Polaris Reports 2019 Third Quarter Results

Polaris Logo Blue [678]

Q3 2019 Highlights

Reported and adjusted sales for the third quarter of 2019 increased 7% to $1,772 million

Reported net income was $1.42 per diluted share; adjusted net income for the same period was $1.68 per diluted share

North American side-by-side retail sales were up low-single digits compared to last year with both RANGER and RZR retail sales up during the quarter

Grossprofit margin for the third quarter was 24.6%, up 30 basis points over prior year. Adjusted gross profit margin was 24.9%, up 10 basis points versus last year due to positive product mix, despite the absorption of approximately 140 basis points of tariff costs and negative foreign exchange impact

Polaris narrowed its full year 2019 earnings guidance by maintaining the upper end of the net income range and increasing the lower end of the range and now expects earnings to be in the $6.20 to $6.30 per diluted share range. Full year 2019 adjusted sales growth guidance is expected to be up approximately 12% over the prior year.

MINNEAPOLIS, MN – October 22, 2019 – (Motor Sports NewsWire) – Polaris Industries Inc. (NYSE: PII):

Key Financial Data

(in thousands, except per share data)

INCOME STATEMENT – Q3 September 30, 2019

Reported

YOY % Chg.

Adjusted*

YOY % Chg.

Sales

$

1,771,647

7%

$

1,771,647

7%

Net income attributable to Polaris

$

88,388

(7)%

$

104,466

(11)%

Diluted EPS

$

1.42

(5)%

$

1.68

(10)%

BALANCE SHEET – Q3 September 30, 2019

Reported

YOY % Chg.

Cash and cash equivalents

$

122,216

(33)%

Inventories, net

$

1,270,110

25%

Total debt, finance lease obligations and notes payable

$

1,783,623

(4)%

Shareholders’ equity

$

1,013,043

13%

CASH FLOW – YTD September 30, 2019

Reported

YOY % Chg.

Net cash provided by operating activities

$

436,131

23%

Purchase of property & equipment

$

189,336

20%

Repurchase and retirement of common shares

$

6,997

(97)%

Cash dividends to shareholders

$

111,722

(1)%

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

CEO Commentary

“Through the strength of our brand portfolio and solid execution from our team, Polaris delivered 7 percent revenue growth and modest margin expansion amid mounting macroeconomic ambiguity. We augmented our industry-leading Off-Road Vehicle lineup with the introduction of our Model Year ’20 products, and continued to improve dealer satisfaction and engagement. We also launched our evolved Polaris brand and Think Outside tagline. This more modern compass appeals to broader demographics – as seen in Polaris Adventures bringing 90 percent new customers to the brand or the uptick in millennial purchases of the RZR and RANGER. Indeed, our RANGER/GENERAL and RZR brands continue to perform well, driving growth in side-by-sides despite an increasingly competitive market. We converted this growth into increased profitability, as our strategic supply chain investments, which are driving organization-wide value enhancement, began realizing cost savings in the quarter. Our commitment to being a customer-centric, highly efficient growth company remains steadfast, and coupled with industry-leading innovation, it will further solidify our position as the global leader in Powersports.”

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

Third Quarter Performance Summary (Reported)

(in thousands, except per share data)

Three months ended September 30,

2019

2018

Change

Sales

$

1,771,647

$

1,651,415

7

%

Gross profit

436,542

401,270

9

%

% of Sales

24.6

%

24.3

%

+34 bpts

Total operating expenses

327,890

283,749

16

%

% of Sales

18.5

%

17.2

%

+133 bpts

Income from financial services

21,602

21,348

1

%

% of Sales

1.2

%

1.3

%

-7 bpts

Operating income

130,254

138,869

(6

)%

% of Sales

7.4

%

8.4

%

-106 bpts

Net income attributable to Polaris

88,388

95,529

(7

)%

% of Sales

5.0

%

5.8

%

-80 bpts

Diluted net income per share

$

1.42

$

1.50

(5

)%

Polaris Inc. (NYSE: PII) (the “Company”) today released third quarter 2019 results with sales of $1,772 million on a reported and adjusted basis, up 7 percent from reported and adjusted sales of $1,651 million and $1,653 million for the third quarter of 2018, respectively. The Company reported third quarter 2019 net income of $88 million, or 1.42 per diluted share, compared with net income of $96 million, or 1.50 per diluted share, for the 2018 third quarter. Adjusted net income for the quarter ended September 30, 2019 was $104 million, or $1.68 per diluted share compared to $118 million, or $1.86 per diluted share in the 2018 third quarter.

Gross profit increased 9 percent to $437 million for the third quarter of 2019 from $401 million in the third quarter of 2018. Reported gross profit margin was 24.6 percent of sales for the third quarter of 2019, up 30 basis points compared to 24.3 percent of sales for the third quarter of 2018. Adjusted gross profit for the third quarter 2019 was $441 million, or 24.9 percent of adjusted sales compared to the third quarter of 2018 adjusted gross profit of $410 million, or 24.8 percent of adjusted sales. Adjusted gross profit margins were up 10 basis points during the quarter. Adjusted gross profit for the third quarter of 2019 excludes the negative impact of $5 million of restructuring and realignment costs, and adjusted gross profit for the third quarter of 2018 excludes the negative impact of $4 million of restructuring and realignment costs, $3 million of acquisition-related costs, and $1 million of Victory Motorcycles® wind-down costs.

Operating expenses increased 16 percent for the third quarter of 2019 to $328 million, or 18.5 percent of sales, from $284 million, or 17.2 percent of sales, in the same period in 2018. Operating expenses in dollars and as a percent of sales, increased primarily due to the addition of the new multi-brand distribution center in Nevada, the costs associated with the 65th anniversary celebration and summer dealer meeting and ongoing investment in research and development.

Income from financial services was $22 million for the third quarter of 2019, up 1 percent compared with $21 million for the third quarter of 2018. Wholesale credit income increased due to higher dealer inventory levels while retail credit income declined due to slightly lower penetration rates during the quarter.

Non-Operating Expenses (Reported)

(in thousands)

Three months ended September 30,

2019

2018

Change

Interest expense

$

19,733

$

19,823

0

%

Equity in loss of other affiliates

$

4,072

$

111

NM

Other income, net

$

(1,711

)

$

(4,124

)

(59

)%

Provision for income taxes

$

19,772

$

27,530

(28

)%

Interest expense was $20 million for both 2019 and 2018 third quarters.

Equity in loss of other affiliates was $4 million for the third quarter of 2019 compared to $111 thousand for the same period last year primarily due to the write-down of certain investments during the quarter.

Other income, net, was $2 million in the third quarter of 2019 compared to $4 million in the third quarter of 2018. Other income is the result of foreign currency exchange rate movements and the corresponding effects on foreign currency transactions related to the Company’s foreign subsidiaries.

The provision for income taxes for the third quarter of 2019 was $20 million, or 18.3 percent of pretax income, compared with $28 million, or 22.4 percent of pretax income for the third quarter of 2018. The decrease in the effective income tax rate is primarily due to additional Section 199 benefits realized from the filing of amended tax returns in the third quarter of 2019 as compared to the third quarter of 2018.

Product Segment Highlights (Reported)

(in thousands)

Sales

Gross Profit

Q3 2019

Q3 2018

Change

Q3 2019

Q3 2018

Change

Off-Road Vehicles / Snowmobiles

$

1,152,405

$

1,035,554

11

%

$

323,940

$

290,631

11

%

Motorcycles

$

149,900

$

155,316

(3

)%

$

11,940

$

19,577

(39

)%

Global Adjacent Markets

$

114,003

$

96,251

18

%

$

31,138

$

24,155

29

%

Aftermarket

$

236,261

$

229,973

3

%

$

61,794

$

66,092

(7

)%

Boats

$

119,078

$

134,321

(11

)%

$

22,335

$

20,253

10

%

Off-Road Vehicles (“ORV”) and Snowmobiles segment sales, including PG&A, totaled $1,152 million for the third quarter of 2019, up eleven percent over $1,036 million for the third quarter of 2018 driven by growth in side-by-side sales and timing of snowmobile shipments. PG&A sales for ORV and Snowmobiles combined increased 10 percent in the third quarter of 2019 compared to the third quarter last year. Gross profit increased 11 percent to $324 million in the third quarter of 2019, compared to $291 million in the third quarter of 2018. Gross profit percentage increased four basis points during the 2019 third quarter.

ORV wholegoodsales for the third quarter of 2019 increased eight percent primarily driven by increased price and mix. Polaris North American ORV retail sales were flat for the quarter with side-by-side vehicles up low-single digits percent and ATV vehicles down mid-single digits percent. The North American ORV industry was up mid-single digits percent compared to the third quarter last year.

Snowmobile wholegood sales in the third quarter of 2019 were $106 million, up 53 percent compared to $69 million in the third quarter last year. Snowmobile sales were favorably impacted by the timing of shipments for the Company’s pre-season snowmobile orders.

Motorcyclessegment sales, including PG&A, totaled $150 million, down three percent compared to the third quarter of 2018. Both Indian and Slingshot reported sales decline during the quarter. Gross profit for the third quarter of 2019 was $12 million compared to $20 million in the third quarter of 2018. The decrease in gross profit was primarily due to tariff costs and negative mix.

North American consumer retail sales for Polaris Indian motorcycles decreased mid-teens percent during the third quarter of 2019 primarily due to the weak mid to heavy-weight two-wheel motorcycle industry that was down high-single digits percent and retail pressure from heavy competitive promotional spending. North American consumer retail sales for Polaris’ motorcycle segment, including both Indian Motorcycles and Slingshot, decreased low-double digit percent during the third quarter of 2019, while the North American Motorcycle industry retail sales for mid to heavy-weight motorcycles including three-wheel vehicles, was down low-single digits percent in the third quarter of 2019.

Global Adjacent Marketssegment sales, including PG&A, increased 18 percent to $114 million in the 2019 third quarter compared to $96 million in the 2018 third quarter primarily due to strong commercial, government and defense sales, and growth in Polaris Adventures. Gross profit increased 29 percent to $31 million or 27.3 percent of sales in the third quarter of 2019, compared to $24 million or 25.1 percent of sales in the third quarter of 2018, due to increased volume and favorable product mix.

Aftermarketsegment sales of $236 million in the 2019 third quarter increased three percent compared to $230 million in the 2018 third quarter. TAP sales of $193 million in the third quarter of 2019 increased two percent compared to $189 million in the third quarter of 2018. The Company’s other aftermarket brands increased sales by five percent. Gross profit decreased to $62 million in the third quarter of 2019, compared to $66 million in the third quarter of 2018 primarily due to higher tariff costs.

Boats segment sales decreased 11 percent to $119 million in the 2019 third quarter compared to $134 million in the 2018 third quarter primarily due to a slowing marine industry. Gross profit increased 10 percent to $22 million or 18.8 percent of sales in the third quarter of 2019, compared to $20 million or 15.1 percent of sales in the third quarter of 2018 due to favorable product mix.

Supplemental Data:

Parts, Garments, and Accessories (“PG&A”)sales increased 11 percent for the 2019 third quarter primarily driven by growth in all segments and categories.

International sales to customers outside of North America, including PG&A, totaled $187 million for the third quarter of 2019, up eight percent from the same period in 2018. The increase in sales is attributable to growth in ORV, motorcycles and Global Adjacent markets.

Financial Position and Cash Flow

(in thousands)

Nine months ended September 30,

2019

2018

Change

Cash and cash equivalents

$

122,216

$

183,411

(33

)%

Net cash provided by operating activities

$

436,131

$

354,138

23

%

Repurchase and retirement of common shares

$

6,997

$

246,931

(97

)%

Cash dividends to shareholders

$

111,722

$

112,748

(1

)%

Acquisition of businesses

$

1,800

$

729,925

NM

Total debt, finance lease obligations and notes payable

$

1,783,623

$

1,864,327

(4

)%

Debt to Total Capital Ratio

64

%

67

%

NM = Not meaningful

Net cash provided by operating activities was $436 million for the nine months ended September 30, 2019, compared to $354 million for the same period in 2018. Total debt at September 30, 2019, including finance lease obligations and notes payable, was $1,784 million. The Company’s debt-to-total capital ratio was 64 percent at September 30, 2019 compared to 67 percent at September 30, 2018. Cash and cash equivalents were $122 million at September 30, 2019, down from $183 million at September 30, 2018.

2019 Business Outlook

Taking into account its year-to-date performance, the Company is narrowing its earnings guidance range for the full year 2019 by increasing the lower end to $6.20 per diluted share and maintaining the upper end of the range at $6.30 per diluted share. Sales are expected to increase approximately 12 percent for the full year 2019 compare to the prior year.

Non-GAAP Financial Measures

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

Third Quarter 2019 Earnings Conference Call and Webcast

Today at 9:00 AM (CDT) Polaris Inc. will host a conference call and webcast to discuss the 2019 third quarter results released this morning. The call will be hosted by Scott Wine, Chairman and CEO; and Mike Speetzen, Executive Vice President – Finance and CFO. The earnings presentation and link to the webcast will be posted on the Polaris Investor Relations website at ir.polaris.com. To listen to the conference call by phone, dial 1-877-883-0383 in the U.S., or 1-412-902-6506 internationally. The Conference ID is 7682873. A replay of the conference call will be available by accessing the same link on our website.

About Polaris

As the global leader in Powersports, Polaris Inc. (NYSE: PII) pioneers product breakthroughs and enriching experiences and services that have invited people to discover the joy of being outdoors since our founding in 1954. With annual 2018 sales of $6.1 billion, Polaris’ high-quality product line-up includes the Polaris RANGER®, RZR® and Polaris GENERAL™ side-by-side off-road vehicles; Sportsman® all-terrain off-road vehicles; Indian Motorcycle® mid-size and heavyweight motorcycles; Slingshot® moto-roadsters; snowmobiles; and deck, cruiser and pontoon boats, including industry-leading Bennington pontoons. Polaris enhances the riding experience with parts, garments, and accessories, along with a growing aftermarket portfolio, including Transamerican Auto Parts. Polaris’ presence in adjacent markets includes military and commercial off-road vehicles, quadricycles, and electric vehicles. Proudly headquartered in Minnesota, Polaris serves more than 100 countries across the globe. www.polaris.com

Forward-looking Statements

Except for historical information contained herein, the matters set forth in this news release, including management’s expectations regarding 2019 future sales, shipments, net income, and net income per share, future cash flows and capital requirements, operational initiatives, tariffs, currency fluctuations, interest rates, and commodity costs, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include such factors as the Company’s ability to successfully implement its manufacturing operations expansion and supply chain initiatives, product offerings, promotional activities and pricing strategies by competitors; economic conditions that impact consumer spending; disruptions in manufacturing facilities; acquisition integration costs; product recalls, warranty expenses; impact of changes in Polaris stock price on incentive compensation plan costs; foreign currency exchange rate fluctuations; environmental and product safety regulatory activity; effects of weather; commodity costs; freight and tariff costs (tariff relief or ability to mitigate tariffs); changes to international trade policies and agreements; uninsured product liability claims; uncertainty in the retail and wholesale credit markets; performance of affiliate partners; changes in tax policy; relationships with dealers and suppliers; and the general overall economic and political environment. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission. The Company does not undertake any duty to any person to provide updates to its forward-looking statements. The data source for retail sales figures included in this release is registration information provided by Polaris dealers in North America compiled by the Company or Company estimates and other industry data sources. The Company must rely on information that its dealers supply concerning retail sales, and other retail sales data sources related to Polaris and the powersports industry, and this information is subject to revision. Retail sales references to total Company retail sales includes only ORV, snowmobiles and motorcycles in North America unless otherwise noted.

CONSOLIDATED STATEMENTS OF INCOME

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

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Sales

$

1,771,647

$

1,651,415

$

5,046,652

$

4,451,420

Cost of sales

1,335,105

1,250,145

3,821,214

3,341,493

Gross profit

436,542

401,270

1,225,438

1,109,927

Operating expenses:

Selling and marketing

149,759

128,929

419,621

369,495

Research and development

77,337

64,181

220,836

197,741

General and administrative

100,794

90,639

297,822

262,206

Total operating expenses

327,890

283,749

938,279

829,442

Income from financial services

21,602

21,348

60,153

64,117

Operating income

130,254

138,869

347,312

344,602

Non-operating expense:

Interest expense

19,733

19,823

60,772

37,087

Equity in loss of other affiliates

4,072

111

5,133

25,576

Other income, net

(1,711

)

(4,124

)

(5,483

)

(27,660

)

Income before income taxes

108,160

123,059

286,890

309,599

Provision for income taxes

19,772

27,530

61,961

65,816

Net income

88,388

95,529

224,929

243,783

Net loss attributable to noncontrolling interest

100

Net income attributable to Polaris Inc.

$

88,388

$

95,529

$

225,029

$

243,783

Net income per share attributable to Polaris Inc. common shareholders:

Basic

$

1.44

$

1.54

$

3.67

$

3.88

Diluted

$

1.42

$

1.50

$

3.62

$

3.78

Weighted average shares outstanding:

Basic

61,480

62,207

61,394

62,894

Diluted

62,265

63,546

62,152

64,550

CONSOLIDATED BALANCE SHEETS

(In Thousands), (Unaudited)

September 30, 2019

September 30, 2018

Assets

Current Assets:

Cash and cash equivalents

$

122,216

$

183,411

Trade receivables, net

217,231

217,694

Inventories, net

1,270,110

1,019,517

Prepaid expenses and other

118,623

105,066

Income taxes receivable

14,958

5,865

Total current assets

1,743,138

1,531,553

Property and equipment, net

887,644

807,511

Investment in finance affiliate

104,060

88,790

Deferred tax assets

95,189

116,447

Goodwill and other intangible assets, net

1,494,646

1,515,431

Operating lease assets

107,906

Other long-term assets

94,839

88,299

Total assets

$

4,527,422

$

4,148,031

Liabilities and Equity

Current Liabilities:

Current portion of debt, finance lease obligations and notes payable

$

66,664

$

66,595

Accounts payable

584,506

436,401

Accrued expenses:

Compensation

169,989

160,033

Warranties

137,114

122,544

Sales promotions and incentives

198,566

187,307

Dealer holdback

136,437

124,259

Other

214,038

179,738

Current operating lease liabilities

34,179

Income taxes payable

4,632

8,963

Total current liabilities

1,546,125

1,285,840

Long term income taxes payable

26,639

26,805

Finance lease obligations

14,840

16,712

Long-term debt

1,702,119

1,781,020

Deferred tax liabilities

4,741

7,054

Long-term operating lease liabilities

76,390

Other long-term liabilities

131,731

122,728

Total liabilities

$

3,502,585

$

3,240,159

Deferred compensation

11,615

9,620

Equity:

Total shareholders’ equity

1,013,043

897,973

Noncontrolling interest

179

279

Total equity

1,013,222

898,252

Total liabilities and equity

$

4,527,422

$

4,148,031

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands), (Unaudited)

Nine months ended September 30,

2019

2018

Operating Activities:

Net income

$

224,929

$

243,783

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

Depreciation and amortization

173,003

155,910

Noncash compensation

56,559

43,219

Noncash income from financial services

(23,704

)

(22,232

)

Deferred income taxes

(9,134

)

(4,171

)

Impairment charges

3,558

21,716

Other, net

1,575

(9,618

)

Changes in operating assets and liabilities:

Trade receivables

(23,613

)

(991

)

Inventories

(304,261

)

(201,229

)

Accounts payable

239,226

90,842

Accrued expenses

75,293

1,620

Income taxes payable/receivable

19,680

28,715

Prepaid expenses and others, net

3,020

6,574

Net cash provided by operating activities

436,131

354,138

Investing Activities:

Purchase of property and equipment

(189,336

)

(157,763

)

Investment in finance affiliate, net

11,703

22,207

Investment in other affiliates, net

7,366

Acquisition of businesses, net of cash acquired

(1,800

)

(729,925

)

Net cash used for investing activities

(179,433

)

(858,115

)

Financing Activities:

Borrowings under debt arrangements / finance lease obligations

2,654,218

2,845,688

Repayments under debt arrangements / finance lease obligations

(2,831,666

)

(1,970,701

)

Repurchase and retirement of common shares

(6,997

)

(246,931

)

Cash dividends to shareholders

(111,722

)

(112,748

)

Proceeds from stock issuances under employee plans

8,165

47,158

Net cash used for financing activities

(288,002

)

562,466

Impact of currency exchange rates on cash balances

(3,092

)

(5,904

)

Net increase (decrease) in cash, cash equivalents and restricted cash

(34,396

)

52,585

Cash, cash equivalents and restricted cash at beginning of period

193,126

161,618

Cash, cash equivalents and restricted cash at end of period

$

158,730

$

214,203

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

Cash and cash equivalents

$

122,216

$

183,411

Other long-term assets

36,514

30,792

Total

$

158,730

$

214,203

NON-GAAP RECONCILIATION OF RESULTS

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

Three months ended September 30,

Nine months ended September 30,

2019

2018

2019

2018

Sales

$

1,771,647

$

1,651,415

$

5,046,652

$

4,451,420

Victory wind down (1)

1,055

1,304

Restructuring & realignment (3)

660

2,789

Adjusted sales

1,771,647

1,653,130

5,046,652

4,455,513

Gross profit

436,542

401,270

1,225,438

1,109,927

Victory wind down (1)

1,239

417

Acquisition-related costs (2)

3,130

3,130

Restructuring & realignment (3)

4,765

4,128

18,048

15,965

Adjusted gross profit

441,307

409,767

1,243,486

1,129,439

Income before taxes

108,160

123,059

286,890

309,599

Victory wind down (1)

1,514

1,757

Acquisition-related costs (2)

1,838

8,989

5,319

16,798

Restructuring & realignment (3)

4,765

4,671

18,048

22,564

EPPL impairment (5)

23,447

Brammo (6)

(13,478

)

Intangible amortization (7)

10,428

10,403

30,925

22,591

Other expenses (4)

4,189

3,288

16,699

5,010

Adjusted income before taxes

129,380

151,924

357,881

388,288

Net income attributable to PII

88,388

95,529

225,029

243,783

Victory wind down (1)

1,154

1,339

Acquisition-related costs (2)

1,401

6,848

4,054

12,799

Restructuring & realignment (3)

3,632

3,559

13,753

17,192

EPPL impairment (5)

22,325

Brammo (6)

(13,113

)

Intangible amortization (7)

7,853

7,763

23,283

16,708

Other expenses (4)

3,192

3,073

12,724

5,110

Adjusted net income attributable to PII (8)

104,466

117,926

278,843

306,143

Diluted EPS attributable to PII

$

1.42

$

1.50

$

3.62

$

3.78

Victory wind down (1)

0.02

0.02

Acquisition-related costs (2)

0.02

0.11

0.07

0.20

Restructuring & realignment (3)

0.06

0.06

0.22

0.26

EPPL impairment (5)

0.34

Brammo (6)

(0.20

)

Intangible amortization (7)

0.13

0.12

0.37

0.26

Other expenses (4)

0.05

0.05

0.21

0.08

Adjusted EPS attributable to PII (8)

$

1.68

$

1.86

$

4.49

$

4.74

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

(2) Represents adjustments for integration and acquisition-related expenses and purchase accounting adjustments

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

(4) Represents adjustments for class action litigation-related expenses and the impacts of tax reform

(5) Represents adjustments for the impairment of the Company’s equity investment in Eicher-Polaris Private Limited (EPPL). This charge is included in Equity in loss of other affiliates (non-operating) on the Consolidated Statements of Income.

(6) Represents a gain on the Company’s investment in Brammo, Inc. This gain is included in Other income (non-operating) on the Consolidated Statements of Income.

(7) Represents amortization expense for acquisition-related intangible assets

(8) The Company used its estimated statutory tax rate of 23.8% for the non-GAAP adjustments in 2019 and 2018, except for the non-deductible items and the tax reform related changes noted in Item 4

NON-GAAP RECONCILIATION OF SEGMENT RESULTS

(In Thousands), (Unaudited)

Three months ended September 30,

Nine months ended September 30,

SEGMENT SALES

2019

2018

2019

2018

ORV/Snow segment sales

$

1,152,405

$

1,035,554

$

3,069,173

$

2,858,959

Restructuring & realignment (3)

660

2,789

Adjusted ORV/Snow segment sales

1,152,405

1,036,214

3,069,173

2,861,748

Motorcycles segment sales

149,900

155,316

464,615

458,285

Victory wind down (1)

1,055

1,304

Adjusted Motorcycles segment sales

149,900

156,371

464,615

459,589

Global Adjacent Markets (GAM) segment sales

114,003

96,251

340,883

322,996

No adjustment

Adjusted GAM segment sales

114,003

96,251

340,883

322,996

Aftermarket segment sales

236,261

229,973

685,668

676,859

No adjustment

Adjusted Aftermarket sales

236,261

229,973

685,668

676,859

Boats segment sales

119,078

134,321

486,313

134,321

No adjustment

Adjusted Boats sales

119,078

134,321

486,313

134,321

Total sales

1,771,647

1,651,415

5,046,652

4,451,420

Total adjustments

1,715

4,093

Adjusted total sales

$

1,771,647

$

1,653,130

$

5,046,652

$

4,455,513

Three months ended September 30,

Nine months ended September 30,

SEGMENT GROSS PROFIT

2019

2018

2019

2018

ORV/Snow segment gross profit

$

323,940

$

290,631

$

888,864

$

831,413

Restructuring & realignment (3)

660

2,789

Adjusted ORV/Snow segment gross profit

323,940

291,291

888,864

834,202

Motorcycles segment gross profit

11,940

19,577

45,704

60,817

Victory wind down (1)

1,239

417

Restructuring & realignment (3)

1,185

Adjusted Motorcycles segment gross profit

11,940

20,816

45,704

62,419

Global Adjacent Markets (GAM) segment gross profit

31,138

24,155

94,851

83,520

Restructuring & realignment (3)

45

479

Adjusted GAM segment gross profit

31,138

24,200

94,851

83,999

Aftermarket segment gross profit

61,794

66,092

173,483

182,291

No adjustment

Adjusted Aftermarket segment gross profit

61,794

66,092

173,483

182,291

Boats segment gross profit

22,335

20,253

98,976

20,253

Acquisition-related costs (2)

3,130

3,130

Boats segment gross profit

22,335

23,383

98,976

23,383

Corporate segment gross profit

(14,605

)

(19,438

)

(76,440

)

(68,367

)

Restructuring & realignment (3)

4,765

3,423

18,048

11,512

Adjusted Corporate segment gross profit

(9,840

)

(16,015

)

(58,392

)

(56,855

)

Total gross profit

436,542

401,270

1,225,438

1,109,927

Total adjustments

4,765

8,497

18,048

19,512

Adjusted total gross profit

$

441,307

$

409,767

$

1,243,486

$

1,129,439

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

(2) Represents adjustments for integration and acquisition-related expenses and purchase accounting adjustments

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

NON-GAAP ADJUSTMENTS
2019 Third Quarter Results & Full Year Guidance

Restructuring, Realignment and Acquisition Related Costs
Polaris announced in 2017 that it was making changes to its network to consolidate production and distribution of like products and better leverage plant capacity and embarked on a multi-phase supply chain transformation initiative to continue to leverage its supply chain as a strategic asset. Additionally, the Company has recorded acquisitions and integration related costs associated with the TAP and Boat Holdings acquisitions. For the third quarter of 2019, the Company has recorded combined costs totaling $7 million.

Intangible amortization related to acquisitions
As a result of the Boat Holdings acquisition, Polaris’ amortization of intangible assets increased by approximately $20 million on an annual basis. Given the significant increase in non-cash amortization associated with this acquisition along with intangible amortization from prior acquisitions, the Company has moved to an adjusted net income metric, excluding intangible amortization from all acquisitions. The Company believes this treatment will provide additional transparency into the true, ongoing earnings performance of its business. For the third quarter of 2019, Polaris excluded $10 million of intangible amortization related to acquisitions.

Eicher-Polaris Joint Venture Impairment in India
Regulatory changes have negatively impacted the likelihood of success of the joint venture, and as a result, in late-February 2018, the Board of Directors of the joint venture approved the wind-down of the joint venture. For the full year ended December 31, 2018, Polaris has recorded charges totaling $27 million, including the impairment of the Company’s equity investment in the Eicher-Polaris joint venture in India and wind down costs. No costs were recorded in 2019.

2019 Adjusted Guidance
2019 guidance excludes the pre-tax effect of acquisition integration costs of approximately $5 million to $10 million, supply chain transformation and network realignment costs of approximately $25 million to $30 million, and approximately $17 million to $20 million for class action litigation-related expenses. Intangible amortization of approximately $40 million related to all acquisitions has also been excluded. The Company has not provided reconciliations of guidance for adjusted diluted net income per share, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include restructuring and realignment costs and acquisition integration costs that are difficult to predict in advance in order to include in a GAAP estimate.

Source: Polaris Industries Inc.

Polaris Logo Blue

####

1 Trackback / Pingback

  1. Polaris Reports 2019 Third Quarter Results – Automotivetestdrivers.com Your Source For Automotive News

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.