Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Q2 2010 Earnings Presentation
27 slides from Polaris's earnings presentation, Jul 20, 2010
Slide 1: Polaris Industries Inc. Second Quarter 2010 Earnings Results
Polaris Industries Inc. Second Quarter 2010 Earnings Results July 20, 2010
Slide 2: Safe Harbor
1Safe 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 stat
Slide 3: 2nd Quarter 2010 Earnings Results - Scott Wine, CEO
Polaris Industries Inc. 2nd Quarter 2010 Earnings Results Scott Wine CEO
Slide 4: Q2 2010 Net Income and EPS
3 Q2 2010 Net Income and EPS Diluted EPS $0.53 $0.75 +42% Net Income ($ in millions) $17.5 $25.6 +47% 2009 2010 Increased net income and record EPS driven by sales growth and margin expansion Gross margins improved 210 basis points Another Strong Quarter
Slide 5: Q2 2010 Sales
4 Q2 2010 Sales Second Quarter 2010 $345.9 $80.3 -$5.4 $5.0 $5.1 $430.9 Total Company Total Company +25% % Change in Total Company Sales 2009 ORV Snow Victory/On-Road PG&A 2010 Sales growth continues to outperform Company expectations - ORV up 31% - International up 32% - Victory/On-Road up 48% - PG
Slide 6: North American Retail Sales
5 North American Retail Sales Polaris N.A. retail sales continues to outperform Side-by-side, Victory and International retail sales up significantly in Q2 Industry remains sluggish Product innovation and MVP continues to drive growth 0% (percentage change from prior year) Significant Improvement Co
Slide 7: Strategic Plan Gaining Momentum
6 Strategic Plan Gaining Momentum Strategic initiatives 1st Half Progress Best in Powersports PLUS 5-8% organic growth #1 in market share in ORV, and gaining Victory progress continues Growth through Adjacencies $100 - 300M growth Began shipping Bobcat product M&A on track Global Market Leadership >
Slide 8: Full Year 2010 Guidance
7 Full Year 2010 Guidance Polaris retail sales continue to accelerate Side-by-side generating significant growth Net income dollars expected to be up 30% to 33% Net income margin improvement accelerating Total Company Sales(in millions) Diluted EPS(in millions) $1,565.9 Up 17% to 20% Actual Guidance
Slide 9: Bennett Morgan, President & COO
Polaris Industries Inc. 2nd Quarter 2010 Earnings Results Bennett Morgan President & COO
Slide 10: Off-Road Vehicle Division
9 Off-Road Vehicle Division Polaris Sales ($000’s) $261.7 +31% Full year 2010 sales guidance increased: Up 22% to 24% (increased range) Gained significant ORV market share again in Q2 2010 - Both ATV and side-by-side share is up in both N.A. and Europe - New RANGER RZR 4 selling well - Began shipmen
Slide 11: Bobcat Alliance
10 Bobcat branded products for construction, industrial, landscape and agriculture Bobcat Alliance Began shipping product in Q2 to Bobcat Goals: increased volume diversify outside powersports new product developments
Slide 12: On-Road Division – Victory / LEV
11 On-Road Division – Victory / LEV Sales ($000’s) $10.5 +48% $15.5 Momentum Continues N.A. Motorcycle Industry 1400cc+ and Victory Retail Sales guidance $52.8 Up 50%+ Victory Crossroads 2010 V-Twin “Bike of the Year” Q1 2010 Full Year Q2 2010 Victory Industry FY 2009 FY2010 Expectations Solid growt
Slide 13: PG&A
12 PG&A Polaris Sales ($000’s) $66.2 +8% $71.4 Q2 2010 PG&A Revenue by Business Unit Q2 2010 PG&A Revenue by Product Category Accessories 44% Full Year 2010 sales guidance (unchanged) Accessories up 25% in Q2 - primarily side-by-sides International PG&A sales up 13% in Q2 Will release almost 200 new
Slide 14: International Division
13 International Division 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 progressing Inter
Slide 15: Manufacturing Realignment
14 Manufacturing Realignment Goal: three manufacturing Centers of Excellence Mexican manufacturing location in Monterrey selected Production expected to begin 1st half 2011Costs to complete in line with original forecast Cost Charged to P&L(in millions) Annualized Savings(in millions) Manufacturing
Slide 16: Operational Excellence
15 Operational Excellence Results Q2 2010 up 1% from Q2 2009 Raw materials and finished goods up due to production increases Increasing inventory for balance of CY10 to improve delivery Worldwide Factory Inventory Inventories in Great Shape North American Polaris Dealer Inventory Levels Down 32% fro
Slide 17: Dealer Health
16 Dealer Health North American Dealer Count U.S. Dealer repossessions are stable Dealer count up slightly driven by Victory and SxS additions Dealer Health Improving – MVP Working Currently 50% of N.A. ORV dealer volume - More ORV dealers to be added in 2H 2010 Gaining significant share MVP is work
Slide 18: Q2 2010 Margins
17 24.1% 26.2% +210 bpts Q2 2010 Margins Net Income as a Percent of Sales Gross Margins Gross Margin Op Expense KTM Impairment IncomeTaxes /Other 5.1% 5.9% 2009 2010 Margin Expansion Continues Gross margins continue to improve driven by Product cost reduction efforts Production volume increase Conti
Slide 19: Mike Malone, V.P. Finance and CFO
Polaris Industries Inc. 2nd Quarter 2010 Earnings Results Mike Malone V.P. Finance and CFO
Slide 20: 2010 Full Year Guidance
19 2010 Full Year Guidance Product Line Sales - Off-Road Vehicles Up 22% to 24% (increased) – Snowmobiles Approximately flat - On-Road Vehicles Up over 50% - PG&A Up mid-single digits Total Company Sales Up 17% to +20% (increased) Gross Margins Up to 130 bpts improvement (increased) Operating expens
Slide 21: Gross Profit Margin Percentage Trends
20 Gross Profit Margin Percentage Trends Guidance Q2 2009 Q2 2010 2010 Prior Period 23.7% 24.1% 25.1% Production volume adjustments Product cost reduction efforts Commodity costs Currency rates Higher selling prices Product mix Manufacturing realignment N/A Warranty costs Tooling amortization Sales
Slide 22: Financial Services Income
21 Financial Services Income Full Year 2010 income guidance lowered slightly due to lower dealer inventory levels Approval rate has seen sequential improvement to 57% Penetration rate stable Retail credit availability remains acceptable Financial Services Income by category Retail Portfolio – HSBC,
Slide 23: Balance Sheet and Liquidity
22 Balance Sheet and Liquidity Total Debt – ending $200.0 $50.0 $200 Net Debt – ending (debt less cash balances) $33.7 $186.3 Improving again Credit Facility (expires December 2011) $450.0 – $450 Average debt outstanding $200.0 $95.6 $200 Debt Interest Rate – ending (variable) 0.83% (0.04%) Increase
Slide 24: Third Quarter 2010 Guidance
23 Up17% to 20% Third Quarter 2010 Guidance Expect continued retail sales growth and market share gains Gross margin expansion expected to continue Total Company Sales(in millions) Diluted EPS $436.2 Q3 Actual Q3 Guidance $0.94 $1.10 to $1.15 Up17% to 22% Q3 Actual Q3 Guidance 2009 2010
Slide 25: Scott Wine, CEO
Polaris Industries Inc. 2nd Quarter 2010 Earnings Results Scott Wine CEO
Slide 26: Priorities for 2nd Half 2010
25 Priorities for 2nd Half 2010 Make growth happen Ramp up production to meet demand Expand & improve MVP Execute manufacturing realignment plan Great Dealer Show – New Product Introductions Maintaining Momentum, Staying on Strategy
Slide 27: Thank you. Q & A
26 Polaris Industries Inc. Thank you. Q & A