Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Q2 2016 Earnings Presentation
25 slides from Polaris's earnings presentation, Jul 20, 2016
Slide 1: Second Quarter 2016 Earnings Results
Second Quarter 2016 Earnings Results July 20, 2016 POLARIS INDUSTRIES INC.
Slide 2: Safe Harbor
Except for historical information contained herein, the matters set forth in this document, including but not limited to management’s expectations regarding 2016 sales, shipments, margins, currencies, net income and cash flow, the opportunities for expansion and diversification of the Company’s busi
Slide 3: Scott W. Wine, Chairman & CEO
Scott W. WineChairman & CEO Second Quarter 2016 Earnings Results July 20, 2016 POLARIS INDUSTRIES INC. Q2'16 Earnings 3
Slide 4: Q2 Sales & Earnings Disappointing, but Cash Flow Up Significantly
Q2 sales and net income slightly better than revised expectationsORV/Snowmobile sales down 6%; Motorcycles up 23%; Global Adjacent Markets up 14%Results include ~$25 million of additional costs: warranty, legal and other recall related costsEarnings per share decreased 27% to $1.09Gross profit margi
Slide 5: Product Safety & Consumer Satisfaction #1 Priority
Announced ORV and Motorcycle product recallsRZR 900, RZR 1000, RANGER 570, heavyweight Indian MotorcyclesReason: gaps in design and development / manufacturing processesIdentified and urgently addressing gapsImproving post sales surveillance processRecorded charges of ~$35 million to cover warranty
Slide 6: Refining Our Organization to Accelerate Growth
CRAIG SCANLONVP – Chief Marketing Officer and Chief Retail Officer for ORV Create and implement global brand strategiesOptimize marketing processes and capture best practicesUtilize consumer behavior analytics Fully leverage existing motorcycles sales infrastructureCombine Lean / cost down effortsCo
Slide 7: Polaris & Industry Retail Weak, but PII Remains Clear #1
Polaris N.A. retail down 7% for Q2 2016 vs. Q2 2015Motorcycle retail sales remain strongORV down; tough comparables; RZR recall disruptiveNorth American Industry retail trends weaker; Q2 downOil/Gas, Ag slowed sequentially from Q1 Polaris & Industry Retail Weak, but PII Remains Clear #1 Share Leader
Slide 8: Dealer Inventory Management Remains a Top Priority
Polaris Q2 2016 N.A. dealer inventory +1% vs. Q2 2015ORV down 8% year-over-year; RZR and ATVs down double-digits %Motorcycles up significantly as expected, shipments normalizedSnowmobiles remain high – no change, off-seasonDealer inventory in-line with Company expectations, but monitoring aggressive
Slide 9: Mike Speetzen, EVP Finance & CFO
Mike SpeetzenEVP Finance & CFO Second Quarter 2016 Earnings Results July 20, 2016 POLARIS INDUSTRIES INC. Q2'16 Earnings 9
Slide 10: 2016 Sales & Earnings Guidance Revised
2016 Sales & Earnings Guidance Revised to Reflect Market Conditions & Increased Warranty 10 Q2'16 Earnings 2016 Full Year Guidance Segments Total Company Sales & EPS Assumptions Protect market shareDealer inventory about flatF/X = minus ~30¢ per shareShare count down ~3%Net income $ down 9% to 14%Gr
Slide 11: Q2 2016 ORV/Snowmobile Segment Sales
Q2 2016 ORV/Snowmobile Segment Sales ORV down 6% due to weak industry / recall impactRANGER Shipments flatRZR/ATV shipments downPromotional environment remained aggressivePG&A up due to increased parts salesORV average selling price flat in Q2 Results Expected to Improve in 2H 2016 11 Q2'16 Earnings
Slide 12: Q2 2016 Motorcycle Segment Sales
6% 26% Q2 2016 Motorcycle Segment Sales Motorcycles up 23% due to market share gains, improved product availabilityAll brands increased salesPG&A up driven by increased accessory offeringsFull-year guidance revised down due to weaker industry trendsAverage selling price was down 1% in Q2 Share Gains
Slide 13: Q2 2016 GAM Segment Sales
Q2 2016 GAM Segment Sales GAM 14% due to continued strong Aixam business and Taylor-Dunn acquisitionFull-year guidance revised upPG&A up due to increased W&T salesAverage selling price for GAM was up 1% in Q2 Building Capabilities 13 Q2'16 Earnings Global Adjacent Markets (GAM) ($ millions) PG&A PG&
Slide 14: Q2 2016 Supplemental Sales Performance
International Parts, Garments & Accessories (PG&A) 14 Q2'16 Earnings Q2 2016 Supplemental Sales Performance Motorcycles Global Adjacent Markets (GAM) Snowmobiles Motorcycles Global Adjacent Markets (GAM) Apparel 38% 21% LatinAmerica 6% 18% 7% 17% 41% 14% 1% 6% 7% 23% 6% Q2 Sales 5% to $197.0 Million
Slide 15: Gross Profit Margin Guidance by Component
Gross Profit Margin Guidance by Component Gross Profit Margin Full-Year Guidance Q2 2016 Actual FY 2016 Guidance Prior period 28.4% 28.4% Production volume/capacity Product cost reduction efforts Commodity costs Currency rates Higher selling prices Product mix Motorcycle Production Constraints New p
Slide 16: Other 2016 Expectations
16 Q2'16 Earnings FY 2016Operating expenses: Increase up to 100 bps, as a % of sales (legal & other recall related costs / acquisitions)Income from financial services: grow faster than total company sales (unchanged)Income taxes: Approx. 35% of pre-tax income (unchanged)International sales: low to m
Slide 17: Scott W. Wine, Chairman & CEO
Scott W. WineChairman & CEO Second Quarter 2016 Earnings Results July 20, 2016 POLARIS INDUSTRIES INC. Q2'16 Earnings 17
Slide 18: Closing Thoughts
Global unrest / uncertainty heightens economic risksPowersports market highly competitive / slow growthMotorcycles market share gains continue; ORV stabilizesHuntsville production ramps; accelerates SxS RFM Lean & VIP driving savings, improved qualityStrong cash conversion to continue; funding more
Slide 19: Thank You / Questions?
Thank YouQuestions?
Slide 20: Supplemental Data
20 Q2'16 Earnings Vision and StrategyForeign Currency Exposure Q2 Financial PositionIncome from Financial Services SUPPLEMENTAL DATA
Slide 21: Vision & Strategy
Strategic Objectives Vision & Strategy VISION Fuel the passion of riders, workers and outdoor enthusiasts around the world by delivering innovative, high quality vehicles, products, services and experiences that enrich their lives. STRATEGY Polaris will be a highly profitable, customer centric, $8B
Slide 22: Foreign Currency Exposure for Polaris
Currency Improved in Q2 22 Q2'16 Earnings Foreign Currency Exposure for Polaris Foreign Currency Hedging Contracts Outstanding Currency Impact on Net IncomeCompared to Prior Year Period Notional Avg. Exchange Foreign Currency CurrencyPosition 2H ’16 Cash FlowExposure Hedged Amounts(US $ in Millions)
Slide 23: Q2 2016 Polaris Financial Position
Q2 2016 Polaris Financial Position 23 Q2'16 Earnings Capital Summary June 2016 Cash Drivers Fav/(Unfav)June 2015 Cash $ 146.6 +23% Debt /Capital Lease Obligations $ 468.1 +17% Shareholders’ Equity $ 924.2 +4% Total Capital $1,392.3 +8% Debt to Total Capital 34% (3%) 2015Operating cash flow up signif
Slide 24: Income from Financial Services
Retail Credit Wholesale Credit PA Receivables 24 Q2'16 Earnings Income from Financial Services Ample Financing Available at Favorable Rates INCOME FROM FINANCIAL SERVICES 2016 expectations: grow faster than total Company salesQ2 income from financial services increased 16%Higher retail credit income
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