Polaris Inc. · NYSE:PII
Polaris — Polaris Industries — FY2016 Earnings Presentation
30 slides from Polaris's earnings presentation, Jan 24, 2017
Slide 1: Fourth Quarter & Full Year 2016 Earnings Results
POLARIS INDUSTRIES INC. Fourth Quarter & Full Year 2016 Earnings Results January 24, 2017
Slide 2: Richard Edwards, Director of Investor Relations
Richard Edwards Director of Investor Relations POLARIS INDUSTRIES INC. Fourth Quarter & Full Year 2016 Earnings Results January 24, 2017 Q4 & FY'16 Earnings 2
Slide 3: 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 future sales, shipments, margins, currencies, net income and cash flow, the opportunities for expansion and diversification of the
Slide 4: Key Definitions
Key Definitions Throughout this presentation, the word “Adjusted” is used to refer to GAAP results minus the following: TAP Inventory step-up purchase accounting TAP acquisition costs and integration expenses Impacts associated with the Victory wind down Beginning in 2017 a new reporting segment cal
Slide 5: GAAP / Non-GAAP Reconciliation Schedules
GAAP / Non-GAAP Reconciliation Schedules Reconciliation of GAAP "Reported" Results to "Adjusted" Results (unaudited) Q4 2016 Reported GAAP Measures Adjustments Adjusted Measures Q4 2016 Q4 2015 $ Chg % Chg Q4 2016 Q4 2015 Q4 2016 Q4 2015 $ Chg % Chg Sales $1,217,789 $1,105,618 $ 112,171 10% $ - - $1
Slide 6: Scott W. Wine, Chairman & CEO
Scott W. Wine Chairman & CEO POLARIS INDUSTRIES INC. Fourth Quarter & Full Year 2016 Earnings Results January 24, 2017 Q4 & FY'16 Earnings 6
Slide 7: Q4 2016 Sales and Income
Q4 2016 Sales and Income Q4 2016 Sales Q4 2016 Adjusted* Net Income ($ millions) ($ millions) $1,217.8 $110.7 $1,105.6 $76.1 Q4 2015 Q4 2016 Q4 2015 Q4 2016 Adjusted Q4 sales and adjusted* net income finished in-line with previous expectations Acquisition of Transamerican Auto Parts (TAP) added $109
Slide 8: Full Year 2016 Sales and Income
Full Year 2016 Sales and Income Full Year Total Company Sales Full Year Adjusted* Net Income ($ millions) ($ millions) $4,719.3 $4,516.6 $455.4 $226.5 FY 2015 FY 2016 FY 2015 FY 2016 Adjusted Full year sales and adjusted* net income finished in-line as expected per revised guidance TAP accounted for
Slide 9: N.A. Powersports Retail Sales
N.A. Powersports Retail Sales Polaris Retail Sales & Market Share Q4’16 Retail Sales by Business (vs. Q4’15) Retail % change, # vehicle units Consolidated Market Share in Units Using Total Motorcycle Industry (# vehicle units) POLARIS INDUSTRY mid-single Off-Road Vehicles ~flat* +5% digits % low-sin
Slide 10: N.A. Dealer Inventory
N.A. Dealer Inventory Polaris N.A. Total Dealer Inventory Q4 Total N.A. Dealer Inventory 2016 2015 2014 +2% +3% -8% -8% -10% -3% Q4 2015 Existing ORV New ORV Snowmobiles Motorcycles Q4 2016 Q1 Q2 Q3 Q4 Models Models Polaris Q4 2016 N.A. dealer inventory down 8% vs. Q4 2015 ORV down 11% year-over-yea
Slide 11: 2016 Product Recall Update
2016 Product Recall Update Aggressively addressed product quality throughout the year Recall Completion Rates – U.S. Issued 13 safety bulletins Significant effort involved to get owners back riding safely ~80% Making Progress ~70% Making significant progress on the two main recalls Completed thoroug
Slide 12: Victory Motorcycle Exit
Victory Motorcycle Exit Reason for Decision The company has lost money since inception in 1998 Sales of Victory are down ~20 percent from the peak in 2012 Limited investment dollars to support all three motorcycle brands Indian Motorcycle brand much more recognizable worldwide Positive impact on rem
Slide 13: Transamerican Auto Parts Acquisition
Transamerican Auto Parts Acquisition Closed acquisition on November 10, 2016 Strong cross-functional integration team in place Margin enhancement initiatives progressing; $20M in synergies expected by 2019 Sourcing, distribution & logistics, pricing optimization Accretive to 2017: $0.25 to $0.30 per
Slide 14: Strategic Objectives
Strategic Objectives Best in Powersports PLUS 5-8% annual organic growth Growth through Adjacencies >$2B from acquisitions & new markets Global Market Leadership >33% of Polaris revenue LEAN Enterprise is Competitive Advantage Significant Quality, Delivery & Cost Improvement >$8 Billion by 2020 12%
Slide 15: Mike Speetzen, EVP Finance & CFO
Mike Speetzen EVP Finance & CFO POLARIS INDUSTRIES INC. Fourth Quarter & Full Year 2016 Earnings Results January 24, 2017 Q4 & FY'16 Earnings 15
Slide 16: 2017 Full Year Guidance
2017 Full Year Guidance Total Company Sales Total Company Adjusted** EPS ($ in millions) +10% to +13% $665 to $690 $4,950 to $5,100 ($.08) to $.22 $4.25 to $4.50 $.50 to $.60 ~($175) (1%) to +1% $.25 to $.30 $4,517 2016 Adj. Sales $3.48 ~$4,250 (Excl. Victory/TAP/FX) FY 2016 TAP Victory Organic FY 2
Slide 17: 2017 Full Year Guidance by Segments
2017 Full Year Guidance by Segments ($ in millions) ORV/Snowmobiles Motorcycles Global Adjacent Markets Aftermarket Down low-single $3,284 digits % Up Down $699 low-double Significantly PG&A PG&A PG&A digits %(2) Up Snow Snow low-single PG&A digits % $342 PG&A PG&A Victory ORV ORV Indian Indian Slin
Slide 18: Off-Road Vehicles (ORV) / Snowmobiles
Off-Road Vehicles (ORV) / Snowmobiles Q4 2016 ORV/Snow Segment Sales FY 2016 ORV/Snow Segment Sales & Guidance ($ millions) ($ millions) Down 9% low-single 5% $3,357.5 $3,283.9 $862.0 $905.0 %∆ digits % PG&A PG&A PG&A PG&A PG&A 7% Snow Snow Snow Snow Snow 13% 3% ORV ORV ORV ORV ORV Q4 2015 Q4 2016 F
Slide 19: Motorcycles
Motorcycles Q4 2016 Motorcycles Segment Sales FY 2016 Motorcycles Segment Sales & Guidance ($ millions) ($ millions) 1% Down $708.5 $699.2 low-double $162.6 digits %(2) PG&A PG&A PG&A 35% PG&A $105.7 %∆ PG&A 25% Victory Victory Victory Victory Indian Indian 41% Indian Indian Indian Slingshot Slingsh
Slide 20: Global Adjacent Markets (GAM)
Global Adjacent Markets (GAM) Q4 2016 GAM Segment Sales FY 2016 GAM Segment Sales & Guidance ($ millions) ($ millions) Up 10% low-single $341.9 digits % PG&A PG&A 21% $98.4 %∆ $81.0 PG&A 23% PG&A W&T / W&T / W&T / W&T / 21% Defense Defense Defense Defense Q4 2015 Q4 2016 FY 2016 FY 2017 Reported Gui
Slide 21: Aftermarket
Aftermarket FY 2016 Aftermarket Segment Sales & Guidance ($ millions) Up Significantly TAP Retail Store $191.6 $108.7 FY 2016 FY 2016 FY 2017 Reported (Other) Reclassified (1) Guidance Closed acquisition of TAP November 2016 FY 2016 reclassified sales includes $83 of other aftermarket brand sales 20
Slide 22: Gross Profit Margin Guidance
Gross Profit Margin Guidance Adjusted* Gross Margin Q4 2016 Adjusted* Gross Margin FY 2016 Adjusted** Gross Margin 2017 Guidance -165 bps Increase up 28.1% 28.4% -370 bps 26.4% to ~180 bps 24.7% Q4 2015 Adjusted FY 2015 Adjusted FY 2017 Adjusted Q4 2016 FY 2016 Guidance Product Mix Promos / Incentiv
Slide 23: Other FY 2017 Expectations
Other FY 2017 Expectations Adjusted operating expenses: increase mid-teens % (slight increase as a % of sales) R&D Legal and other related costs Operating expense from acquired companies Variable compensation Income from financial services: down ~10% due to lower dealer inventory levels Interest exp
Slide 24: Scott W. Wine, Chairman & CEO
Scott W. Wine Chairman & CEO POLARIS INDUSTRIES INC. Fourth Quarter & Full Year 2016 Earnings Results January 24, 2017 Q4 & FY'16 Earnings 24
Slide 25: Closing Comments
Closing Comments New Administration brings economic optimism/uncertainty Powersports competitors aggressive – ORV product positioning improved Safety & Quality fundamentals in place TAP integration proceeding on plan Indian Motorcycles outpacing industry VIP/RFM implementation building competitive a
Slide 26: Thank You
Thank You Questions?
Slide 27: Supplemental Data
Supplemental Data Q4 Supplemental Sales Performance – PG&A, International Q4 Financial Position Income from Financial Services Q4 & FY'16 Earnings 27
Slide 28: Q4 2016 Supplemental Sales Performance
Q4 2016 Supplemental Sales Performance Parts, Garments & Accessories (PG&A)* International Q4 Sales 9% to 214.4 Million Q4 Sales 2% to $178.2 Million ∆ from (~flat constant currency) Q4'15 ∆ from GAM Q4'15 Snowmobiles Motorcycles 23% Snow GAM 7% 12% 24% ORV / ORV 17% Motorcycles Snow Motorcycles 7%
Slide 29: 2016 Polaris Financial Position
2016 Polaris Financial Position Cash Drivers Capital Summary December 2016 ($ millions) ($ millions) +679 -$246 Fav/(Unfav) Dec 2015 -$724 Cash $ 127 -18% +$572 -$140 -$209 Debt /Capital Lease Obligations $1,142 +147% Shareholders’ Equity $ 867 -12% $155 +$40 $127 Total Capital $2,009 +39% Cash Oper
Slide 30: Income from Financial Services
Income from Financial Services Income from Financial Services Wholesale Credit PA Receivables Retail Credit ($ millions) ($ millions) 13% Approval Rate Penetration Rate $78.5 $1,305.3 8% 58% 61% $1,206.9 Retail Financing 31% 33% 7% $19.3 Wholesale Credit Other Q4 2016 FY 2016 FY 2015 FY 2016 FY 2015