of 2018 due to higher tariff costs.

 

Boats segment sales, which consist of the Boat Holdings acquisition which closed July 2, 2018, were $182 million in the 2019 second quarter. Gross profit was $40 million or 22.2 percent of sales in the second quarter of 2019.

 

Supplemental Data:

 

  • Parts, Garments, and Accessories (“PG&A”) sales increased 10 percent for the 2019 second quarter primarily driven by growth across the Company's segments.

 

  • International sales to customers outside of North America, including PG&A, totaled $231 million for the second quarter of 2019, up 13 percent from the same period in 2018. The increase in sales is primarily attributable to growth in Indian Motorcycles and Global Adjacent Markets.

 

 

Financial Position and Cash Flow

 

(in thousands)

Three Months ended June 30,

 

2019

 

2018

 

Change

Cash and cash equivalents

$

96,081

 

 

$

181,753

 

 

(47)

%

Net cash used for operating activities

$

202,852

 

 

$

165,149

 

 

23

%

Repurchase and retirement of common shares

$

6,537

 

 

$

192,367

 

 

(97)

%

Cash dividends to shareholders

$

74,430

 

 

$

75,694

 

 

(2)

%

Total debt, capital lease obligations and notes payable

$

1,898,068

 

 

$

1,112,622

 

 

71

%

  Debt to Total Capital Ratio

67

%

 

56

%

 

 

 

 

 

 

 

 

 

Net cash used for operating activities was $203 million for the six months ended June 30, 2019, compared to $165 million for the same period in 2018. Total debt at June 30, 2019, including finance lease obligations and notes payable, was $1,898 million. The Company’s debt-to-total capital ratio was 67 percent at June 30, 2019 compared to 56 percent at June 30, 2018. Cash and cash equivalents were $96 million at June 30, 2019, down from $182 million at June 30, 2018.

 

 

2019 Business Outlook

For the full year 2019, the Company is narrowing its earnings guidance range by increasing the lower end to $6.10 per diluted share and maintaining the upper end at $6.30 per diluted share, including the impact of the China 301 list 3 tariff rate increasing from 10 percent to 25 percent effective May 2019, and the benefit of the Company's tariff mitigation actions. The Company is also narrowing its full year 2019 sales guidance range and now expect sales to grow in the range of 12 percent to 13 percent compared to the prior year given only six months remain to year-end.

 

 

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.

 

 

Second Quarter 2019 Earnings Conference Call and Webcast

Today at 9:00 AM (CDT) Polaris Industries Inc. will host a conference call and webcast to discuss the 2019 second quarter results released this morning. The call will be hosted by Scott Wine, Chairman and CEO; and Mike Speetzen, Executive Vice President - Finance and CFO. 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 9324868. A replay of the conference call will be available by accessing the same link on our website.

 

 

Polaris Industries Inc. to Host and Webcast Analyst & Investor Meeting

Polaris Industries Inc. also announced today that the executive management team of Polaris will host an Analyst/Investor Meeting in Minneapolis, MN in conjunction with its 65th anniversary celebration and dealer meeting. The meeting will be held on Monday, July 29, 2019 from 7:30 AM to 10:30 AM central time. Management will be discussing its future strategy to drive growth and profitability, including a first look at several exciting new model year 2020 Polaris products. Presenters at the Analyst/Investor meeting will include Scott Wine, Chairman and CEO; Mike Speetzen, Executive Vice President - Finance and CFO; Ken Pucel, EVP Operations, Engineering and Lean along with other Polaris executive team members. The meeting agenda, slide presentation, and a link to the live audio webcast will be posted on the Polaris Investor Relations website at ir.polaris.com on the Events & Presentations page. A replay of the webcast will be available for one week following the event and will be accessible on the same website link. For more information about the Analyst/Investor Meeting, please contact Peggy James at 763-542-0502.

 

 

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 2018 sales of $6.1 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® mid-size and heavyweight motorcycles; Slingshot® moto-roadsters; snowmobiles; and pontoon, deck, and cruiser boats. 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.

 

 

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 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; 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
June 30,

 

Six months ended
June 30,

 

2019

 

2018

 

2019

 

2018

Sales....................................................................

$

1,779,315

 

 

$

1,502,532

 

 

$

3,275,005

 

 

$

2,800,005

 

Cost of sales...........................................................

1,342,867

 

 

1,117,356

 

 

2,486,109

 

 

2,091,348

 

Gross profit.............................................................

436,448

 

 

385,176

 

 

788,896

 

 

708,657

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing.............................................

140,603

 

 

122,859

 

 

269,862

 

 

240,566

 

Research and development........................................

76,379

 

 

68,330

 

 

143,499

 

 

133,560

 

General and administrative.........................................

104,090

 

 

92,874

 

 

197,028

 

 

171,567

 

Total operating expenses..............................................

321,072

 

 

284,063

 

 

610,389

 

 

545,693

 

Income from financial services.......................................

19,746

 

 

21,344

 

 

38,551

 

 

42,769

 

Operating income......................................................

135,122

 

 

122,457

 

 

217,058

 

 

205,733

 

Non-operating expense:

 

 

 

 

 

 

 

Interest expense....................................................

20,620

 

 

9,216

 

 

41,039

 

 

17,264

 

Equity in loss of other affiliates...................................

455

 

 

3,954

 

 

1,061

 

 

25,465

 

Other expense (income), net.....................................

(271

)

 

(3,561

)

 

(3,772

)

 

(23,536)

 

Income before income taxes.........................................

114,318

 

 

112,848

 

 

178,730

 

 

186,540

 

Provision for income taxes...........................................

26,173

 

 

20,308

 

 

42,189

 

 

38,286

 

Net income............................................................

$

88,145

 

 

$

92,540

 

 

$

136,641

 

 

$

148,254

 

 

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interest.......................

118

 

 

----

 

 

100

 

 

----

 

Net income attributable to Polaris Industries Inc....................

$   88,263

 

 

$     92,540

 

 

$    136,641

 

 

$    148,254

 

Net income per share:

 

 

 

 

 

 

 

Basic................................................................

$

1.44

 

 

$

1.46

 

 

$

2.23

 

 

$

2.34

 

Diluted...............................................................

$

1.42

 

 

$

1.43

 

 

$

2.20

 

 

$

2.28

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic..................................................................

61,419

 

 

63,172

 

 

61,352

 

 

63,238

 

Diluted.................................................................

62,164

 

 

64,886

 

 

62,096

 

 

65,052

 

 

 


CONSOLIDATED BALANCE SHEETS

(In Thousands), (Unaudited)

 

June 30, 2019

 

June 30, 2018

 

 

 

 

Assets

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents.............................................................................

$

96,081

 

 

$

181,753

 

Trade receivables, net.......................................................................................

224,501

 

 

190,343

 

Inventories, net...............................................................................................

1,130,264

 

 

925,243

 

Prepaid expenses and other.............................................................................

112,921

 

 

106,586

 

Income taxes receivable...................................................................................

7,037

 

 

10,269

 

Total current assets...................................................................................................

1,570,804

 

 

1,414,194

 

Property and equipment, net......................................................................................

889,825

 

 

762,268

 

Investment in finance affiliate....................................................................................

97,303

 

 

92,954

 

Deferred tax assets.....................................................................................................

92,641

 

 

115,399

 

Goodwill and other intangible assets, net......................................................................................................................

1,508,722

 

 

765,050

 

Operating lease assets......................................................................................................................

108,013

 

 

-

 

Other long-term assets.............................................................................................

96,904

 

 

89,613

 

Total assets..........................................................................................................

$

4,364,212

 

 

$

3,239,478

 

Liabilities and Equity...........................................................................

 

 

 

Current Liabilities:

 

 

 

Current portion of debt, finance lease obligations and notes payable........................................................................................................

$

66,505

 

 

$

40,120

 

Accounts payable.............................................................................................

418,850

 

 

361,717

 

Accrued expenses:

 

 

 

Compensation............................................................................................

140,205

 

 

129,719

 

Warranties................................................................................................

132,758

 

 

106,155

 

Sales promotions and incentives...............................................................

182,089

 

 

184,811

 

Dealer holdback.......................................................................................

138,726

 

 

125,016

 

Other.....................................................................................................

212,067

 

 

161,659

 

Current operating lease liabilities ........................................................................

35,084

 

 

-

 

Income taxes payable .....................................................................................

6,094

 

 

5,973

 

Total current liabilities...............................................................................................

1,332,378

 

 

1,115,170

 

Long term income taxes payable................................................................................

28,380

 

 

25,332

 

Finance lease obligations..............................................................................................

15,780

 

 

17,135

 

Long-term debt...........................................................................................................

1,815,783

 

 

1,055,367

 

Deferred tax liabilities..................................................................................................

5,357

 

 

8,667

 

Long-term operating lease liabilities............................................................................................

75,439

 

 

-

 

Other long-term liabilities............................................................................................

128,360

 

 

127,529

 

Total liabilities..............................................................................................................

$

3,401,517

 

 

$

2,349,200

 

Deferred compensation..............................................................................................

10,607

 

 

12,768

 

Equity:

 

 

 

Total shareholders’ equity...........................................................................................

951,909

 

 

877,510

 

Noncontrolling interest...........................................................................................

179

 

 

-

 

Total equity..........................................................................................................

$

952,088

 

 

$

877,510

 

Total liabilities and shareholders’ equity......................................................................

$

4,364,212

 

 

$

3,239,478

 

 
 
 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands), (Unaudited)

 

Six months ended June 30,

 

2019

 

2018

Operating Activities: 

 

 

 

Net income

$

136,541 

 

 

$

148,254 

 

Adjustments to reconcile net income to net cash used for operating activities

 

 

 

Depreciation and amortization

111,946 

 

 

98,584 

 

Noncash compensation

34,233 

 

 

33,001 

 

Noncash income from financial services

(15,465)

 

 

(14,626)

 

Deferred income taxes

(5,903)

 

 

(1,704) 

 

Impairment charges

                                        —  

 

20,249 

 

Other, net

1,061 

 

 

(8,262)

 

Changes in operating assets and liabilities:

 

 

 

Trade receivables

(26,941)

 

 

 

5,326 

 

Inventories

(159,090)

 

 

(146,661)

 

Accounts payable

72,049 

 

 

45,835 

 

Accrued expenses

18,950

 

 

(35,693)

 

Income taxes payable/receivable

30,773 

 

 

19,828 

 

Prepaid expenses and others, net

4,698 

 

 

1,018 

 

Net cash used for operating activities

202,852

 

 

165,149

 

Investing Activities:

 

 

 

Purchase of property and equipment

(137,203)

 

 

(104,569)

 

Investment in finance affiliate, net

10,221 

 

 

10,436 

 

Investment in other affiliates, net

 

 

7,366 

 

Investment in other affiliates, net

(1,800)

 

 

---- 

 

     

Net cash used for investing activities

(128,782)

 

 

(86,767)

 

Financing Activities:

 

 

 

Borrowings under debt arrangements / financial lease obligations

1,788,696 

 

 

1,511,810 

 

Repayments under debt arrangements / financial lease obligations

(1,853,507)

 

 

(1,310,863)

 

Repurchase and retirement of common shares

(6,537)

 

 

(192,367)

 

Cash dividends to shareholders

(74,430)

 

 

(75,694)

 

Proceeds from stock issuances under employee plans

6,213 

 

 

43,448 

 

Net cash provided by financing activities

(139,565) 

 

 

(23,666) 

 

Impact of currency exchange rates on cash balances

(112)

 

 

(6,370)

 

Net increase in cash, cash equivalents and restricted cash

(65,607)

 

 

48,346 

 

Cash, cash equivalents and restricted cash at beginning of period

193,126 

 

 

161,618 

 

Cash, cash equivalents and restricted cash at end of period

$

127,519 

 

 

$

209,964 

 

 

 

 

 

The following presents the classification of cash, cash equivalents and restricted cash within the consolidated balance sheets:

 

 

 

Cash and cash equivalents

$

96,081

 

 

$

181,753 

 

Other long-term assets

31,438

 

 

28,211 

 

Total

$

127,519

 

 

$

209,964 

 

 

 

 

 

NON-GAAP RECONCILIATION OF RESULTS

(In Thousands, Except Per Share Data), (Unaudited)

 

Three months ended June 30,

 

Six months ended June 30,

 

2019

 

2018

 

2019

 

2018

Sales

$

1,779,315

 

 

$

1,502,532

 

 

$

3,275,005

 

 

$

2,800,005

 

Victory wind down (1)

 

 

798

 

 

 

 

249

 

Restructuring & realignment (3)

 

 

1,659

 

 

 

 

2,129

 

Adjusted sales

1,779,315

 

 

1,504,989

 

 

3,275,005

 

 

2,802,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

436,448

 

 

385,176

 

 

788,896

 

 

708,657

 

Victory wind down (1)

 

 

(874)

 

 

 

 

(822)

 

Restructuring & realignment (3)

6,592

 

 

6,045

 

 

13,283

 

 

11,837

 

Adjusted gross profit

443,040

 

 

390,347

 

 

802,179

 

 

719,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

114,318

 

 

112,848

 

 

178,730

 

 

186,540

 

Victory wind down (1)

 

 

(426)

 

 

 

 

243

 

Acquisition-related costs (2)

2,351

 

 

5,729

 

 

3,481

 

 

7,809

 

Restructuring & realignment (3)

6,592

 

 

11,696

 

 

13,283

 

 

17,893

 

EPPL impairment (5)

 

 

3,817

 

 

 

 

23,447

 

Brammo (6)

 

 

 

 

 

 

(13,478)

 

Intangible amortization (7)

10,250

 

 

6,058

 

 

20,497

 

 

12,188

 

Other expenses (4)

6,151

 

 

1,722

 

 

12,510

 

 

1,722

 

Adjusted income before taxes

139,662

 

 

141,444

 

 

228,501

 

 

236,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

88,263

 

 

92,540

 

 

136,641

 

 

148,254

 

Victory wind down (1)

 

 

(325)

 

 

 

 

185

 

Acquisition-related costs (2)

1,792

 

 

4,366

 

 

2,653

 

 

5,941

 

Restructuring & realignment (3)

5,022

 

 

8,912

 

 

10,121

 

 

13,633

 

EPPL impairment (5)

 

 

2,908

 

 

 

 

22,325

 

Brammo (6)

 

 

 

 

 

 

(13,113)

 

Intangible amortization (7)

7,717

 

 

4,446

 

 

15,430

 

 

8,945

 

Other expenses (4)

4,686

 

 

1,767

 

 

9,532

 

 

2,037

 

Adjusted net income (8)

107,480

 

 

114,614

 

 

174,377

 

 

188,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

$

1.42

 

 

$

1.43

 

 

$

2.20

 

 

$

2.28

 

Victory wind down (1)

 

 

(0.01)

 

 

 

 

 

Acquisition-related costs (2)

0.03

 

 

0.07

 

 

0.04

 

 

0.09

 

Restructuring & realignment (3)

0.08

 

 

0.14

 

 

0.16

 

 

0.21

 

EPPL impairment (5)

 

 

0.04

 

 

 

 

0.34

 

Brammo (6)

 

 

 

 

 

 

(0.20)

 

Intangible amortization (7)

0.12

 

 

0.07

 

 

0.25

 

 

0.14

 

Other expenses (4)

0.08

 

 

0.03

 

 

0.16

 

 

0.03

 

Adjusted EPS (8)

$

1.73

 

 

$

1.77

 

 

$

2.81

 

 

$

2.89

 

 

 

 

 

 

 

 

 

(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 June 30,

 

Six months ended June 30,

SEGMENT SALES

2019

 

2018

 

2019

 

2018

ORV/Snow segment sales

$

1,049,321

 

 

$

990,841

 

 

$

1,916,768

 

 

$

1,823,405

 

Restructuring & realignment (3)

 

 

1,659

 

 

 

 

2,129

 

Adjusted ORV/Snow segment sales

1,049,321

 

 

992,500

 

 

1,916,768

 

 

1,825,534

 

 

 

 

 

 

 

 

 

Motorcycles segment sales

196,773

 

 

171,412

 

 

314,715

 

 

302,969

 

Victory wind down (1)

 

 

798

 

 

 

 

249

 

Adjusted Motorcycles segment sales

196,773

 

 

172,210

 

 

314,715

 

 

303,218

 

 

 

 

 

 

 

 

 

Global Adjacent Markets (GAM) segment sales

121,924

 

 

113,418

 

 

226,880

 

 

226,745

 

No adjustment

 

 

 

 

 

 

 

Adjusted GAM segment sales

121,924

 

 

113,418

 

 

226,880

 

 

226,745

 

 

 

 

 

 

 

 

 

Aftermarket segment sales

228,872

 

 

226,861

 

 

449,407

 

 

446,886

 

No adjustment

 

 

 

 

 

 

 

Adjusted Aftermarket sales

228,872

 

 

226,861

 

 

449,407

 

 

446,886

 

 

 

 

 

 

 

 

 

Boats segment sales

182,425

 

 

 

 

367,235

 

 

 

No adjustment

 

 

 

 

 

 

 

Adjusted Boats sales

182,425

 

 

 

 

367,235

 

 

 

 

 

 

 

 

 

 

 

Total sales

1,779,315

 

 

1,502,532

 

 

3,275,005

 

 

2,800,005

 

Total adjustments

 

 

2,457

 

 

 

 

2,378

 

Adjusted total sales

$

1,779,315

 

 

$

1,504,989

 

 

$

3,275,005

 

 

$

2,802,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

SEGMENT GROSS PROFIT

2019

 

2018

 

2019

 

2018

ORV/Snow segment gross profit

$

312,689

 

 

$

297,221

 

 

$

564,924

 

 

$

540,782

 

Restructuring & realignment (3)

 

 

1,659

 

 

 

 

2,129

 

Adjusted ORV/Snow segment gross profit

312,689

 

 

298,880

 

 

564,924

 

 

542,911

 

 

 

 

 

 

 

 

 

Motorcycles segment gross profit

26,802

 

 

24,672

 

 

33,764

 

 

41,240

 

Victory wind down (1)

 

 

(874)

 

 

 

 

(822)

 

Restructuring & realignment (3)

 

 

1,185

 

 

 

 

1,185

 

Adjusted Motorcycles segment gross profit

26,802

 

 

24,983

 

 

33,764

 

 

41,603

 

 

 

 

 

 

 

 

 

Global Adjacent Markets (GAM) segment gross profit

33,884

 

 

28,107

 

 

63,713

 

 

59,365

 

Restructuring & realignment (3)

 

 

(11)

 

 

 

 

434

 

Adjusted GAM segment gross profit

33,884

 

 

28,096

 

 

63,713

 

 

59,799

 

 

 

 

 

 

 

 

 

Aftermarket segment gross profit

55,214

 

 

57,747

 

 

111,689

 

 

116,199

 

Acquisition-related costs (2)

 

 

 

 

 

 

 

Adjusted Aftermarket segment gross profit

55,214

 

 

57,747

 

 

111,689

 

 

116,199

 

 

 

 

 

 

 

 

 

Boats segment gross profit

40,477

 

 

 

 

76,641

 

 

 

Acquisition-related costs (2)

 

 

 

 

 

 

 

Boats segment gross profit

40,477

 

 

 

 

76,641

 

 

 

 

 

 

 

 

 

 

 

Corporate segment gross profit

(32,618)

 

 

(22,571

)

 

(61,835

)

 

(48,929

)

Restructuring & realignment (3)

6,952

 

 

3,212

 

 

13,283

 

 

8,089

 

Adjusted Corporate segment gross profit

(26,026

)

 

(19,359

)

 

(48,552

)

 

(40,840

)

 

 

 

 

 

 

 

 

Total gross profit

436,448

 

 

385,176

 

 

788,896

 

 

708,657

 

Total adjustmentsn 

6,592

 

 

5,171

 

 

13,283

 

 

11,015

 

Adjusted total gross profit

$

443,040

 

 

$

390,347

 

 

$

802,179

 

 

$

719,672

 

 

 

 

 

 

 

 

 

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

(2) Represents adjustments for corporate restructuring, network realignment costs, and supply chain transformation

 

 

NON-GAAP ADJUSTMENTS
2019 Second 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 second quarter of 2019, the Company has recorded combined costs totaling $9 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 second 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 $15 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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