2019 First Quarter Earnings Release

Polaris Reports 2019 First Quarter Results

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

 

 

Q1 2019 Highlights

 

Reported and adjusted sales for the first quarter of 2019 increased 15% to $1,496 million

Reported net income was $0.78 per diluted share, down 8% over the prior year; adjusted net income for the same period was $1.08 per diluted share, down 4% over the prior year, ahead of Company expectations

North American retail sales decreased 3% for the quarter compared to last year; ORV N.A. retail sales were down mid-single digits percent and motorcycle sales were down high-single digits percent, both negatively impacted by weather

Gained market share in snowmobiles for the season ending March 2019; maintained market share in Indian motorcycles in a challenging industry environment

Dealer inventory was down 1% year-over-year for the first quarter 2019, in-line with expectations

Polaris increased its full year 2019 earnings guidance and now expects earnings to be in the $6.05 to $6.30 per diluted share, which includes the absorption of $80 to $90 million of additional tariff costs anticipated in 2019 over 2018. Full year 2019 adjusted sales growth guidance remains unchanged at up 11% 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........................................................................................

$

1,495,690

 

 

15%

 

 

$

1,495,690

 

 

15%

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

$

48,378

 

 

(13)%

 

 

$

66,897

 

 

(9)%

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

$

0.78

 

 

(8)%

 

 

$

1.08

 

 

(4)%

 

 

 

 

 

 

 

 

 

BALANCE SHEET - Q1 March 31, 2019

Reported

 

YOY % Chg.

 

 

 

 

 

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

$

151,439

 

 

(9)%

 

 

 

 

 

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

$

1,148,637

 

 

24%

 

 

 

 

 

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

$

2,101,282

 

 

104%

 

 

 

 

 

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

$

879,202

 

 

(10)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW - YTD Q1 March 31, 2019

Reported

 

YOY % Chg.

 

 

 

 

 

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

$

(38,217)

 

 

NM

 

 

 

 

 

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

$

70,254

 

 

26%

 

 

 

 

 

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

$

6,110

 

 

(59)%

 

 

 

 

 

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

$

37,144

 

 

(2)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NM = Not meaningful

 

 

 

 

 

 

 

 

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

 

"Polaris’ 65th anniversary year is off to a solid start, as we delivered sound results and finished the Quarter with strong momentum. The team executed well, providing quality products to our customers while navigating a dynamic trade environment. Retail sales results were somewhat mixed, with greater than 20 percent Snowmobile growth helping to offset modest weather-related declines in ORV, Motorcycles and Boats, although all three of these segments came on strong at the end of March. Our product lineup has never been stronger, our Boat brands fared well during the recent boat shows, dealer inventory levels are well-positioned to support the peak spring retail selling season, and our strategic sourcing program is accelerating savings and value enhancement. We remain steadfastly committed to enhancing our customer-centric culture, which amplifies our investments in innovation and operational prowess, and as we look to the balance of 2019, we are confident about gaining market share as we continue bringing innovative products to our customers and solidifying our position as the leader in Powersports."

 

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

 

 

First Quarter Performance Summary (Reported)

 

(in thousands, except per share data)

Three months ended March 31,

 

2019

 

2018

 

Change

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

$

1,495,690

 

 

$

1,297,473

 

 

15

%

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

352,448

 

 

323,481

 

 

9

%

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

23.6

%

 

24.9

%

 

-137 bpts

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

289,317

 

 

261,630

 

 

11

%

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

19.3

%

 

20.2

%

 

-82 bpts

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

18,805

 

 

21,425

 

 

(12)

%

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

1.3

%

 

1.7

%

 

-39 bpts

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

81,936

 

 

83,276

 

 

(2)

%

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

5.5

%

 

6.4

%

 

-94 bpts

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

48,378

 

 

55,714

 

 

(1

3)%

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

3.2

%

 

4.3

%

 

-106 bpts

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

$

0.78

 

 

$

0.85

 

 

(8)

%

 

 

Minneapolis, MN (April 23, 2019) -Polaris Industries Inc. (NYSE: PII) (the "Company") today released first quarter 2019 results with sales of $1,496 million on a reported and adjusted basis, up 15 percent from $1,297 million for the first quarter of 2018, including $185 million of Boat segment sales reported in the first quarter of 2019. The Company reported first quarter 2019 net income of $48 million, or $0.78 per diluted share, compared with net income of $56 million, or $0.85 per diluted share, for the 2018 first quarter.  Adjusted net income for the quarter ended March 31, 2019 was $67 million, or $1.08 per diluted share compared to $74 million, or $1.13 per diluted share in the 2018 first quarter.

 

Gross profit increased 9 percent to $352 million for the first quarter of 2019 from $323 million in the first quarter of 2018.   Reported gross profit margin was 23.6 percent of sales for the first quarter of 2019 compared to 24.9 percent of sales for the first quarter of 2018.  Gross profit for the first quarter of 2019 includes the negative impact of $7 million of restructuring and realignment costs.  Excluding these costs, first quarter 2019 adjusted gross profit was $359 million, or 24.0 percent of adjusted sales.  For the first quarter of 2018 adjusted gross profit of $329 million, or 25.4 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 140 basis points.  Higher average selling prices were more than offset by tariff costs and the addition of Boats which has lower gross profit margins.

 

Operating expenses increased 11 percent for the first quarter of 2019 to $289 million, or 19.3 percent of sales, from $262 million, or 20.2 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 due to the addition of Boats, which has a lower operating expense to sales ratio.

 

Income from financial services was $19 million for the first quarter of 2019, down 12 percent compared with $21 million for the first quarter of 2018.  The decrease is primarily attributable to lower retail sales during the quarter.

 

 

Non-Operating Expenses (Reported)

 

(in thousands)

Three months ended March 31,

 

2019

 

2018

 

Change

Interest expense

$

20,419

 

 

$

8,048

 

 

154

%

Equity in loss of other affiliates

$

606

 

 

$

21,511

 

 

(97

)%

Other expense (income), net

$

(3,501

)

 

$

(19,975

)

 

82

%

Provision for income taxes

$

16,016

 

 

$

17,978

 

 

(11

)%

 

 

Interest expense was $20 million for the first quarter of 2019 compared to $8 million for the same period last year, primarily due to increased debt levels to finance the Boat acquisition and higher interest rates.

 

Equity in loss of other affiliates was $1 million for the first quarter of 2019 compared to $22 million for the same period last year.  In the first quarter 2018, the Company recorded charges totaled approximately $20 million associated with the shut down of the Eicher-Polaris joint venture in India.

 

Other income, net, was $4 million in the first quarter of 2019  compared to $20 million in the first quarter of 2019 resulting from foreign currency exchange rate movements and the corresponding effects on foreign currency transactions related to the Company’s foreign subsidiaries. In the first quarter of 2018, in addition to the impact of foreign currency exchange rate movements, the Company reported a $13 million gain on the sale of the Company's investment in Brammo Inc.

 

The provision for income taxes for the first quarter of 2019 was $16 million, or 24.9 percent of pretax income, compared with $18 million, or 24.4 percent of pretax income for the first quarter of 2018.

 

Net income attributable to non-controlling interest of $18 thousand reported in the first quarter of 2019 relates to net income attributable to the minority owner of a  joint venture between Polaris and a supplier in Vietnam to manufacturer components for the Company.

 

 

Product Segment Highlights (Reported)

 

(in thousands)

Sales

 

Gross Profit

 

Q1 2019

 

Q1 2018

 

Change

 

Q1 2019

 

Q1 2018

 

Change

Off-Road Vehicles / Snowmobiles

$

867,447

 

 

$

832,564

 

 

4

%

 

$

252,535

 

 

$

243,561

 

 

4

%

Motorcycles

$

117,942

 

 

$

131,557

 

 

(10

)%

 

$

6,962

 

 

$

16,568

 

 

(58

)%

Global Adjacent Markets

$

104,956

 

 

$

113,327

 

 

(7

)%

 

$

29,829

 

 

$

31,258

 

 

(5

)%

Aftermarket

$

220,535

 

 

$

220,025

 

 

-

 

 

$

56,475

 

 

$

58,452

 

 

(3

)%

Boats

$

184,810

 

 

$

 

 

 

 

$

36,164

 

 

$

 

 

 

 

Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $867 million for the first quarter of 2019, up four percent over $833 million for the first quarter of 2018 driven by growth in side-by-side sales.  PG&A sales for ORV and Snowmobiles combined increased 12 percent in the first quarter of 2019 compared to the first quarter last year. Gross profit increased four percent to $252 million in the first quarter of 2019, compared to $244 million in the first quarter of 2018. Gross profit percentage declined 20 basis points during the quarter as higher average selling prices and favorable product mix were more than offset by higher tariff costs.

 

  • ORV wholegood sales for the first quarter of 2019 increased 4 percent primarily driven by increased average selling prices.  Polaris North American ORV retail sales decreased mid-single digits percent for the quarter with side-by-side vehicles down low-single digits percent and ATV vehicles down low-double digits percent. The North American ORV industry was down low-single digits percent compared to the first quarter last year.

 

  • Snowmobile wholegood sales in the first quarter of 2019 were $13 million, down 28 percent compared to $18 million in the first quarter last year. Polaris snowmobile retail sales were up high-single digits percent during the first quarter of 2019 and up about 20 percent for the twelve month season ending March 2019. North American industry retail was up low-double digits percent for the first quarter and up low-single digits percent for the season ending March 2019. Polaris gained significant market share for the season.

 

Motorcycles segment sales, including PG&A, totaled $118 million, down 10 percent compared to the first quarter of 2018, driven largely by declines in Slingshot sales, and to less of an extent, Indian Motorcycle sales, partly due to an ongoing challenging motorcycle market. Gross profit for the first quarter of 2019 was $7 million compared to $17 million in the first quarter of 2018. The decrease in gross profit was primarily the result of lower volume and tariff costs.

 

North American consumer retail sales for the Polaris motorcycle segment, including both Indian Motorcycle and Slingshot, decreased high-single digits percent during the first quarter of 2019. Indian Motorcycle retail sales decreased mid-single digits percent. Slingshot's retail sales were down low-double digits percent during the quarter. Motorcycle industry retail sales, 900cc and above, were down mid-single digits percent in the first quarter of 2019.

 

Global Adjacent Markets segment sales, including PG&A, decreased seven percent to $105 million in the 2019 first quarter compared to $113 million in the 2018 first quarter. Reported gross profit decreased five percent to $30 million in the first quarter of 2019, compared to $31 million in the first quarter of 2018. Adjusted gross profit decreased 6 percent to $30 million in the first quarter of 2019, compared to $32 million in the first quarter of 2018 due to negative product mix.

 

Aftermarket segment sales of $221 million in the 2019 first quarter increased slightly compared to $220 million in the 2018 first quarter. TAP sales in the first quarter of 2019 were $197 million, which was down two percent from $201 million in the first quarter of 2018. TAP sales declined two percent due to ongoing soft wholesale sales along with lower e-commence demand while the Company's other aftermarket brands increased sales over 20 percent. Gross profit decreased to $56 million in the first quarter of 2019, compared to $58 million in the first quarter of 2018 due to negative product mix.

 

Boats segment sales, which consist of the Boat Holdings acquisition which closed July 2, 2018, were $185 million in the 2019 first quarter. Gross profit was $36 million or 19.6 percent of sales in the first quarter of 2019.

 

Supplemental Data:

 

  • Parts, Garments, and Accessories (“PG&A”) sales increased eight percent for the 2019 first quarter primarily driven by growth in ORV and snowmobiles.

 

  • International sales to customers outside of North America, including PG&A, totaled $203 million for the first quarter of 2019, down four percent, from the same period in 2018. Increased Indian Motorcycle and PG&A sales were more than offset by negative foreign exchange movements which reduced sales by seven percent for the quarter.

 

 

Financial Position and Cash Flow

 

(in thousands)

Three Months ended March 31,

 

2019

 

2018

 

Change

Cash and cash equivalents

$

151,439

 

 

$

166,357

 

 

(9

)%

Net cash used for operating activities

$

(38,217)

 

 

$

(3,189)

 

 

 

NM

Repurchase and retirement of common shares

$

6,110

 

 

$

14,987

 

 

(59

)%

Cash dividends to shareholders

$

37,144

 

 

$

37,796

 

 

(2

)%

Total debt, capital lease obligations and notes payable

$

2,101,282

 

 

$

1,029,479

 

 

104

%

  Debt to Total Capital Ratio

71

%

 

51

%

 

 

 

 

 

 

 

 

NM = Not meaningful

 

 

 

 

 

 

Net cash used for operating activities was $38 million for the three months ended March 31, 2019, compared to $3 million for the same period in 2018. The increase in net cash used for operating activities for the 2019 period was the result of higher factory inventory due to timing of shipments, preparation for new product launches and additional costs related to tariffs. Total debt at March 31, 2019, including finance lease obligations and notes payable, was $2,101 million. The Company’s debt-to-total capital ratio was 71 percent at March 31, 2019 compared to 51 percent at March 31, 2018. Cash and cash equivalents were $151 million at March 31, 2019, down from $166 million at March 31, 2018.

 

 

2019 Business Outlook

Given the 2019 first quarter results, the Company is increasing its full year earnings guidance and now expects adjusted net income to be in the range of $6.05 to $6.30 per diluted share, compared with adjusted net income of $6.56 per diluted share for 2018.  Full year 2019 sales expectation remains unchanged at up 11 to 13 percent. The full year earnings guidance is inclusive of the Company's expectations related to the negative impact of external factors such as the annualized impact of tariffs, adverse foreign exchange impacts, and higher interest rates, totaling approximately $1.50 per diluted share, on a combined basis. Absent these items, the Company is expected to generate positive earnings growth on a year-over-year basis.

 

 

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.

 

 

Investor Conference Call

First Quarter 2019 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 2019 first 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 2001345. A replay of the conference call will be available by accessing the same link on our website.

 

 

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.

 

 

Fordward-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, 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; 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 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)

 

 

POLARIS INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

(Unaudited)

 

Three months ended March 31,

 

 

2019

 

2018

 

Sales

$

1,495,690

 

 

$

1,297,473

 

 

Cost of sales

1,143,242

 

 

973,992

 

 

Gross profit

352,448

 

 

323,481

 

 

Operating expenses:

 

 

 

 

Selling and marketing

129,259

 

 

117,707

 

 

Research and development

67,120

 

 

65,230

 

 

General and administrative

92,938

 

 

78,693

 

 

Total operating expenses

289,317

 

 

261,630

 

 

Income from financial services

18,805

 

 

21,425

 

 

Operating income

81,936

 

 

83,276

 

 

Non-operating expense:

 

 

 

 

Interest expense

20,419

 

 

8,048

 

 

Equity in loss of other affiliates

606

 

 

21,511

 

 

Other income, net

(3,501

)

 

(19,975)

 

 

Income before income taxes

64,412

 

 

73,692

 

 

Provision for income taxes

16,016

 

 

17,978

 

 

Net income 

$

48,396

 

 

$

55,714

 

 

Net income attributable to noncontrolling interest

(18)

 

 

-

 

 

Net income attributable to Polaris Industries Inc

48,378

 

 

55,714

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

Basic

$

0.79

 

 

$

0.88

 

 

Diluted

$

0.78

 

 

$

0.85

 

 

Weighted average shares outstanding:

 

 

 

 

Basic

61,284

 

 

63,303

 

 

Diluted

62,027

 

 

65,219

 

 

 

 


CONSOLIDATED BALANCE SHEETS

(In Thousands), (Unaudited)

 

March 31, 2019

 

March 31, 2018

 

 

 

 

Assets

 

 

 

Current Assets:

 

 

 

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

$

151,439

 

 

$

166,357

 

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

206,812

 

 

184,044

 

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

1,148,637

 

 

922,925

 

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

106,512

 

 

96,247

 

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

25,550

 

 

13,013

 

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

1,638,950

 

 

1,384,586

 

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

868,128

 

 

759,957

 

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

99,501

 

 

95,511

 

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

88,489

 

 

114,881

 

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

1,506,414

 

 

777,844

 

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

112,286

 

 

-

 

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

94,949

 

 

86,828

 

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

$

4,408,717

 

 

$

3,219,607

 

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

 

 

 

Current Liabilities:

 

 

 

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

$

66,512

 

 

$

65,245

 

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

436,938

 

 

366,872

 

Accrued expenses:

 

 

 

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

92,107

 

 

85,997

 

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

116,217

 

 

116,286

 

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

181,881

 

 

174,610

 

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

112,705

 

 

107,829

 

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

201,790

 

 

191,057

 

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

34,814

 

 

-

 

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

5,144

 

 

6,599

 

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

1,248,108

 

 

1,114,495

 

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

29,379

 

 

22,432

 

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

15,926

 

 

18,497

 

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

2,018,844

 

 

945,737

 

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

5,847

 

 

10,006

 

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

79,736

 

 

-

 

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

122,654

 

 

123,680

 

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

$

3,520,494

 

 

$

2,234,847

 

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

8,724

 

 

11,298

 

Equity:

 

 

 

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

879,202

 

 

973,462

 

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

297

 

 

-

 

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

$

879,499

 

 

$

973,462

 

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

$

4,408,717

 

 

$

3,219,607

 

 
 
 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

Three months ended March 31,

 

2019

 

2018

Operating Activities: 

 

 

 

Net income

$

48,396 

 

 

$

55,714 

 

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

 

 

 

Depreciation and amortization

54,415 

 

 

52,720 

 

Noncash compensation

12,091 

 

 

12,032 

 

Noncash income from financial services

(7,655)

 

 

(7,003)

 

Deferred income taxes

(1,329)

 

 

113 

 

Impairment charges

                                        —  

 

18,733 

 

Other, net

606 

 

 

(10,700)

 

Changes in operating assets and liabilities:

 

 

 

Trade receivables

(11,184)

 

 

 

15,587 

 

Inventories

(180,021)

 

 

(135,850)

 

Accounts payable

91,182 

 

 

48,138 

 

Accrued expenses

(75,662)

 

 

(75,722)

 

Income taxes payable/receivable

14,747 

 

 

14,747 

 

Prepaid expenses and others, net

18,620 

 

 

8,302 

 

Net cash used for operating activities

(38,217)

 

 

(3,189)

 

Investing Activities:

 

 

 

Purchase of property and equipment

(70,254)

 

 

(55,558)

 

Investment in finance affiliate, net

213 

 

 

256 

 

Investment in other affiliates, net

 

 

11,183 

 

     

Net cash used for investing activities

(70,041)

 

 

(44,119)

 

Financing Activities:

 

 

 

Borrowings under debt arrangements / financial lease obligations

1,010,200 

 

 

694,401 

 

Repayments under debt arrangements / financial lease obligations

(870,568)

 

 

(578,342)

 

Repurchase and retirement of common shares

(6,110)

 

 

(14,987)

 

Cash dividends to shareholders

(37,144)

 

 

(37,796)

 

Proceeds from stock issuances under employee plans

3,207 

 

 

11,905 

 

Net cash provided by financing activities

99,605 

 

 

75,181 

 

Impact of currency exchange rates on cash balances

(993)

 

 

1,856 

 

Net increase in cash, cash equivalents and restricted cash

(9,646)

 

 

29,729 

 

Cash, cash equivalents and restricted cash at beginning of period

193,126 

 

 

161,618 

 

Cash, cash equivalents and restricted cash at end of period

$

183,480 

 

 

$

191,347 

 

 

 

 

 

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

 

 

 

Cash and cash equivalents

$

151,439

 

 

$

166,357 

 

Other long-term assets

32,041

 

 

24,990 

 

Total

$

183,480

 

 

$

191,347 

 

 

 

 

 

NON-GAAP RECONCILIATION OF RESULTS

(In Thousands, Except Per Share Data)

(Unaudited)

 

Three months ended March 31,

 

 

2019

 

2018

 

Sales

$

1,495,690 

 

 

$

1,297,473 

 

 

Victory wind down (1)

 

 

(549)

 

 

 

Restructuring & realignment (3)

 

 

470 

 

 

Adjusted sales

1,495,690 

 

 

1,297,394 

 

 

 

 

 

 

 

Gross profit

352,448 

 

 

323,481 

 

 

Victory wind down (1)

 

 

52 

 

 

Restructuring & realignment (3)

6,691 

 

 

5,792 

 

 

Adjusted gross profit

359,139 

 

 

329,325 

 

 

 

 

 

 

 

Income  before taxes

64,412 

 

 

73,692 

 

 

Victory wind down (1)

 

 

669 

 

 

Acquisition-related costs (2)

1,130

 

 

2,080 

 

 

Restructuring & realignment (3)

6,691 

 

 

6,197 

 

 

EPPL impairment (5)

 

 

19,630 

 

 

Brammo (6)

 

 

(13,478)

 

 

Intangible amortization (7)

10,247 

 

 

6,130 

 

 

Other expenses (4)

6,359  

 

 

 

 

Adjusted income before taxes

88,839 

 

 

94,920 

 

 

 

 

 

 

 

Net income

48,378

 

 

55,714 

 

 

Victory wind down (1)

 

 

510 

 

 

Acquisition-related costs (2)

861 

 

 

1,585 

 

 

Restructuring & realignment (3)

5,099 

 

 

4,721 

 

 

EPPL impairment (5)

 

 

19,417 

 

 

Brammo (6)

 

 

(13,113)

 

 

Intangible amortization (7)

7,713 

 

 

4,499 

 

 

Other expenses (4)

4,846 

 

 

270  

 

 

Adjusted net income (8)

66,897 

 

 

73,603 

 

 

 

 

 

 

 

Diluted EPS

$

0.78 

 

 

$

0.85 

 

 

Victory wind down (1)

 

 

0.01 

 

 

Acquisition-related costs (2)

0.02 

 

 

0.02 

 

 

Restructuring & realignment (3)

0.08 

 

 

0.08 

 

 

EPPL impairment (5)

 

 

0.30 

 

 

Brammo (6)

 

 

(0.20)

 

 

Intangible amortization (7)

0.12 

 

 

0.07 

 

 

Other expenses (4)

0.08 

 

 

 

 

Adjusted EPS (8)

$

1.08 

 

 

$

1.13 

 

 

 

 

 

 

 

(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 non-recurring litigation 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

 

 

 

 

 

POLARIS INDUSTRIES INC.

NON-GAAP RECONCILIATION OF SEGMENT RESULTS

(In Thousands)

(Unaudited)

 

Three months ended March 31,

 

 

2019

 

2018

 

SEGMENT SALES

 

 

 

 

ORV/Snow segment sales

$

867,447

 

 

$

724,103

 

 

Restructuring & realignment (2)

-

 

 

470

 

 

Adjusted ORV/Snow segment sales

867,447

 

 

833,034

 

 

 

 

 

 

 

Motorcycles segment sales

117,942

 

 

131,557

 

 

Victory wind down (1)

-

 

 

(549)

 

 

Adjusted Motorcycles segment sales

117,942

 

 

131,008

 

 

 

 

 

 

 

Global Adjacent Markets (GAM) segment sales

104,956

 

 

113,327

 

 

No adjustment

 

 

 

 

Adjusted GAM segment sales

104,956

 

 

113,327

 

 

 

 

 

 

 

Aftermarket segment sales

220,535

 

 

220,025

 

 

No adjustment

 

 

 

 

Adjusted Aftermarket sales

220,535

 

 

220,025

 

 

 

 

 

 

 

Boats segment sales

184,810

 

 

 

 

No adjustment

 

 

 

 

Adjusted Boats sales

184,810

 

 

 

 

 

 

 

 

 

Total sales

1,495,690

 

 

1,297,473

 

 

Total adjustments

 

 

(79)

 

 

Adjusted total sales

$

1,495,690

 

 

$

1,297,394

 

 

 

 

 

 

 

SEGMENT GROSS PROFIT

 

 

 

 

ORV/Snow segment gross profit

$

252,235

 

 

$

243,561

 

 

Restructuring & realignment (2)

 

 

470

 

 

Adjusted ORV/Snow segment gross profit

252,235

 

 

244,031

 

 

 

 

 

 

 

Motorcycles segment gross profit

6,962

 

 

16,568

 

 

Victory wind down (1)

 

 

52

 

 

Adjusted Motorcycles segment gross profit

6,962

 

 

16,620

 

 

 

 

 

 

 

Global Adjacent Markets (GAM) segment gross profit

29,829

 

 

31,258

 

 

Restructuring & realignment (2)

 

 

445

 

 

Adjusted GAM segment gross profit

29,829

 

 

31,703

 

 

 

 

 

 

 

Aftermarket segment gross profit

56,475

 

 

58,452

 

 

TAP (2)

 

 

 

 

Adjusted Aftermarket segment gross profit

56,475

 

 

58,452

 

 

 

 

 

 

 

Boats segment gross profit

36,164

 

 

 

 

No adjustment

 

 

 

 

Boats segment gross profit

36,164

 

 

 

 

 

 

 

 

 

Corporate segment gross profit

(29,217

)

 

(26,358

)

 

Restructuring & realignment (2)

6,691

 

 

4,877

 

 

Adjusted Corporate segment gross profit

(22,526

)

 

(21,481

)

 

 

 

 

 

 

Total gross profit

352,448

 

 

323,481

 

 

Total adjustments

6,691

 

 

5,844

 

 

Adjusted total gross profit

$

359,139

 

 

$

329,325

 

 

 

 

 

 

 

(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 First Quarter Results & Full Year Guidance

 

Restructuring, Realignment and Acquisition Related CostsPolaris 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 first quarter of 2019, the Company has recorded combined costs totaling $8 million.

 

Intangible amortization related to acquisitionsAs 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 first quarter of 2019, Polaris excluded $10 million of intangible amortization related to acquisitions.

 

Eicher-Polaris Joint Venture Impairment in IndiaRegulatory 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 the first quarter of 2019.

 

2019 Adjusted Guidance2019 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. 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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