Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — Q3 2016 Earnings Presentation
26 slides from Polaris's earnings presentation, Oct 25, 2016
Slide 1: Third Quarter 2016 Earnings Results
POLARIS INDUSTRIES INC. Third Quarter 2016 Earnings Results October 25, 2016
Slide 2: Safe Harbor
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 and 2017 sales, shipments, margins, currencies, net income and cash flow, the opportunities for expansion and diversification
Slide 3: Scott W. Wine, Chairman & CEO
Scott W. Wine Chairman & CEO POLARIS INDUSTRIES INC. Third Quarter 2016 Earnings Results October 25, 2016 Q3'16 Earnings 3
Slide 4: Q3 2016 Sales and Income
Q3 2016 Sales and Income Q3 2016 Sales Q3 2016 Net Income ($ millions) ($ millions) $1,456.0 $1,185.1 $155.2 $32.3 Q3 2015 Q3 2016 Q3 2015 Q3 2016 Q3 sales and net income finished in-line with pre-release expectations ORV/Snowmobile sales down 23%; Motorcycles down 3%; Global Adjacent Markets up 6%
Slide 5: Q3 2016 N.A. Powersports Retail Sales
Q3 2016 N.A. Powersports Retail Sales Polaris Retail Sales vs. Prior Year Retail Sales by Business vs. Q3 2015 (% change, # vehicle units) (# vehicle units) POLARIS INDUSTRY +11% Off-Road Vehicles high-single digits % low-single digits %* +7% +6% Side-by-Sides high-single digits % ATVs low-double di
Slide 6: N.A. Dealer Inventory
N.A. Dealer Inventory Polaris N.A. Total Dealer Inventory Total N.A. Dealer Inventory 2016 2015 2014 -10% +3% +5% -10% -14% -4% Q3 2015 Existing ORV New ORV Snowmobiles Motorcycles Q3 2016 Q1 Q2 Q3 Q4 Models Models Polaris Q3 2016 N.A. dealer inventory down 10% vs. Q3 2015 ORV down 16% year-over-yea
Slide 7: 2016 Product Recalls Update
2016 Product Recalls Update Previously announced recalls progressing on/ahead of plan Completion rates increasing weekly Slingshot safety/service bulletins issued 10/24 Anticipated costs included in Q3 results No injuries reported Safety and quality improvements enhanced, including: Hired internal a
Slide 8: MY'17 Key Product Launch Summary
MY’17 Key Product Launch Summary Off-Road Vehicles Motorcycles RIDE COMMAND™ Largest screen Fastest interface Most customizable RANGER XP® 1000 New 850 & 1000 More Power More power Industry first gas HVAC Utility versions OCTANE® 3 driver modes RZR® Turbo – 168 HP 104 HP, 76 FT-16 torque Race inspir
Slide 9: Recently Announced Acquisition
Recently Announced Acquisition Transamerican Auto Parts (TAP) Anticipated Reporting Structure After Close $740 million fully-integrated manufacturer, distributor, retailer & installer of off-road Jeep and truck Steve Eastman accessories President – PG&A / Aftermarket 30+ Years Retail Experience 75 r
Slide 10: Mike Speetzen, EVP Finance & CFO
Mike Speetzen EVP Finance & CFO POLARIS INDUSTRIES INC. Third Quarter 2016 Earnings Results October 25, 2016 Q3'16 Earnings 10
Slide 11: 2016 Full Year Guidance
2016 Full Year Guidance Total Company Sales & EPS Segments ($ millions) ($ millions) Sales EPS (diluted) Off-Road Vehicles Motorcycles Global Adjacent mid- to high- /Snowmobiles Markets single digits % $4,719 (unchanged from $6.75 Pre-Release) 47% to 50% Down $3.40 to $3.60 high-single to (narrowed)
Slide 12: Off-Road Vehicles (ORV) / Snowmobiles
Off-Road Vehicles (ORV) / Snowmobiles Q3 2016 ORV/Snowmobile Segment Sales ($ millions) RANGER XP® 1000 $1,193.5 ∆ from Ranch Edition 23% PG&A $923.4 Q3’15 Snow 0% PG&A Snow 35% ORV ORV 25% Q3 2015 Q3 2016 ORV down 25% due to weak industry / recall impact Delayed MY’17 shipments for safety revalidat
Slide 13: Motorcycles
Motorcycles Q3 2016 Motorcycle Segment Sales ($ millions) 3% ∆ from $188.7 $183.2 Q3’15 PG&A PG&A 10% Victory Victory 2% Indian Indian Slingshot Slingshot Q3 2015 Q3 2016 Indian® Roadmaster® INDIAN SPRINGFIELD™ Motorcycles down 3% Indian and Victory up Slingshot down – shipment timing Full-year guid
Slide 14: Global Adjacent Markets (GAM)
Global Adjacent Markets (GAM) Q3 2016 GAM Segment Sales ($ millions) 6% ∆ from $73.8 $78.5 Q3’15 PG&A PG&A 14% Work & Work & 5% Transportation/ Transportation/ Defense Defense Q3 2015 Q3 2016 GAM 6% due to Taylor-Dunn acquisition PG&A up due to Taylor-Dunn acquisition Average selling price for GAM w
Slide 15: Q3 2016 Supplemental Sales Performance
Q3 2016 Supplemental Sales Performance Parts, Garments & Accessories (PG&A) International Q3 Sales 1% to $224.4 Million Q3 Sales 8% to $141.0 Million ∆ from (-7% constant currency) Q3'15 ∆ from GAM Q3'15 Snowmobiles Motorcycles 14% GAM 5% 12% Snow ORV 10% ORV / Snow Motorcycles 70% 13% 19% Motorcycl
Slide 16: 2016 Gross Profit Margin Guidance
2016 Gross Profit Margin Guidance Gross Profit Margin Full-Year Guidance Gross Profit Margin Guidance by Component Q3 2016 Actual FY 2016 Guidance Prior period 28.5% 28.4% 28.4% 380 bps to 390 bps Production volume/capacity Product cost reduction efforts Commodity costs Currency rates Higher selling
Slide 17: Other FY 2016 Expectations
Other FY 2016 Expectations Operating expenses: increase ~300 bps, as a % of sales (legal & other recall related costs / acquisitions) Income from financial services: grow faster than total company sales Income taxes: approximately equal to 2015 income tax rate of 33.6% International sales: about fla
Slide 18: 2017 Initial Thoughts
2017 Initial Thoughts Continued Powersports industry challenges: flat to down third straight year Oil and Gas/Ag unchanged: ongoing pressure Tough competitive environment: promo spending remains elevated Non-recurring charges of $120 million, primarily in gross margins Mid-teens percent increase in
Slide 19: Scott W. Wine, Chairman & CEO
Scott W. Wine Chairman & CEO POLARIS INDUSTRIES INC. Third Quarter 2016 Earnings Results October 25, 2016 Q3'16 Earnings 19
Slide 20: Closing Comments
Closing Comments Global markets and economies: weak and unpredictable Political risks increasing: structural impediments to growth not addressed PII market position improves: ORV share stabilizes / Motorcycle share grows Solid foundation to build on: better inventories, lead times, TAP, etc. SQDC: E
Slide 21: Thank You
Thank You Questions?
Slide 22: Supplemental Data
SUPPLEMENTAL DATA Vision and Strategy Foreign Currency Exposure Q3 Financial Position Income from Financial Services Q3'16 Earnings 22
Slide 23: Vision & Strategy Guiding Principles
Vision & Strategy Guiding Principles VISION STRATEGY Fuel the passion of riders, workers and Polaris will be a highly profitable, customer centric, $8B global Best People, Best Team outdoor enthusiasts around the world enterprise by 2020. We will make the best off-road and on-road by delivering inno
Slide 24: Foreign Currency Exposure for Polaris
Foreign Currency Exposure for Polaris F/X Impacts vs. Prior Year Actual FY 2016 ($ in millions) Q3 2016 Expectations Sales ($2) ($35) Gross Profit ($0) ($45) Pretax Income ($6) ($35) Open F/X Hedging Contracts as of September 30, 2016 Foreign Currency Hedging Currency Impact on Net Income Contracts
Slide 25: Q3 2016 Polaris Financial Position
Q3 2016 Polaris Financial Position Cash Drivers Capital Summary September 2016 ($ millions) ($ millions) Fav/(Unfav) $426 -$105 Sept 2015 -$155 Cash $ 123 -46% -$28 -$154 Debt /Capital Lease Obligations $ 437 +39% $155 -$55 $39 $123 Shareholders’ Equity $ 928 -1% Total Capital $1,365 +9% Cash Operat
Slide 26: Income from Financial Services
INCOME FROM FINANCIAL SERVICES Income from Financial Services Wholesale Credit PA Receivables Retail Credit ($ millions) ($ millions) Approval Rate Penetration Rate 1% 6% $1,321.1 $19.1 $19.2 $1,246.3 60% 58% Retail Retail Financing Financing 32% 33% Wholesale Wholesale Credit Credit Other Other Q3