Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Investor Presentation (June 2016)
32 slides from Polaris's investor presentation, Jun 7, 2016
Slide 1: Investor Presentation June 7, 2016
Investor Presentation June 7, 2016 POLARIS INDUSTRIES INC.
Slide 2: Corporate Overview – 2015
CORPORATE OVERVIEW – 2015 2015 Sales by Reporting Segments* 1954 Year Polaris was Founded ~8,100 Employees Worldwide 16 Manufacturing Locations 5 Research & Development Centers ~1,800 Dealers In North America ~1,700 Dealers Outside North America >390,000 Units Shipped Worldwide >100 Countries – Pola
Slide 3: 2015 Sales & Net Income
Grew Full Year Sales 5%; Net income flatAll businesses gained market share in 2015International sales down 5% (up 10% excluding currency)Constant Currency: EMEA +2%; Latin America +66%; Asia Pacific +21%; Pretax Income included ~$70 million of negative currencyEarnings per share up 2% to $6.75Repurc
Slide 4: 2015 Performance – What Happened?
Company Performance Below Expectations 4 IR JUNE 7 2016 WHAT WENT WELL INTERNAL FACTORS EXTERNAL FACTORS STRENGTHENING DOLLAR US Canda Euro OIL & AG COMMODITIES DOWNSoft retail in oil statesMORE COMPETITIVE OFFERINGSHonda, BRP, John Deere, YamahaMILD WINTERSnowmobile market weak PAINT ISSUESSco
Slide 5: Strategic Objectives: 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 6: 2016 Sales Guidance by Reporting Segments
ORV/Snowmobiles Down Modestly, Motorcycles Unchanged; GAM Increased 6 IR JUNE 7 2016 Global Adjacent Markets Motorcycles ORV / Snowmobiles 2016 SALES GUIDANCE BY REPORTING SEGMENTS* $698.3 Uphigh-teens %(unchanged) IndianVictorySlingshot IndianVictorySlingshot PG&A PG&A PG&A PG&A W&TDefense W&TDefen
Slide 7: Off-Road Vehicles (ORV) 2016 Objectives
OFF-ROAD VEHICLES (ORV) 7 IR JUNE 7 2016 2016 Objectives Polaris Off-Road Vehicles Sales* Polaris N.A. ORV Market Share Polaris Off-Road Maintain #1 Market Share Position in More Competitive Environment ($ millions)Excludes PG&A Twice the Nearest Competitor! #1 COMPETITORS (8) Leverage #1 Industry P
Slide 8: Motorcycles 2016 Objectives
MOTORCYCLES 8 IR JUNE 7 2016 2016 Objectives Motorcycle Vehicle Sales Indian® “Legendary” / Victory® “American Muscle”Broaden product lineExpand dealer network Accelerate accessories growthSlingshot®Broaden consumer baseBuild upon first mover advantageGrow globallyEnhance dealer engagement Total Mot
Slide 9: Snowmobiles 2016 Objectives
SNOWMOBILES 9 IR JUNE 7 2016 2016 Objectives Snowmobile Vehicle Sales Industry-leading qualityGrow Timbersled™ categoryLeverage platform commonalityContinue to grow Market ShareIntroduced 7 new MY’17 snowmobiles in March (+4 Limited Editions) 6-Year Market Share Pts. Growth – N.A. Strong #2 and Gain
Slide 10: Parts, Garments & Accessories (PG&A) 2016 Objectives
PARTS, GARMENTS & ACCESSORIES (PG&A) 10 IR JUNE 7 2016 2016 Objectives PG&A Sales – All Businesses Grow Core PG&A globallyBuild aftermarket brandsExpand digital shopping experienceRefine retail transformation model (SMART) FY 2015 Sales by Segment & Category Accelerate Core Growth / Broaden Aftermar
Slide 11: Global Adjacent Markets 2016 Objectives
GLOBAL ADJACENT MARKETS 11 IR JUNE 7 2016 2016 Objectives Global Adjacent Markets Vehicle Sales* Aixam grows #1 market share . . . AgainExpand commercial sales / improved executionLeverage installed baseAdd scale / capability through M&AObtain program of record (Military) Work & Transportation / Mil
Slide 12: International: Overcome Currency Challenges, Grow Share, Leverage Opole
Overcome Currency Challenges, Grow Share, Leverage Opole 12 IR JUNE 7 2016 INTERNATIONAL 5%(cc +10%) ($ millions)Includes PG&A 2016 Objectives Drive motorcycle growth – midsize offerings catalystsEffectively leverage Poland operationsContinue to build emerging market foundationImprove execution~1,7
Slide 13: Lean Delivers Sustainable Profitable Growth and Competitive Advantage
Lean Delivers Sustainable Profitable Growth and Competitive Advantage 13 IR JUNE 7 2016 LEAN ENTERPRISE Lean drives continuous improvement across the business.Customer Value, Flow, Pull, Standardized Work, Waste Elimination, Built-in Quality and Speed RFM Commercial Model Lean Product Development Le
Slide 14: Research & Development
750 experienced engineers Industry-leading technology centersWyoming, MNRoseau, MNSwitzerland France (Goupil, Aixam) R&D Investment Fuels Innovation & Growth Innovation Vitality Index R&D Spend 14 IR JUNE 7 2016 RESEARCH & DEVELOPMENT ($ millions)
Slide 15: New Manufacturing Facility – Huntsville, AL
725,000 sq. ft. manufacturing plantInitially produce RANGER® SxS; Slingshot® to start in Q3 2016~1,700 employees at capacity~$150 million investmentProvides capacity, flexibility and improved efficienciesIncorporates most advanced lean flow processes and industry-leading technologies Huntsville Prod
Slide 16: Q1 2016 Comments
Difficult / Decent Start to YearSales & Earnings down- on guidance; Indian outpacing industry; ORV catching up; RecallVariability too ConsistentMonth-to-month, region-to-region demand shifts challengingLean Enterprise Traction BuildingVIP cost initiatives; Inventory reduction; Standard work & waste
Slide 17: Q2 2016 Update
ORV sales softer than previously anticipatedPoor weather, RZR recall, slow dealer floor traffic ORV/Snowmobile segment sales now expected in the range of down high-single to low-double digits %Gross margin pressure due to mix, plus potential increased recall costsGross Margin % trending lower than Q
Slide 18: Laser Focus on Generating Profitable Growth
Laser Focus on Generating Profitable Growth R&D and technology investments at record levels Huntsville production started; plant network optimization complete Lean/Enterprise Costs on target for gross 300-500 bps gross margin expansion Commercial innovation accelerating to augment product innovation
Slide 19: Forward-Looking Statements
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 20: Appendices
CONSISTENT FINANCIAL PERFORMANCE Q1 2016 SALES & NET INCOMEQ1 2016 N.A. RETAIL SALES & DEALER INVENTORY2016 FULL YEAR DETAILED GUIDANCE2016 FULL YEAR GROSS PROFIT MARGIN GUIDANCE FOREIGN CURRENCIES EXPOSURES FOR POLARIS POLARIS FINANCIAL POSITIONFACTORY INVENTORYTAYLOR-DUNN ACQUISITIONPOLARIS CUSTOM
Slide 21: Financial Strength & Flexibility
Return on Invested Capital Sales & Earnings Per Share Strong Balance Sheet & Cash Flow Generation Dividends & Share Repurchase 5-Year Total Return 20 IR JUNE 7 2016 FINANCIAL STRENGTH & FLEXIBILITY Dividend 4%More AggressiveShare Buyback Expectations ($ millions) *PEERS: ACAT, BC, DE, DOO, HOG, WGO
Slide 22: Q1 2016 Sales & Net Income
Q1 sales and net income in-line with guidanceORV/Snowmobile sales down 9%; Motorcycles up 18%; Global Adjacent Markets down 5%Results include ~$30 million of additional costs: product liability, warranty, acquisition related costs and severance accrualsEarnings per share decreased 45% to $0.71Gross
Slide 23: Q1 2016 N.A. Retail Sales & Dealer Inventory
Polaris N.A. retail 6% for Q1 2016 vs. Q1 2015Polaris held Powersports share – remains clear #1North American Industry improved sequentially vs. Q4; Q1 similar to PolarisPolaris Q1 2016 N.A. dealer inventory 1% vs. Q1 2015ORV 10% year-over-year; RANGER®, RZR® and ATVs all declinedMotorcycles
Slide 24: 2016 Full Year Guidance
Earnings Per Share (diluted) Gross Profit Margin 23 IR JUNE 7 2016 Total Company Sales 2016 Sales & Earnings Guidance Remains Unchanged Assumptions Protect market shareDealer inventory about flatSegment ExpectationsORV/Snowmobiles low to mid-single digits % (decreased)Motorcycles high-teens % (unc
Slide 25: 2016 Gross Profit Margin Guidance
By Component Q1 2015 Actual Q1 2016 Actual FY 2016 Guidance Prior period 29.1 28.4% 28.4% Production volume/capacity to Product cost reduction efforts Commodity costs Currency rates Higher selling prices Product mix Motorcycle Production Constraints New plant start-up costs Warranty costs Depreciati
Slide 26: Foreign Currency Exposure for Polaris
Currency Improved Slightly in Q1; Remains Volatile 25 IR JUNE 7 2016 FOREIGN CURRENCY EXPOSURE FOR POLARIS Foreign Currency Hedging Contracts Currency Impact on Net Income Notional Avg. Exchange Compared to Prior Year Period Foreign Currency CurrencyPosition Cash FlowExposure Hedged Amounts(US $ in
Slide 27: Polaris Financial Position
POLARIS FINANCIAL POSITION 26 IR JUNE 7 2016 Capital Summary March 2016 Cash Drivers Fav/(Unfav)March 2015 Cash $ 145.8 +32% Debt /Capital Lease Obligations $ 532.4 (63%) Shareholders’ Equity $ 930.9 8% Total Capital $1,463.3 23% Debt to Total Capital 36% (9%) 2015Operating cash flow up significantl
Slide 28: Polaris Sales Growth & Factory Inventory
Inventory Turns Decreasing as Inventory Value Grows at a Faster Rate than Sales Factory Inventory & Turns Sales 27 IR JUNE 7 2016 POLARIS SALES GROWTH & FACTORY INVENTORY ($ millions) Factory inventory historically growing faster than sales – major focus in 2016Inventory reduction closely tied to Re
Slide 29: Acquisition: Taylor-Dunn
ACQUISITION: TAYLOR-DUNN (3/7/16) 28 IR JUNE 7 2016 Taylor Dunn Product Line Taylor-Dunn Overview Leader in light-industrial and commercial vehicles2015 sales: ~1% of total Polaris (80% N.A.)~80 models, ~95% electric ~240 dealers worldwide150+ Employees; HQ and manufacturing in Anaheim, CACustomers:
Slide 30: Polaris Customer Usage Profiles
Snowmobiles Motorcycles POLARIS CUSTOMER USAGE PROFILES IR JUNE 7 2016 Off-Road Vehicles 29 AVERAGEAGE 50 43 44 43 47 52 56 42 INCOME ~$100k ~$100k -- ~$90k ~$90k ~$100k - $125k $160k ~$90k MALEFEMALE 91% 9% 91% 9% 98% 2% 87%13% 75%25% 90%10% 95%5% 90%10% PRIMARYUSE Work & PlayFarm/RanchProperty Mai
Slide 31: Manufacturing Locations
17 In-House Manufacturing Facilities Worldwide 30 IR JUNE 7 2016 MANUFACTURING LOCATIONS Monterrey MEXICOSxS, Engines Spirit Lake & MilfordIOWAMotorcycles,SxS, ACE, GEM RoseauMINNESOTASnow, ATV, SxS OsceolaWISCONSINEngines BourranFRANCEGoupil Chanas &Aix-les-BainsFRANCEAixam Mega Cuyahoga FallsOHIO
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Polaris Industries — Investor Presentation (June 2016) on 6ix