Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Q3 2010 Earnings Presentation
28 slides from Polaris's earnings presentation, Oct 19, 2010
Slide 1: Polaris Industries Inc. Third Quarter 2010 Earnings Results
0 Polaris Industries Inc. Third Quarter 2010 Earnings Results October 19, 2010
Slide 2: Safe Harbor
1 Safe Harbor Except for historical information contained herein, the matters set forth in this document, including but not limited to management’s expectations regarding 2010 sales, shipments, net income, cash flow, and manufacturing realignment transition costs and savings, are forward-looking sta
Slide 3: 3rd Quarter 2010 Earnings Results - Scott Wine, CEO
2 Polaris Industries Inc. 3rd Quarter 2010 Earnings Results Scott Wine CEO
Slide 4: Q3 2010 Net Income and EPS
3 Q3 2010 Net Income and EPS Net Income ($ in millions) Diluted EPS $0.94 $1.37 +46% $31.2 $47.2 +51% 2009 2010 2009 2010 Highest quarterly Earnings per Share in Polaris history Gross margins improved 190 basis points Operating income increased 120 basis points to 11.7% Another Record Quarter for EP
Slide 5: Q3 2010 Sales
4 Q3 2010 Sales Third Quarter 2010 % Change in Total Company Sales Sales growth continues to outperform Company expectations Gained significant market share in ORV and Victory Making Growth Happen $436.2 $580.1 +33% 2009 2010 Volume 29% Product mix and price 3% Currency 1% 33%
Slide 6: Q3 2010 Revenue and N.A. Retail Sales
5 Q3 2010 Revenue and N.A. Retail Sales Revenue (Million $) $436.2 $128.2 -$4.9 $10.8 $9.8 $580.1 +33% 2009 ORV Snow Victory/On-Road PG&A 2010 Polaris N.A. Retail Sales (Units) Approx. +20% 50%+ Up high teens % +21% Q3 2009 ORV Victory Snow Q3 2010 Polaris Revenue and N.A. Retail Sales continue to o
Slide 7: Strategic Plan is Working
6 Strategic Plan is Working Best in Powersports PLUS 5-8% organic growth #1 in market share in ORV, and gaining Victory progress accelerating Innovation pipeline is robust Growth through Adjacencies $100 - 300M growth Bobcat product well received M&A on track Multi-year National Guard award received
Slide 8: 3rd Quarter 2010 Earnings Results - Bennett Morgan, President & COO
7 Polaris Industries Inc. 3rd Quarter 2010 Earnings Results Bennett Morgan President & COO
Slide 9: Off-Road Vehicle Division
8 Off-Road Vehicle Division Polaris Sales (millions) $261.1 +49% $389.3 Q3 2009 Q3 2010 Full year 2010 sales guidance: Up 32% to 33% (increased range)Gained significant ORV market share again in Q3 2010 - Both ATV and side-by-side share is up in both N.A. and Europe - Model year 2011 products well r
Slide 10: Adjacencies: Military / Bobcat Alliance
9 Adjacencies Military / Bobcat Alliance Bobcat Strategic AllianceSourced vehicle launched Co-developed vehicle on-track to push further into Work side-by-sides Bobcat Partnership – On-track MilitaryAdded new products to serve more markets Polaris EV LSV (Low speed vehicle) RANGER dieselReceived $67
Slide 11: Snowmobile Division
10 Snowmobile Division 800 Pro RMK Polaris Sales (millions) $82.2 -6% $77.3 Q3 2009 Q3 2010 -13% $179.2 Approx. flat FY 2009 FY 2010 guidance Full Year 2010 Sales Guidance: Approx. Flat with last year (Unchanged) Gaining market share season-to-dateNew MY ’11 snowmobiles shipping on schedule Dealer i
Slide 12: On-Road Division – Victory / LEV
11 On-Road Division – Victory / LEV Polaris Sales (millions) $9.3 +116% $20.1 Q3 2009 Q3 2010 -44% $52.8 Up 50%+ FY 2009 FY 2010 guidance 2011 Crossroads Custom N.A. Motorcycle Industry 1400cc+ and Victory Retail Sales Q2 2010 Q3 2010 More than 10% Up over 50% Full Year FY 2009 FY 2010 Expectations
Slide 13: PG&A
12 PG&A Polaris Sales (millions) YTD 2010 PG&A Revenue by Business Unit YTD 2010 PG&A Revenue by Product Category $83.5 +12% $93.3 Q32009 Q3 2010 -9% $312.7 Up mid-single digits FY 2009 FY 2010 guidance Off-Road Vehicles 71% Snow 17% Other 6% Victory 6% Parts 53% Accessories 45% Apparel 2% Accessori
Slide 14: International Division
13 International Division Polaris Sales (millions) YTD 2010 Revenue by Geography YTD 2010 Revenue by Business Unit $59.3 +4% $61.4 Q3 2009 Q3 2010 -17% 252.4 Up approx. 20% FY 2009 FY 2010 guidance Europe 70% Aus/NZ 13% Latin America 8% ME / Africa 8% Asia 1% Off-Road Vehicles 69% PG&A 18% Snow 7% O
Slide 15: Manufacturing Realignment on Plan
14 Manufacturing Realignment Cost Charged to P&L (in millions) Capital Expenditures (in millions) Annualized Savings (in millions) $22 - $25 Estimated Costs to Completion $11 - $12 Full Year 2010 Estimate $5.8 YTD Actual to September 2010 $35 Estimated Capital to complete project $2 YTD Actual to Se
Slide 16: Dealer Health
15 Dealer Health North American Polaris Dealer Inventory Levels Down 25% from Q3 2009Victory down 32% from Q3 2009Core ATVs down 37% from Q3 2009 and 4% sequentially from Q2 2010Close to optimal levels Max Velocity Program (MVP) Currently 100% of N.A. ORV dealer volumeSmaller dealers on slightly les
Slide 17: Innovation Remains Key to Success
16 Innovation Remains Key to Success Model Year 2011 New Products well received: Improvements to Core and Performance models Better Sportsman XP ( 1-Up and 2-Up) Better RANGER XP Improved RZR ergonomics and styling Added Value models New ATV value models (Sportsman 400, 500HO, 800HO) Two new value R
Slide 18: Q3 2010 Margins
17 Q3 2010 Margins Gross Margins 24.1% 26.0% +190 bpts Q3 2009 Q3 2010 Net Income as a Percent of Sales 2009 Gross Margin Operating Expense KTM gain Income Taxes / Other 2010 7.1% +1.9% -0.5% +0.3% -0.7% 8.1% Gross margins continue to improve driven by Product cost reduction efforts Production volum
Slide 19: 3rd Quarter 2010 Earnings Results - Mike Malone, CFO
18 Polaris Industries Inc. 3rd Quarter 2010 Earnings Results Mike Malone V.P. Finance and CFO
Slide 20: Full Year 2010 Guidance
19 Full Year 2010 Guidance Total Company Sales (in millions) $1,565.9 Up 24% to 25% 2009 Actual 2010 Guidance Polaris retail sales continue to accelerateSide-by-sides generating significant growth Diluted EPS expected to be up 37% to 38% EPS expected in $4.17 to $4.20 range Net income margin improve
Slide 21: 2010 Full Year Guidance
20 2010 Full Year Guidance Product Line Sales - Off-Road Vehicles Up 32% to 33% (increased) - Snowmobiles Approximately flat - On-Road Vehicles Up over 50% - PG&A Up mid-single digits Total Company Sales Up +24% to +25% (increased) Gross Margins Up to 110 bpts improvement Operating expenses Up in do
Slide 22: Gross Profit Margin Percentage Trends
21 Gross Profit Margin Percentage Trends Q3 2009 Q3 2010 Guidance Q4 2010 Guidance 2010 Prior Period 22.5% 24.1% 27.3% 25.1% Production volume adjustments Product cost reduction efforts Commodity costs Currency rates Higher selling prices Product mix Manufacturing realignment Warranty costs Tooling
Slide 23: Financial Services Income
22 Financial Services Income Financial Services Income by category $3.9 +5% $4.1 $ in millions Q3 2009 Q3 2010 Other Activities Wholesale Credit Retail Financing Retail Portfolio – HSBC, GE & Sheffield combined 52% 57% 60% Q3 2009 Q2 2010 Q3 2010 35% 33% 33% Q3 2009 Q2 2010 Q3 2010 Approval rate Pen
Slide 24: Balance Sheet and Liquidity Profile
23 Balance Sheet and Liquidity Profile $ In millions (except per share and interest rate data) YTD Q3 2010 Fav (Unfav) 2009 2010 Full Year Guidance Cash $264.5 $191.7 Improving again Total Debt – ending $200.0 $0.0 $200 Credit Facility (expires December 2011) $450.0 – $450 Average debt outstanding $
Slide 25: Fourth Quarter 2010 Guidance
24 Fourth Quarter 2010 Guidance Total Company Sales (in millions) Up 22% to 24% $471.8 2009 Q4 Actual 2010 Q4 Guidance Diluted EPS Up 11% to 13% $1.31 $1.45 to $1.48 2009 Q4 Actual 2010 Q4 Guidance Expect continued retail sales growth and market share gains Gross margin % expected to decline due to
Slide 26: 3rd Quarter 2010 Earnings Results - Scott Wine, CEO
25 Polaris Industries Inc. 3rd Quarter 2010 Earnings Results Scott Wine CEO
Slide 27: 2011 – Initial Thoughts
26 2011 – Initial Thoughts U.S & European economies expected to slowly improve Powersports market growth remains muted “Make Growth Happen” theme continues International presence and growth accelerate – China, Brazil Market share expansion throughout the world; again Victory momentum to continueMont
Slide 28: Thank you. Q & A
27 Polaris Industries Inc. Thank you. Q & A