Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Investor Day (July 2010)
130 slides from Polaris's investor day presentation, Jul 27, 2010
Slide 1: Polaris Industries Inc. Analyst / Investor Meeting
Polaris Industries Inc. Analyst / Investor Meeting Richard Edwards, Director of Investor Relations Tuesday, July 27, 2010 Orlando, FL
Slide 2: Analyst / Investor Meeting Agenda
July 27, 2010 ANALYST / INVESTOR MEETING AGENDA – July 27, 2010 8:00 Opening Remarks Scott Wine 8:10 Strategy Overview Bennett Morgan 8:25 Off-Road Vehicles, Bobcat, Military Matt Homan 8:55 Snowmobiles, PG&A, & Financial Services Scott Swenson 9:15 Sales & Mktg, MVP, On-Road Vehicles Mike Jonikas 9
Slide 3: Safe Harbor
July 27, 2010 Private Securities Litigation Reform Act of 1995 Polaris Industries Inc. Disclosure Litigation Statement 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,
Slide 4: Scott Wine, CEO
Polaris Industries Inc. Analyst / Investor Meeting Scott Wine, CEO July 27, 2010
Slide 5: 2010 1st Half Financial Metrics
Polaris 2010 1st half Financial Metrics 2010 YTD Actual Var to ‘09 R $792 6 +20% Revenue 792.6 Gross Profit % 26.2% +190 bpts Op Profit % 9.4% +180 bpts 5 7% +Net Income % 5.7% 180 bpts Cash Flow % to Net Income 126% +160% pts Shareholder Return 27.0% +12% pts 5 July 27, 2010 High Quality Earnings &
Slide 6: Strategic Progress Continues
Strategic Progress Continues… $3.0 Billion Grow Sales $3 Billion by 2014 1st Half Progress Best in Powersports PLUS 5-8% organic growth #1 in market share in ORV, and gaining $1.566 Billion Victory progress continues Growth through Adjacencies $100 - 300M growth Began shipping Bobcat product 2009 Ac
Slide 7: Full Year 2010 Guidance
Full Year 2010 Guidance Total Company Sales (in millions) Diluted EPS (in millions) Up 17% to 20% Up 25% to 28% $3 80 3 90 $1,565.9 $3.05 3.80 to $3.90 2009 2010 2009 2010 Product Line Sales Guidance Off-Road Vehicles up 22% to 24% Actual Guidance Actual Guidance On-Road Vehicles up over 50% Snowmob
Slide 8: Bennett Morgan, President & COO
Polaris Industries Inc. Analyst / Investor Meeting Morgan Bennett Morgan, President & COO July 27, 2010
Slide 9: Macro-Economic Outlook
Macro-Economic Outlook 1) U.S. Recession technically over Q4 2009 GDP +5.6%; Q1 2010 GDP +2.7%; 2010 Forecast +2.5% Much of this was inventory replacement 2) Housing will get a bit worse – will remain serious issue for next 2+ years 3) Consumer confidence is low & will remain so vs. historical comps
Slide 10: Update on 2010 Objectives
Update on 2010 Objectives Objectives Progress-To-Date (1st half 2010) Make Growth Happen Sales up 20% Int’l sales up 36% Industry product news again leading new Bobcat shipments begun Acquisition activity will increase Swissauto acquisition completed Pipeline of potential acquisitions full $166M of
Slide 11: North American Retail Sales
North American Retail Sales 9% 13% Snow Vic ORV TOTAL (percentage change from prior year) -4% 0% -23% -20% -12% -22% -17% Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Polaris N.A. retail sales continues to outperform Side-by-side, Victory and International retail sales up significantly in Q2 Indu
Slide 12: Revenue Drivers
Revenue Drivers 20% 0% 6% 10% 1st Half 2010 Future Periods N.A. Retail Unit Sales Growth -10% 3% 11% Currency rates Average Selling Price N.A. Dealer Inventory Reduction N.A. Retail Unit Sales Growth Currency Average Selling Price N.A. Dealer Inventory Reduction International Adjacencies Wholesale $
Slide 13: Adjacencies: Military / Bobcat / LEV
Adjacencies Military / Bobcat / LEV Polaris ($000’ ) Military Added 5 new vehicles Huge Market potential Military Sales s) +51% Up 20% to 30% 2009 2010 E tdSl T d Request for quote activity up substantially guidance Expected Sales Trends Bobcat Strategic Alliance Began shipments in Q2 New product we
Slide 14: Operational Excellence – What's New: Max Velocity Program
Operational Excellence – What’s New Max Velocity Program (MVP Expansion) Goal: Maximize Retail Sales Maximize Inventory Turns Maximize Market Share Currently 50% of N.A. ORV dealer volume – expanding to all ORV dealers in 2H MVP i ki is working – Gaining significant share Retail Sales accelerating I
Slide 15: Manufacturing Realignment Goals
Operational Excellence – What’s New Manufacturing Realignment Goals 1. Three Centers of Excellence Direct Labor & Benefit Cost Per Hour Hour Overlapping manufacturing capabilities 2. Dramatically reduce cost of logistics and labor with footprint U it d Chi C h M i G $ Per H redesign 3. Move closer t
Slide 16: Net Promoter Scores
Operational Excellence – End Game World Class Net Promoter Scores (NPS) Net Promoter Scores 2006 2007 2008 2009 Most satisfied customers for our products 2010 YTD Top Net Promoter Score 75+ Consistent market share gains in all businesses 16 July 27, 2010 Increased Consumer Satisfaction
Slide 17: Expanding Margins
Operational Excellence – End Game Expanding Margins Total Company Gross Margins Total Company Net Income Margins Up to 26.4% 22.1% 22.9% 25.1% 6.3% 6.0% 6.5% Up to 7.2% 2007 2008 2009 2010 2007 2008 2009 2010 Expanding profit margins 2010 Expectations Continuous non value add waste reduction through
Slide 18: Speed to Market
Operational Excellence – End Game Speed to Market Concept Design Validation Production Distribution Feedback Total Lagging 2006 Concept Design Validation Production Production Feedback Total Competitive 2007 Concept Design Validation Production Production Feedback Total 2008 Concept Design Validatio
Slide 19: Operational Excellence Results
Polaris’ Operational Excellence Results - Game Changer Market Share 3 years of market share gains Dealer Inventory Down over 60% in units in 4 years in N.A. Quality Net Promoter Score (improve NPS) continues to Cost Gross Profit Margin up 430 bpts over 3 years (guidance) g ) Speed Fastest in powersp
Slide 20: How We Continue to Win
How We Continue to Win Economy and consumer environments remain challenging Polaris expected to continue to gain share Focus remains on “value” and “performance” Intelligently invest in diversifying portfolio innovate Continue to Strong MY11 news again – more to come in the future Continue to improv
Slide 21: Q&A
> PGLARIS Q&A
Slide 22: Polaris Off-Road Update
POLARIS OFF-ROAD UPDATE Matt Homan Vice President Off-Road Vehicles JULY 27th, 2010
Slide 23: Agenda
AGENDA Industry Overview Polaris Plans & Results MY2011 New Products Adjacent Markets
Slide 24: Off-Road Customer Profiles
OFF-ROAD CUSTOMER PROFILES (North America) ATV RZR RANGER AGE INCOME MALE/FEMALE38 Yrs $60K 85% / 15% 24% #1 Trail Riding #2 Farm/Ranch #3 Hunt 1st TIME OWNER USAGE Differentiated Customer Ladder
Slide 25: Off-Road Industry Growth
OFF-ROAD INDUSTRY GROWTH ( North America) ) ATV ORV ATV = -16% 5 Year CAGRs SxS 2009 ATV & SxS = +5% SxS Markets Similar Size in $ Sales ORV = -11% I d t R i Ch ll d 2005 2006 2007 2008 2009 SxS Industry U.S. Only ATV Industry N.A. 4 Industry Remains Challenged
Slide 26: Off-Road Competitive Overview
OFF-ROAD COMPETITIVE OVERVIEW ( North America) ) 2010 TREND 2009 SxS 2009 ATV 2009 TOTAL ORV #9 #1 #2 Honda #1 #2 #1 Polaris #8 #6 #5 Arctic Cat #2 #7 #4 Kawasaki #5 #3 #3 Yamaha #3 N/A #8 Deere N/A #5 #7 Suzuki < font color="white" style="DISPLAY: inline; FONT-SIZE: 6pt; FONT-FAMILY: Times New Roma
Slide 27: Off-Road Vehicles 2010 Plan
OFF-ROAD VEHICLES 2010 PLAN 1. Gain Share: Leverage Product & Marketing L 2009 L h ATV/S S C bi d M k ti Leverage Launch + SxS Combined Marketing 2. Expand Margins: Cost Down + Mexico Execute Cost Down Plans + Ready Mexico for 2011 3. New Products: Enter Incre mental New Segments Strengthen “Best of
Slide 28: Off-Road Vehicles 2010 Results
OFF-ROAD VEHICLES 2010 RESULTS ( North America) ) 2010 FORECAST 2010 PLAN Ahead of Plan Single-digit declines SxS Industry Sales Modestly Worse Down -15% ATV Industry Sales Ahead of Plan Flat vs. LY ORV Revenue Single Ahead of Plan Reduce by 20%+ Dealer Inventory Ahead of Plan Expand Margins Gross P
Slide 29: Share: Leverage Product & Marketing
SHARE: Leverage Product & Marketing ( North America) ) SxS Share = +175% Since ’06 ATV SxS (Estimated) ATV Share = Highest In 2006 2007 2008 2009 2010 YTD 10 Years Retail Efforts = Accelerated Share Gains 2010 YTD SxS U.S. Share Estimated 8
Slide 30: ORV Margins: Strong Cost Down Plan
ORV MARGINS: Strong Cost Down Plan Gross Profit % Operating Margin % 1. Value Analysis/Value Engineering 2. Purchasing – i.e. Low Cost Sourcing 3. Strength Driven Pricing Excellent Margin Expansion Progress 2007 2008 2009 2010 Forecast 9
Slide 31: 2011 New Products: Strategy
2011 NEW PRODUCTS: Strategy BEST of BEST – Even Better for 2011 BETTER Sportsman XP (1 Up and 2 Up) 1-2-BETTER RANGER XP RZR = More Trail + More RZR S BEST VALUE – Expand in 2011 NEW ATV Value Line NEW RANGER Mid-Size Line-up INCREMENTAL SEGMENTS Enter in 2011 – Global + Military = Diesel and On-Roa
Slide 32: 2011 Best of Best – New Sportsman XP
2011 Best of Best – NEW! Sportsman XP NEW! Bi I Big Improvements 12 lb weight reduction STX Seat – Comfort/Grip Improved Splash Protection 17% More Range (EPS models) New Tires With More Traction Multi-Function Gauge (non-EPS) Multi non 11 Best ATV – Gets Better
Slide 33: 2011 Best of Best – New Sportsman 2-Ups
2011 Best of Best – NEW! Sportsman 2-Ups NEW! L&R Passenger Hand Grips NEW! Accessory Rear Box NEW! M ltiF ti G P k Multi-Function Gauge Package NEW! Electrical ‘Center’ Moved Forward NEW! 17% More Fuel Capacity Improved Rear Suspension Travel From 10” to 10.25” 12 NEW! Convert From 2-Up to 1-Up
Slide 34: 2011 Best of Best – New RANGER XP
2011 Best of Best – NEW! RANGER XP NEW! More Power 50HP 55 MPH Top Speed p p NEW! Big Improvements Fuel Range +20% Lighting +20% Brighter Multi-Function Gauge 800 POWER NEW! RANGER XP 800 g EZ Attach Side Nets 13
Slide 35: 2011 Best of Best – New RZR
2011 Best of Best – NEW! RZR NEW! More Power 800HO Engine NEW! Rear Storage +60% Cargo Capacity % g p y 23 Tie Down Points NEW! One Piece Nets One-Easier in/out 14 NEW! More Style and More Trail
Slide 36: 2011 Best of Best – New RZR S
2011 Best of Best – NEW! RZR S NEW! Polaris Long Travel System Long-Equals More Value / Same Performance NEW! 2” Big Bore Sachs Shocks Incredibly Smooth Ride NEW! ITP 900 XCT Ti Tires Polaris SxS Exclusive NEW! O Pi N t One-Piece Nets Easier in/out 15 NEW! RZR S – Competitive Weapon @ $12,499
Slide 37: 2011 Best Value – ATV Industry Opportunity
2011 Best Value – ATV Industry Opportunity Industry 500cc Sales Industry Big Bore Sales Industry 400/Entry Rec Ut Sales PREMIUM PREMIUM 40% VALUE 50% VALUE 100% Value 60% 50% Polaris Share = STRONG in Premium & Value Polaris Strong in Premium – Underperforms in Value Polaris Share = Underperforms in
Slide 38: 2011 Best Value – New Sportsman Line
2011 Best Value – NEW! Sportsman Line NEW! Full-Size Sportsman 400 – $5,599 NEW! Sportsman 500HO – $5,999 NEW! Sportsman 800HO – $7,499 +19% Travel Improved Sight Lines Improved Sight Lines +25% Ground Clearance +63% Towing NEW! High/Low Tranny Radiator UP 3” = MUD 50W Low Beam New Quieter Tranny En
Slide 39: 2011 Best Value – New RANGER Mid-Size
2011 Best Value – NEW! RANGER Mid-Size RANGER 400 $7,999 NEW! RANGER 500EFI $8,999 NEW! 500EFI Crew $9,999 Retail = Strong Start Moves to Mid-Size 4 Person Capacity On-Track to be #3 Best Selling RANGER Best Value in Industry EFI Power Full Instrumentation RIGHT Price Gap Mid-Size Footprint Multi-Pa
Slide 40: 2011 Incremental New – New Diesel
2011 Incremental New – NEW! Diesel 3 C li d 24 HP 904 Y E i Targeted At N.A., International and Military Markets 3-Cylinder, 904cc Yanmar Engine Reliability + Torque F t t +35MPH T S d Fastest: Top Speed Big Torque 90% Peak Torque @ 1600 RPM Better Ride Than Any Diesel ( IRS, Suspension) , p ) +40%
Slide 41: 2011 Incremental New – New EV LSV
2011 Incremental New – NEW! EV LSV Targeted At N.A. and Military Markets On-Road Compliant Windshield, Turn Signals, Horn, Mirrors g Hallmark RANGER Features IRS AWD w/VersaTrac IRS, VersaTrac, IRS Federal Tax Credit for Purchases 10% of Sale Price On Government Approved List 20 NEW! EV LSV Expands
Slide 42: 2011 Polaris Line-Up
2011 Polaris Line-Up Best of the Best Better For 2011 p Even + Best Value M V l f 2011 More Value for 21
Slide 43: Adjacent Markets – Military Plan
ADJACENT MARKETS – MILITARY PLAN Leverage Full Line Of Mission Support Vehicles .. Leverage MV700, MVRS700, plus Sportsman & RANGERs .. Army, National Guard, Air Force, Special Forces, etc. y, , , p , New Products To Serve More Markets .. RANGER Diesel + Polaris EV LSV Expanding to other Government
Slide 44: Adjacent Markets – Military Strategy
ADJACENT MARKETS – MILITARY STRATEGY ATV SxS Dedicated B i U it Military M d l Polaris Defense Honda Business Unit Models John Deere Yamaha Kawasaki Kubota Club Car EZ-GO 23 POLARIS is Differentiated with Full Prod uct & Service
Slide 45: Adjacent Markets – Military Results
ADJACENT MARKETS – MILITARY RESULTS Revenue Revenue 3 Year CAGR = Op Margin 44% Op Profit 3 Year CAGR = +42% 2010 Estimates 2007 2008 2009 2010 Forecast 24 MILITARY GROWTH – STRONG RETURNS
Slide 46: Adjacent Markets – Bobcat Partnership Strategy Update
ADJACENT MARKETS – BOBCAT PARTNERSHIP STRATEGY UPDATE 1. Supply Vehicle Launched + 2. Co-Developed Vehicles: On-Track to Push Further into Work SxS 2. Real Benefits: Diesel Launched in North Compact Construction Manufacturer 1 # + American, Military and International Markets 1 # Off-Road Vehicles Ma
Slide 47: Adjacent Markets – Bobcat Partnership
ADJACENT MARKETS – BOBCAT PARTNERSHIP BOBCAT RANGER STYLE New Current ENGINE 500cc 800cc FRONT SUSPENSION Struts Dual A-Arms SEATS 2 Person 3 Person SPEED 30 MPH 55 MPH PAYLOAD 1100 lbs 1000 lbs TRAVEL 6” 9” GROUND CLEARANCE 9.5” 12.0” TILT & POWER STEER NO YES 26 BOBCAT Supply Product = Differentia
Slide 48: Off-Road Summary
OFF-ROAD SUMMARY Polaris #1 in Off-Road – Wi i th C titi B ttl Winning the Competitive Battle 2010 Results Ahead of Plan – But Markets Are Challenged STRONG 2011 New Products – MORE! Best of the Best + Best Value NEW Adjacent Markets – Strong Growth Opportunity 27
Slide 49: Snowmobiles, Parts, Garments & Accessories, Financial Services
Snowmobiles Parts, Garments & Accessories Financial Services Scott Swenson Vice President & General Manager Analyst Meeting Orlando, FL July 27, 2010
Slide 50: Snowmobile Industry Overview
2 7-27-10 Snowmobile Industry Overview Worldwide Industry Retail: Outlook for Industry Long-Term: Industry will be flattish in near term. Potential for modest growth with snow fall & economic recovery. 2.6 million registered owners generate a lucrative parts, garments & accessories business 95% repe
Slide 51: Snowmobile Industry Demographics
3 7-27-10 Snowmobile Industry Demographics 2010 Registered – U.S. 1.5 million (down 9% … Michigan) 2010 Registered – Canada .6 million (down 20% … Ontario) 2010 Registered – Europe .5 million (estimate) Average Age 43 % 50 or older 45% % Male 88% Median Annual Household Inc. $75,000 Avg. Miles Ridde
Slide 52: State of Snowmobile Market
4 7-27-10 State of Snowmobile Market Snowfall inconsistent last winter: solid in Eastern US, spotty in Mountains, awful in Canada. Significant retail impact from macro-economic conditions last season. Minimal market share movement: Arctic Cat & Ski Doo up with Polaris & Yamaha down. Dealer inventory
Slide 53: Snowmobile Industry (North America)
5 7-27-10 Snowmobile Industry (North America) Growth in Mountains, Crossover & Utility 2010/2011 Industry % 5 Year Trend Performance/Trail Mountain Crossover Utility Touring Kids Entry Core Ultimate 2 Stroke 4 Stroke Down Up Flat 34% 23% 17% 13% 11% 2% 27% 39% 34% 76% 24%
Slide 54: New Sleds: MY '11
6 7-27-10 800 RMK Switchback Assault New Sleds: MY ’11 800 Rush 550 IQ (Shift/LXT) 55% Canada >50% of North American Orders 50% Canada
Slide 55: Snowmobile Quality
7 7-27-10 Snowmobile Quality Snowmobile quality, primarily 800s, still not meeting expectations: - Increased warranty reserve. Q2 financial impact. - Net promoter scores remain last in industry MY ’10 Rush quality results showed significant improvement. MY ’11 800 engine improvements. Highly confide
Slide 56: Snowmobile Outlook
8 7-27-10 Snowmobile Outlook 2010 Calendar Year: - MY ’11 product intro exceeded expectations; RMK a huge hit & will drive growth in the mountains. - Revenues expected to be flat. - Snow check sales up over 200%. - International retail up slightly: Finland solid year; Russia recovering. - Retail foc
Slide 57: PG&A Overview and Competition
9 7-27-10 COMPETITION: Aftermarket: i.e.; Parts Unlimited, Tucker Rocky, MotoVan, Indirects: Other OEM’s Pure Polaris Overview Service Parts, Accessories, Apparel & Financial Services 38,000 SKU’s, $313 Million in Sales in 2009 Highest Gross Margins Top Selling Commodities Cabs/Cab Components (ORV)
Slide 58: PG&A Sales & Margin Growth
10 7-27-10 PG&A Sales & Margin Growth $=millions Proven History of Growing Revenues AND Margins Revenues Gross Margin Operating Margin 2002 2003 2004 2005 2006 2007 2008 2009 $203 $223 $245 $274 $270 $293 $344 $313 Base 103% 106% 107% 110% 117% 116% 124% 118% 122% 125% 136% 132% 152% 2010 Revenue Fo
Slide 59: PG&A Revenue Mix
11 7-27-10 ORV 72% 2009 PRODUCT MIX BY GEOGRAPHY PG&A Revenue Mix 2009 PRODUCT MIX BY PRODUCT LINE 2009 PRODUCT MIX BY BUSINESS Revenue Growth Drivers: SxS Accessories + Bobcat ATV Parts Military Parts International Parts & Accessories Victory Accessories PWC, 1% Snow 20% VIC, 7% US 69% CANADA 16% I
Slide 60: PG&A Sales/Distribution (North America)
12 7-27-10 PG&A Sales/Distribution (North America) APPROACH Drive every day profitability Focus resources on “power” items More resources on growth dealers - Free fixtures & signage - In-dealership merchandisers Easy for Dealer to Order - Automated on-line ordering - Consistent programs Drive salesp
Slide 61: Innovation Drives Sales
13 7-27-10 Innovation Drives Sales ATV: 80 New Accessories Glacier III plow Tire/Rim options: 27 combinations - ITP partnership - Luster rim Lock & Ride Windshields: 18 options VICTORY: 45 New Accessories Core Custom Experience Lock & Ride: Trunk, backrest, luggage rack, windshields Exhaust: Tri-Pro
Slide 62: Financial Services – Retail
14 7-27-10 Financial Services – Retail Approval Rates Credit Penetration Installment vs. Revolving Partner Status - HSBC Revolving: Expires October 2013. Regulatory concerns. - Sheffield Installment: Expires Feb. 2011. Negotiating extension. - GE Installment: Expires Feb 2011. Negotiating extension.
Slide 63: Wholesale Credit to Dealers
15 7-27-10 Wholesale Credit to Dealers Joint Venture Partnership with GE for Dealer Financing in U.S. – Polaris Acceptance Established in 1996. Stable relationship. Shared 50/50 equity, income and risk Receivables funded by GE debt Expires in 2012, purchase option Dealer repossessions are stable, wi
Slide 64: Summary
16 7-27-10 Summary Snow - Product key to share growth … Rush/800 RMK are winners - Large, stable and active installed base - Nice cash flow business PG&A - Proven ability to grow sales AND margins - Innovation drives growth. Integration with vehicles at an all time high - Highest margin opportunity
Slide 65: Sales & Corporate Marketing, MVP, On-Road Division
Sales & Corporate Marketing MVP On-Road Division Mike Jonikas, Vice President Tuesday, July 27, 2010 Analyst Meeting Orlando, FL
Slide 66: Agenda
2 Agenda N.A. Sales & Corporate Marketing Roadmap Dealer Network Overview Max Velocity Program (MVP) Dealership Health On-Road Division Roadmap Low Emission Small Vehicles Motorcycles & Recreational Riding
Slide 67: N.A. Dealer Network Overview
3 N.A. Dealer Network Overview Healthier Position Relative To Competitors Economy Negatively Impacting Most Dealerships Optimism Retail Margins w/Key Polaris Lines RANGER, RZR, Sportsman, Victory Cross PURE accessories Max Velocity Program (MVP) 30% better segment stocking Better retail sales & more
Slide 68: N.A. Competitive Landscape
4 N.A. Competitive Landscape Holding North American dealer count wherever feasible Expect new value product offerings in on-road motorcycle & higher cc ORV segments Re-trenched focus upon cruiser & touring motorcycle segments Expect aggressive system-wide cost down, new product & marketing for young
Slide 69: Sales & Corporate Marketing Roadmap
5 Sales & Corporate Marketing Roadmap Best in Powersports PLUS 1. Count Strong N.A. Dealer Count Position 2. Retail Best Powersports Retail Practices 3. MVP Right Product, at Right Place, at Right Time Distribution Leadership
Slide 70: Strong N.A. Dealer Count Position
6 Strong N.A. Dealer Count Position Industry Leadership Position Consumer Desire for Our Brands Product quality & innovation Effective demand creation Efficient Business Model Inventory age & turns Within existing credit capacities ORV Leadership Position Snow Leadership Position MC Fully Penetrate
Slide 71: Retail Pull Business Model Advantage
7 Retail Pull Business Model Advantage Drive Best Powersports Retail Practices Retail Practices – dealership improves every year (new or better practices) Right Product, at Right Place, at Right Time (MVP) Segment Stocking - designated key segments stocked & displayed Replenishment Availability - ti
Slide 72: Best Powersports Retail Practices
8 Best Powersports Retail Practices New Sell-in Approach Menu For Greater Improvement Automotive dealer model learning Stair-step Annual Participation Hurdle Continuous tactical improvement Cost Efficient Motivation Cash flow & personal recognition Polaris V.I.P. Program Implement Designated Retail
Slide 73: Right Product, Place, and Time (MVP)
9 Right Product, Place, and Time (MVP) Segment Stocking Advantage Viable Product Segments Consumer desired for reasonable turns Designated segments by market Appropriate Flooring Support Terms Mutual incentive for profitable turns Frequent Replenishment Orders Consistent DSM selling execution Nimble
Slide 74: On-Road Division Roadmap
10 On-Road Division Roadmap Build Global Motorcycle Presence 1. Victory: sizeable, profitable, global 2. Flank into Segments Beyond Heavyweight Motorcycles 3. Effective and Financially Viable Global Distribution 4. Compelling Global Niche Brand Position Create Sizeable Small Vehicles Business 1. Pen
Slide 75: N.A. & E.U. Motorcycle Market
11 N.A. & E.U. Motorcycle Market $10.4 Billion Source: 2009 MIC & Giral; Excludes non-reporting SE Asian OEMs $2.2B $2.9B $2.1B $1.1B $0.9B $0.9B $0.3B Strategic Direction Sizeable Victory Business – Effective demand creation - Lean operations Flank Beyond Heavyweight - Global opportunities Effectiv
Slide 76: Low Emission Small Vehicle Market
12 Low Emission Small Vehicle Market $3.3 Billion Source: Power Products Marketing; Goldman Sachs; McKinsey; Euromonitor $1.3B $1.2B $0.8B Strategic Direction Segments Poised for Growth - Ageing & urbanization tailwinds - Increasing gov’t regulation - Technology more affordable Sizeable Market Posit
Slide 77: Low Emission Small Vehicles
13 Low Emission Small Vehicles People Transport Light Duty Government Commercial Sites Stealth Hunters Multi-Acre Homeowners Comfort & Handling - Comfort ride suspension technology - Adjustable driver seat Peace of Mind Operation - Seat belts front & rear - Low & high beam lighting MyChoice™ Rear Se
Slide 78: Victory Motorcycles
Steve Menneto, General Manager Tuesday, July 27, 2010 Analyst Meeting Orlando, FL Fuel It. Victory
Slide 79: N.A. 1400+cc Motorcycle Industry
2 N.A. 1400+cc Motorcycle Industry Industry Retail History Units 2010 Industry Retail 2010 N.A. 1400+ cc industry down 14% Touring segment declining at a slower pace than Cruiser segment Cruiser segment decline is sharper in last year Touring Cruiser 2006 2007 2008 2009 50000 75000 100000 125000 150
Slide 80: 2010 N.A. 1400+cc Competitive Summary
3 2010 N.A. 1400+cc Competitive Summary Victory Growing Share In Difficult Market Conditions Rank Manufacturer Strategy Share Trend 1 Harley Aspiration Brand Most Complete Product Line-up Huge Installed Owner Base 2 Metrics Trusted Brands Breadth of Distribution Bases 3 Victory Modern American Styli
Slide 81: 2010 Victory – What's Different
4 2010 Victory - What’s Different New Team – Medina & Field Sales New Promotion plan - More Aggressive on Non-currents New Lower MSRP on Vegas & Kingpin New Focus on Military New Demo Plan – 2X the trucks/3X the Demos New Brand Position – “Fuel It.” New Touring Models – Cross Country & Cross Roads N
Slide 82: Victory Consumer Profile
5 Victory Consumer Profile 35 to 54 year old male Married, Household income $80k+ Experienced motorcycle rider Patriotic Product wants: innovation, quality, performance, value Love Victory: industry leading dealership & product satisfaction Fuel It. - Connecting with our Customers through Shared Val
Slide 83: Victory Growth Strategy
6 Victory Growth Strategy 1. Expand Victory Touring Business 2. Strengthen Victory Proposition With Core Customer 3. Lean Operations 4. International Sales 5. Expand Global Distribution Presence
Slide 84: Expand Victory Touring Business
7 Expand Victory Touring Business NEW! MY’11 Cross Roads Custom Innovation Compelling modern styling Performance & Comfort (vs. HD) 26% more storage 18% more torque 60% more suspension travel Quality & Value Competitively priced Cross Roads Hard Bag Luxury: 41% Soft Bag: 21% Standard: 29% Hard Bag:
Slide 85: Expand Victory Touring Business
8 Expand Victory Touring Business Cross Country with Lock & Ride Trunk Standard Touring Market NEW! MY’11 Lock & Ride Trunk Industry Leading Capacity & Comfort
Slide 86: Strengthen Victory Proposition
9 Strengthen Victory Proposition Leverage Industry Leading Dealership & Product Satisfaction Aggressive shift in Cruisers - More Power & More Value Expanded 8-Ball Line-Up Starting at $12,499
Slide 87: Lean Operations
10 Lean Operations 1. Continue To Reduce Dealer Inventory Levels YTD 2010 Down 32% vs. LY … more work to do driving retail Mix of Non-currents to Currents improving 2. Grow Retail without Growing Inventory Core Custom Program – 2 Models with 48 combinations Customer: More Options, Lower Price, Less
Slide 88: Victory International
11 Victory International International Retail Outpacing Industry Building Victory Brand with Media & Events
Slide 89: Expand Global Distribution Presence
12 Expand Global Distribution Presence United Kingdom Australia
Slide 90: Corporate Development
Corporate Development Todd Balan – VP Corporate Development July 27, 2010
Slide 91: Agenda
2 Agenda Polaris acquisition impact Acquisition processes Target spaces Timing and magnitude Swissauto review Analyst meeting 7-27-10
Slide 92: Polaris Strategy
3 Polaris Strategy Polaris will become a highly profitable $5B global enterprise by 2019. We will make the best off-road and on-road vehicles and products for recreation, transportation and work supporting consumer, commercial and military applications. Our winning advantage is our innovative cultur
Slide 93: Year Plan and Objectives
4 Analyst meeting 7-27-10 10 Year Plan and Objectives $5B in Sales and $500M in Net Income by 2019 $1.5 $3.0 Grow Sales $3 Billion by 2014 6.5% 8.0% Expand net income margins 8% of sales by 2014 2009 Actual 2014 Best in Powersports PLUS Polaris Powertrains are a competitive advantage in cost and per
Slide 94: Acquisition Rationale & Strategy
5 Analyst meeting 7-27-10 Rational: Acquisition Rational & Strategy - North America accounts for 84% of revenues – Diversification - Geographic expansion - Manageable growth Reduces risk Lessens cyclicality Stronger balanced Polaris FUNDS CONTINUED GROWTH IN CORE BUSINESS Strategy: - Expansion of ex
Slide 95: Acquisitions Approach
6 Analyst meeting 7-27-10 Acquisitions Approach Approach: 1. Develop & build the process to identify, rank & filter segments 2. Identify, rank & filter companies within selected segments 3. Cultivate long and short term acquisition candidates 4. Build functional Polaris teams capable of performing d
Slide 96: Ideation Funnel Approach
7 Analyst meeting 7-27-10 Ideation Funnel Approach Offer DD Negotiations Integration Activities Objectives Stages Market research, brainstorming define markets Get opportunities on paper, build and organize spaces Research, prioritize targets, track progress, understand spaces Move high priorities c
Slide 97: Target Spaces
8 Analyst meeting 7-27-10 Target spaces New Customers New Channels New Geographies New Products & Technologies Innovative Culture Engineering Adaptability Operations Flexibility Corporate Speed New Businesses Forward Integration Backward Integration New Capabilities Primary Focus Secondary Focus
Slide 98: Core Competencies and Criteria for Acquisitions
9 Analyst meeting 7-27-10 Core Competencies Product Innovation – Applications Engineering Flexible Manufacturing Unique Culture Speed Criteria for Acquisitions Financial Return ROI EPS Accretion Growth Above GDP Segments Emerging Markets Growth Accelerators Mega Trends Energy Consumerism Health and
Slide 99: Timing and Magnitude
10 Analyst meeting 7-27-10 Timing and Magnitude $B 1.6 5.0 core growth Polaris will likely buy $500M - $1B in acquisitions between 2010-2015 International On-Road Military Adjacencies STAYING DISCIPLINED IS THE KEY examples of non-organic growth 0.0 1.0 2.0 3.0 4.0 5.0 2009 2011 2013 2015 2017 2019
Slide 100: Swissauto Powersports
11 Analyst meeting 7-27-10 Swissauto Powersports Automotive Supercharging and Kart Business ~15 people Powersports 15 people Acquisition date: January 2010 Acquired: Engineering team with Strong performance powertrain design, test, and prototyping skill sets. Single cylinder 4-stroke technology Tech
Slide 101: Who is Swissauto Powersports
12 Analyst meeting 7-27-10 Who is Swissauto Powersports… Powersports is a company with many years of experience with high performance engines as well as the automotive and power sports industries. Core competencies of the team: Internal combustion engines and supercharger design Simulations for inte
Slide 102: Fit with 2010 Polaris Objectives
13 Analyst meeting 7-27-10 Fit with 2010 Polaris Objectives Best in Powersports Plus Growth Outside Powersports Global Market Leadership Operations as a Competitive Advantage Strong Financial Performance swissauto Powersports compliments our objectives
Slide 103: Operational Excellence: A Pathway To World Class Performance
Polaris Industries Inc. Operational Excellence A Pathway To World Class Performance Suresh Krishna VP Integration & Chief Supply Chain Officer July 27, 2010
Slide 104: Manufacturing Realignment
Manufacturing Realignment Closer to our customer - Market shift to SxS is increasing our sales in the south; lowers logistics cost South of border manufacturing provides a lower cost footprint Exit from non-core manufacturing seating/stamping Support international expansion into Latin America Organi
Slide 105: Mexico: Location – Monterrey
MEXICO: Location – Monterrey 1. Top destination for business in Mexico 2. Good mix of industrial and automotive companies 3. Good availability of engineering and managerial talent; technical school and university in area 4. Strong labor pool. Good skill set for manufacturing 5. Good supply base for
Slide 106: Manufacturing Realignment Underway
4 Manufacturing Realignment Manufacturing Realignment Underway Transition Costs, Capital Expenditures and Estimated Annualized Savings Cap. Ex. $35 million Savings $30+ million Transition Costs $20 - $25 million to Complete 1H 10 2H 10 1H 11 2H 11 1H 12 2H 12 1H 13 Transition Costs Low Transition Co
Slide 107: Supply Chain
4 POLARIS" Supply Chain
Slide 108: Supply Chain Improvement
Supply Chain Improvement Costs: 5% gross cost reduction in 2010 - Manufacturing productivity: up – Spend productivity due to value engineering LCC: up Flexibility/Speed - Reduction in Supplier lead times to support MVP - Reduction of Manufacturing lead times in factory Inventory - Right size invento
Slide 109: Manufacturing Productivity
7 Manufacturing Productivity Productivity Gains Continue 2010 Est. $800 Continuous Improvement 700 Polaris Manufacturing Wholegoods Revenue Per Employee 300 400 500 600 $ $650 $700 $750 Emp $000's 0 100 200 09 09 10 10 10 10 10 10 2010 $450 $500 $550 600 Revenue Per 2010 Oct- Dec- Feb- Apr- Jun- Aug
Slide 110: Manufacturing Flexibility
Manufacturing Flexibility Polaris Manufacturing Revenue Change vs. Plant Labor & Overhead Spend 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Expectation $ Mfg Cost % Chg $ Sales % Chg Production Facilities Highly Flexible
Slide 111: Worldwide Procurement
Worldwide Procurement STRATEGY: Move Sourcing spend from Europe and Japan, into India, Asia and Mexico How will we do it: India Sourcing office. Dedicated Mexico resource LCC Content: Tier 1 and Tier 2 2006: 6% 2010: 25% 2014: 37%
Slide 112: Supplier Lead Time Reduction
Flexibility Supplier Lead Time Reduction Supplier Lead Times Improving Weeks 2006 2007 2008 2009 2010 2011 ORV Victory Supplier Lead Times
Slide 113: Inventory Reductions
Inventory Reductions Less Factory Inventory Required to Meet Demand Total Global Factory Inventory Inventory Days on Hand Q1 Q2 Q3 Q4 2008 2009 2010
Slide 114: International Operations
International Operations Mike Dougherty Vice President, Global New Market Development
Slide 115: Global Market Leadership Overview
2 Global Market Leadership Overview Polaris International Sales ($000’s) $304.2 -17% $252.4 Up 15% to 20% Growth 2010 Forecast 2008 2009 2010 Objectives Grow sales Further Strengthen Core EMEA business Develop new markets – China, Brazil Expand Victory Global distribution Polaris International At a
Slide 116: International Division 2010 YTD
3 International Division 2010 YTD Polaris Sales ($000’s) $58.7 +32% $77.5 Q2 2010 Revenue by Geography Q2 2010 Revenue by Business Unit Full year 2010 sales guidance lowered slightly to up 15% to 20% – Primarily driven by currency Gained share in ORV again in Q2 China and Victory expansion progressi
Slide 117: International YTD 2010 Sales
4 International YTD 2010 Sales 1st Half 2010 $112.1 $6.5 $25.6 $5.2 $3.6 ($0.4) $152.6 2009 Total Intl 2010 Total Intl % Change in Total International Sales Sales growth continues to outperform Company expectations - SxS up over 50% - Victory/On-Road up over 100% - ATV up over 20% - PG&A up over 20%
Slide 118: European 2010 ORV Competitive Overview
5 European 2010 ORV Competitive Overview Top 8 Markets Traditional Brands 2010 YTD Market Estimate ˜ 16k units (down 8.1%) Top 8 Markets All Brands 2010 YTD Market Estimate ˜ 35k units (down 14.1%) Approximately 75% of the market is on-road Variety of street-legal homologation alternatives 3 points
Slide 119: International 2H Plan
6 International 2H Plan Growth Continues – Keep ORV Leadership Position – Gain More ORV Share w/ SxS – Expand Victory Distribution & Market Share – Enter Work SxS Segment with Diesel Strengthen European Business with HQ Opening Expand Presence in China & Brazil Develop Market Entry Strategy For Indi
Slide 120: MY11 International Product
7 MY11 International Product SPORTSMAN® XTREME PERFORMANCE NEW! SPORTSMAN® Forest 850 NEW! SPORTSMAN® Forest 550 SPORTSMAN® UTILITY NEW! SPORTSMAN® TRACTOR 500 EFI NEW! SPORTSMAN® Forest 500 NEW! SPORTSMAN® X2 550 Intl SPORTSMAN® 2-UP NEW! SPORTSMAN ® TOURING 500 HO Intl NEW! SPORTSMAN ® TOURING 550
Slide 121: 2011 RANGER – New Diesel Power
8 Convenience in Agriculture – Diesel ˜ 80% of SxS market in Europe – 5 liter limit on storing gasoline on farm property in Europe – Low cost, gov’t subsidized “Red Diesel” is readily available Military Market Potential Critical For Penetrating Commercial Segment Australia & UK Primary Initial Marke
Slide 122: Global Market Future Assumptions
9 Global Market Future Assumptions External Drivers – Developing Markets lead Global Economic Recovery – EU Matures & Stabilizes BIC GDP growth 5-10%; EU = 1-3% – Powersports market follows Auto/MC trends in Developing Markets – SxS Market follows N.A trend and becomes largest business Consumer Driv
Slide 123: Projected Global Market Trends
10 Projected Global Market Trends Auto ORV GDP Motorcycle (millions of units) (thousands of units) (millions of units) (trillions of USD) USA excluded for scale purposes 2009/10: 554k 2015: 585k China EU USA Brazil India 2009/10 2015 0 5 10 15 20 25 30 35 40 50 60 70 80 90 100 2 4 6 8012 14 16 18
Slide 124: Changing Biking Scenario in Developing Markets
11 Changing Biking Scenario in Developing Markets Passionate Commuting to office Sensitive for Cost & Mileage ~100cc bikes Compromise on Price and mileage Want better power ~ 125cc bikes Youngsters with passion towards bike Better power & looks ~ 180cc to 350/500cc bikes Financially sound people Pas
Slide 125: Global Market Leadership – 2014
12 Global Market Leadership – 2014 2014 Strategic Initiatives: Double EMEA Revenue Double ORV Business China / Brazil / India Presence $100M M/C Business How We Win: – Triple SxS through share gains and entering work markets – Purpose built products drive EMEA growth – Victory Global Expansion – Dif
Slide 126: EMEA 2014 Development Strategy
13 EMEA 2014 Development Strategy Europe – Maintain Leadership in Off Road Vehicles w/ SxS – Strengthen Germany – Victory + New On Road Segments – Establish Polaris HQ, Rationalize + Expand Operations – More Work & Military Applications with Diesel – New Product Development w/ Swiss Auto Russia – Pr
Slide 127: New Market Development 2014 Strategy
14 New Market Development 2014 Strategy China #1 Off Road – Create market, premium brand, new products Enter Cruisers – Local partner, Victory, new products Establish Polaris China Operations & Partners Brazil #1 Off Road Focus (distribution + local assembly partner) Go On Road: Victory + new produc
Slide 128: Polaris China Launch
Polaris China Launch Beijing Auto Show – Polaris Booth / Press Event 1st Dealership Grand Opening – Beijing 1st Polaris Customer Ceremony
Slide 129: Global Market Leadership Progress
16 Global Market Leadership Progress… Grow - Strengthen Core – Develop New Markets Make Growth Happen >25% of Polaris Revenue 1H PII Int’l Rev ~ 20% 1H Int’l Growth = 36% FY Int’l Growth = 15-20% Strengthen Core ORV Business ORV Market Share Double SxS Business EMEA Swiss HQ Diversifying On Road / A
Slide 130: International Operations Q & A
International Operations Q & A