Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Q4 2008 Earnings Presentation
26 slides from Polaris's earnings presentation, Jan 29, 2009
Slide 1: 4th Quarter & Full-Year 2008 Earnings Results
Polaris Industries Inc. 4th Quarter & Full-Year 2008 Earnings Results January 29, 2009
Slide 2: Safe Harbor
Safe Harbor Today's presentation includes statements which should be considered forward-looking for the purposes of the private securities reform act of 1995. Additional information concerning these factors that may influence results can be found in our 2007 annual report and 2007 Form 10-K, which a
Slide 3: 2008 Full Year Results: Record Sales & EPS
2007 2008 2007 2008 2008 Full Year Results Diluted EPS * $3.10 $3.50 +13% $1,780.0 $1,948.3 +9% Total Company Sales ($ in millions) * From continuing operations. Record Sales & EPS
Slide 4: 2008 Full Year Sales
ORV Snow Victory PG&A 2007 $1,780.0 +9% +15% - -17% +17% 2008 $1,948.3 2007 Total Company 2008 Total Company 2008 Full Year Sales Geographic Sales % Change in Total Company Sales United States Canada Other Foreign Countries Sales 1371 273 304.2 0 Volume Product Mix & Price Currency Total Canada +18%
Slide 5: 2008 Full Year Earnings
0.2% - -0.3% 0.4% - -1.5% 0.1% 0.8% 07 Net Margin 07 Net Margin Gross Profit Financial Services Interest Expense Non-Operating Incom 2008 Full Year Earnings Gross profit margins improved 80 basis points Financial Services income decreased $24.1 million Net margin expansion - focal point for 2009 and
Slide 6: Fourth Quarter 2008 Results
2007 2008 2007 2008 $541.4 Fourth Quarter 2008 Results Revenue down with weak retail sales environment Snow stands out, +19% EPS met expectations Currency impact turned negative Diluted EPS * Total Company Sales ($ in millions) * From continuing operations. $523.6 - -3% $1.07 $1.11 +4%
Slide 7: Fourth Quarter 2008 Sales
2007 ORV Snow Victory PG&A 2008 Fourth Quarter 2008 Sales Geographic Sales Q4 % Change in Q4 2008 Total Company Sales United States Canada Other Foreign Countries Sales 1371 273 255 0 Volume Product Mix & Price Currency Total Q4 Sales by Product line ORV Snowmobiles Victory PG&A Sales 319.8 95.2 21.
Slide 8: Fourth Quarter 2008 Earnings
2007 2008 $38.0 $36.2 - -5% Fourth Quarter 2008 Earnings Net income within expectations Gross profit margins improved 80 basis points Finance Services income decreased $5.7 million Net Income as a Percent of Sales * Net Income * * From continuing operations. Gross Margin Op Expense Financial Service
Slide 9: North American Retail Sales - 2008
North American Retail Sales - 2008 ATVs, Side by sides, Motorcycle and Snowmobiles, combined North American retail sales deteriorated throughout Q4 International also declined in Q4 Polaris gained market share in all businesses in 2008 for 2nd year in row Industry Polaris Industry Polaris Industry P
Slide 10: North American Dealer Inventory
North American Dealer Inventory All Products Dealer inventory down 7% at year-end 2008; not enough Core ATVs and motorcycles require further reductions MVP key to sustainable reductions 2009 dealer inventory levels are expected to significantly decline once again Jan Feb Mar Apr May Jun Jul Aug Sep
Slide 11: 2008 Summary Highlights
2008 Summary Highlights: Record sales and EPS Sales up 9% EPS up 13% Share gains in every business International operations grew 18% Industry leading new products Sportsman XP; RZR S; RANGER HD; 800 Assault/Dragon Operational Excellence delivered Improved quality • Increased speed to market • MVP De
Slide 12: Operational Excellence
2006 2007 2008 2009 Operational Excellence 21.7% 22.1% 22.9% Cost - Gross Profit Margin Expansion Supply chain lead time reduction of 50% New product development cycle time reduced by 37% MVP go to market dealer business model Lean expansion NPS improved in 3 of 4; industry leading in Victory & SxS
Slide 13: Off-Road Vehicle Division
Off-Road Vehicle Division $1.195B $1.306B - -17% to -25% - -20% to -35% Polaris Revenue ($000's) - -22% N.A. Off-Road Vehicle Industry +9% 67% of Total Polaris Sales #1 Market Share in ORV in N.A. & Europe New Sportsman XP & Ranger selling well Consolidated into ORV Division Improve cost synergies &
Slide 14: Snowmobile Division
2007 2008 2009 Guidance Snowmobile Division $179M $205M - -10% to -20% Polaris Revenue ($000's) - -20% N.A. Snowmobile Industry +15% 10% of Total Polaris Sales Gained Share in 2008; #2 Significant Quality Improvement +20% Launched RUSH in 2009 Industries only progressive rate rear suspension Good sn
Slide 15: Victory Division
2007 2008 2009 2005 2006 2007 2008 2009 Victory Division $113M - -25% to -40% - -15% to -25% Polaris Revenue ($000's) - -9% N.A. Motorcycle Industry 1400cc+ - -17% $94M 5% of Total Polaris Sales Industry leader in ownership satisfaction Gained share for 5th year in a row Aggressive supply reduction
Slide 16: PG&A Division
2007 2008 2009 PG&A Division $293M +17% $344M - -9% to -13% Polaris Revenue ($000's) 18% of Total Polaris Sales Sales growth in all businesses; record sales Highest margin business Innovation continues: 260 new accessories in '08 Expect to outperform WG sales in '09 2008 PG&A Revenue by Business Uni
Slide 17: International Division
2007 2008 2009 International Division Polaris Revenue ($000's) +18% $304M - -10% to -20% 2008 Revenue by Geography 2008 Revenue by Business Unit 16% of Total Polaris Sales #1 market share in ORV for EMEA & gaining share EMEA markets weak in '08; expect same in '09 Gaining share in Snow in '08 Increa
Slide 18: Adjacencies
Adjacencies Military: New customer penetration Global expansion / after sale support Expanded business development resources Expecting to announce 2 new adjacencies in '09 Outside powersports On road / outside powersports Additional organic opportunities in pipeline Focus: Global Outside powersports
Slide 19: Financial Services Income
2007 2008 2007 2008 Q4 2008 Q4 2008 2007 2008 2009 Other Activities Wholesale Credit Retail Financing Financial Services Income 2008 wholesale credit income $13.3 million, down 4% 2008 retail credit income $5.7 million, down 80% 2008 other activities income $2.2 million, down 31% Financial Services
Slide 20: 2009 Full Year Guidance
2009 Full Year Guidance Product Line Sales Off Road Vehicles (ORV) Down 17% to 25% Snowmobiles Down 10% to 20% Victory Motorcycles Down 25% to 40% PG&A Down 9% to 13% Total Company Sales Down 15% to 23% Gross Margins Up to 130 bpts improvement Operating expenses Down significantly in dollars but up
Slide 21: Gross Profit Margin Percentage Trends
Gross Profit Margin Percentage Trends Flexible variable cost structure and timely execution drives gross margin expansion
Slide 22: Balance Sheet and Liquidity Profile
Balance Sheet and Liquidity Profile $ In millions (except per share data) 2008 Actual 2009 Guidance Total Debt at Year-end $200.0 Approximately flat Net Debt at Year-end (debt less cash balances) $172.9 Improving Credit Facility (expires December 2011) $450.0 $450 Average debt outstanding $283.0 Sim
Slide 23: First Quarter 2009 Guidance
First Quarter 2009 Guidance Industry retail sales demand trends are expected to decline at least double-digits throughout 2009, and worse in first half First quarter 2008 included a $0.06 EPS benefit from retail credit income received from HSBC Q1 2009 will include severance costs for workforce redu
Slide 24: Ready for 2009
Ready for 2009 Aligned Strategy & Structure Off-Road Vehicle Division International Team Adjacencies Attacked Costs Workforce reductions announced 460 Operating Expense reductions > $10M Manufacturing/Production costs reduced with volume Accelerated Operational Excellence Speed / Factory Adjustments
Slide 25: Polaris 5-Year Strategic Objectives
Polaris 5-Year Strategic Objectives Best in Powersports PLUS 5-8% organic growth Growth through Adjacencies $100 - 300M growth Global Market Leadership >25% of Polaris Revenue Operations is a Competitive Advantage Op Ex drives >200bpts Op Margin improvement Strong Financial Performance Sustainable,
Slide 26: Thank you. Q & A
Polaris Industries Inc. Thank you. Q & A