Polaris Reports 2015 Fourth Quarter and Full Year Results

Polaris Industries Inc. (NYSE:PII) reported net income of $6.75 per
diluted share for the year ended December 31, 2015, a two percent
increase compared to $6.65 per diluted share for the year ended December
31, 2014. Net income was $455.4 million for the full year 2015,
approximately flat to previous year’s net income of $454.0 million.
Sales for the full year 2015 totaled a record $4,719.3 million, an
increase of five percent compared to sales of $4,479.6 million for the
full year 2014.

For the fourth quarter ended December 31, 2015, Polaris reported net
income of $1.66 per diluted share, a decrease of 16 percent compared to
the prior year’s fourth quarter net income of $1.98 per diluted share.
Net income was $110.7 million for the fourth quarter of 2015, down 18
percent from the previous fourth quarter’s net income of $135.4 million.
Sales for the fourth quarter of 2015 totaled $1,105.6 million, a
decrease of 13 percent over last year’s fourth quarter sales of $1,275.0
million.

“While 2015 was a difficult year, we did manage to grow market share in
each of our businesses and increased sales and earnings per share for
the sixth consecutive year. That said, our performance failed to meet
our earlier projections, as both external and internal challenges
restrained growth and profitability. The strengthening dollar and
weakening oil markets combined with an unseasonably warm winter
constrained demand for off-road vehicles and snowmobiles, placing
pressure on dealer inventory and forcing us to curtail shipments in the
fourth quarter. While our execution to plan did not meet our
historically high standards, we have taken numerous actions to position
Polaris for better performance in 2016,” commented Scott Wine, Polaris’
Chairman and Chief Executive Officer.

“Our outlook for 2016 reflects another volatile year in powersports
driven by near-term growth pressures from weak end markets as the threat
of a worldwide economic slowdown looms. However, we have been in this
situation before, and we know how to manage through difficult economic
climates. We will continue to optimize dealer inventory, aggressively
manage operating costs and other risk exposures, and provide our
end-consumer with products and services that exceed their expectations.
Concurrently we will continue to invest in projects that accelerate
future growth and our lean journey, such as the Huntsville, Alabama
plant which is scheduled to begin production in the second quarter of
this year. I believe we have the best team in powersports, a strong and
diverse portfolio of brands and products, broad capabilities across all
our disciplines, and a proven strategy that will continue to create
value for our stakeholders in the years to come.”

2015 Product and Operations Highlights

Introduced 20 new MY‘16 ORVs in 2015, including the all-new RZR XP^®
1000 Turbo – the most powerful recreational side-by-side available, the
all-new POLARIS GENERAL™ 1000 – the new standard in off-road work
and play versatility

The new moto-roadster, Slingshot, significantly exceeded our sales
expectations in its first full sales year

Added to the iconic Indian Motorcycle^®
line-up with the introduction of the all-new Indian^®
Scout Sixty™, a 999cc premium motorcycle at the lowest MSRP in the
Indian Motorcycle^® line to-date at $8,999

Expanded the award winning AXYS^® platform
into seven new MY’16 RMK^® mountain sled models

Introduced more than 500 new PG&A accessories

Continued to add to the Polaris family with five acquisitions;
Brammo’s electric motorcycle business, Hammerhead Off-Road Vehicles in
China, Timbersled Products – the maker of snow bikes, the
purchase of a paint facility in Spearfish, S.D., and 509^®
– an aftermarket leader in snowmobile helmets and goggles

Added several new MY’16 vehicles in the Company’s adjacent markets
including the completely redesigned GEM^® with
better ergonomics and refreshed styling

Eicher/Polaris JV began production and retail of its new Multix™
utility 3-in-1 personal vehicle

Broke ground on the new ORV manufacturing plant in Huntsville,
Alabama which will provide additional capacity and flexibility to the
Company’s current manufacturing footprint. Production is expected to
begin in the second quarter of 2016

Renewed the Polaris Acceptance joint-venture agreement with GE
Commercial Distribution Finance Corporation, a business of GE Capital,
through 2022 and extended retail credit agreements with Sheffield and
Synchrony Banks (both through December 2020)

2016 Business Outlook

Given the anticipated ongoing weak industry trends in North America,
particularly in the oil and gas regions and continued volatility in the
currency markets, the Company expects full year 2016 net income to be in
the range of $6.20 to $6.80 per diluted share, compared to the $6.75 per
diluted share reported in 2015. Full year 2016 sales are anticipated to
be in the range of down two percent to up three percent over full year
2015 sales. Ongoing currency volatility and industry retail sales
uncertainty are the major reasons for the wider guidance range for sales
and earnings per share for 2016.

2015 Performance Summary (in thousands, except per share data)
Reporting Segments*		Three Months ended December 31,											Years ended December 31,
Sales		2015				2014				Change			2015				2014				Change
Off-Road Vehicles/Snowmobiles		$	862,032			$	1,051,801			(18	%)		$	3,708,933			$	3,741,154			(1	%)
Motorcycles			162,558				122,219			33	%			698,257				418,546			67	%
Global Adjacent Markets			81,028				100,980			(20	%)			312,100				319,948			(2	%)
Total Sales		$	1,105,618			$	1,275,000			(13	%)		$	4,719,290			$	4,479,648			5	%
Gross Profit		$	310,274			$	367,573			(16	%)		$	1,339,042			$	1,319,178			2	%
Gross profit as a % of sales			28.1	%			28.8	%		-77 bps				28.4	%			29.4	%		-108 bps
Operating Expenses		$	169,072			$	176,927			(4	%)		$	692,206			$	666,155			4	%
Operating expenses as a % of sales			15.3	%			13.9	%		141 bps				14.7	%			14.9	%		-20 bps
Operating Income		$	159,160			$	210,000			(24	%)		$	716,139			$	714,690			0	%
Operating Income as a % of sales			14.4	%			16.5	%		-207 bps				15.2	%			16.0	%		-78 bps
Net Income		$	110,682			$	135,397			(18	%)		$	455,361			$	454,029			0	%
Net income as a % of sales			10.0	%			10.6	%		-61 bps				9.6	%			10.1	%		-49 bps
Diluted Net Income per share		$	1.66			$	1.98			(16	%)		$	6.75			$	6.65			2	%

*Reporting Segment sales include their respective parts,
garments and accessories (“PG&A”) related sales

Off-Road Vehicle (“ORV”) and Snowmobile
segment sales, including their respective PG&A related sales, decreased
18 percent from the fourth quarter of 2014 to $862.0 million. ORV
vehicle sales decreased 20 percent, snowmobile vehicle sales were down
25 percent and ORV and snowmobile related PG&A sales, combined,
decreased five percent in the 2015 fourth quarter compared to the same
period last year. For the full year 2015, Polaris ORV and snowmobile
segment sales decreased one percent compared to full year 2014.

ORV wholegood sales decreased 20 percent reflecting weak
North American retail sales, particularly in regions heavily dependent
upon the oil markets including Texas, Oklahoma, Louisiana and western
Canada. Polaris North American ORV unit retail sales were down
low-single digits percent from the 2015 fourth quarter, with both
consumer purchases of side-by-side vehicles and ATV retail sales lower
than prior year. While the Company experienced modest market share loss
in the 2015 fourth quarter, Polaris outpaced the ORV industry, gaining
market share in both ATVs and side-by-sides for the full year 2015,
building on its #1 position.

Snowmobile wholegood sales declined 25 percent due to timing of
shipments in the 2015 fourth quarter compared to the prior year’s fourth
quarter as the Company was able to manufacture and ship its snowmobiles
earlier in 2015. The Company continued to outperform the overall
snowmobile market with increased market share season-to-date ending
December 31, 2015.

Motorcycle segment sales,
including their respective PG&A related sales, increased 33 percent in
the 2015 fourth quarter to $162.6 million primarily due to continued
strong retail sales for Indian motorcycles and Slingshot^®.
For the full year 2015, Polaris motorcycle segment sales increased 67
percent compared to the prior year.

North American consumer retail demand for the Polaris motorcycle
segment, including Victory^®, Indian Motorcycle^®
and Slingshot^®, was up low-single digits percent during the
2015 fourth quarter while the overall motorcycle industry retail sales,
900cc and above, declined high-single digits percent in the 2015 fourth
quarter. During the 2015 fourth quarter, the Company began retailing its
newest addition to the Indian Motorcycle^® line-up, the new
2016 Indian^® Scout Sixty™, which shares many elements of the
award-winning Indian^® Scout^® released in 2014, but
starting at a sub-$9,000 price point that brings industry-leading
mid-sized performance within reach of every rider. Additionally,
interest in the new Slingshot^® moto-roadster continued strong
as the Company completed its first full year of retailing the new
moto-roadster which far exceeded the Company’s expectations for sales
and profitability. Product availability for Indian Motorcycle^®
and Slingshot^® improved considerably in the 2015 fourth
quarter as throughput at the Company’s Spirit Lake, Iowa motorcycle
plant increased and the new paint facility purchased in Spearfish, South
Dakota, began production. Victory Motorcycles^® retail sales
were down mid-teens percent in the 2015 fourth quarter primarily due to
continued low product availability. For the fourth quarter and full year
2015, Polaris’ motorcycle business gained a significant amount of market
share.

Global Adjacent Markets segment
sales along with their respective PG&A related sales, decreased 20
percent to $81.0 million in the 2015 fourth quarter compared to the 2014
fourth quarter. For the full year 2015, Global Adjacent Markets segment
sales decreased two percent compared to the prior year.

Work and Transportation group wholegood sales were down 12 percent
during the fourth quarter of 2015 due to ongoing currency pressures and
tough comparison as the Company began shipping the new co-developed
Ariens^® Gravely^® Atlas JSV™ side-by-side vehicles
in the fourth quarter last year. Additionally, sales for the Company’s
defense business were down significantly due to U.S. military budget
constraints pushing the timing of shipments for current orders into the
future.

Supplemental Data:

Parts, Garments, and Accessories (“PG&A”) sales,
which are included in each of the three respective reporting
segments, experienced a seven percent decline during the 2015 fourth
quarter. All segments experienced lower PG&A sales during the quarter.
The lower PG&A related sales were the result of lower vehicle sales and
poor snow conditions which impact in-season snowmobile related PG&A
sales. For the full year 2015, Polaris PG&A related sales increased five
percent compared to the prior year.

International sales to customers outside of North America
totaled $181.9 million for the fourth quarter of 2015, including PG&A,
down eight percent from the same period in 2014. International sales on
a constant currency basis were up three percent in the 2015 fourth
quarter. For the full year 2015, international sales decreased five
percent to $651.6 million compared to the prior year (sales were up ten
percent on a constant currency basis). Europe, Middle East and Africa
(“EMEA”) reported sales declined 13 percent in the 2015 fourth quarter
and Asia Pacific reported sales were up three percent while Latin
American reported sales were up 26 percent. International reported sales
by reportable segment in the fourth quarter compared to last year were
as follows: ORV/Snowmobiles segment sales were down 16 percent,
Motorcycles segment sales were up 58 percent, and Global Adjacent
Markets segment sales declined 14 percent.

Gross profit decreased 16 percent to $310.3 million in the fourth
quarter of 2015, compared to $367.6 million in the fourth quarter of
2014. As a percentage of sales, gross profit margin declined 77 basis
points to 28.1 percent of sales for the fourth quarter of 2015, compared
to 28.8 percent of sales for the same period last year. While currency
movements from a year ago, primarily the Canadian dollar, were expected
to negatively impact gross margins during the fourth quarter of 2015,
the amount of impact was higher than originally anticipated as the
Canadian dollar continued to weaken sequentially from the 2015 third
quarter. The negative currency impact during the quarter along with
higher promotional costs and negative product mix, were partially offset
by lower commodity costs, cost savings from product cost reduction
efforts and higher selling prices. For the full year 2015, gross profit
as a percentage of sales decreased 108 basis points to 28.4 percent.

Operating expenses declined four percent to $169.1 million or
15.3 percent of sales for the fourth quarter of 2015, compared to $176.9
million or 13.9 percent of sales for the fourth quarter of 2014. The
decrease in dollars was driven largely by ongoing investments in
research and development, offset by operating cost control measures and
the reduction in incentive compensation plan expenses resulting from the
Company’s lower stock price and lower profitability in 2015. For the
2015 full year, operating expenses, as a percent of sales, decreased 20
basis points to 14.7 percent.

Income from financial services was $18.0 million during the
fourth quarter 2015, a decrease of seven percent compared to $19.4
million in the fourth quarter of 2014. The decrease is attributable to
lower shipments and weak retail in the 2015 fourth quarter. For the full
year, income from financial services was $69.3 million, a 12 percent
increase compared to $61.7 million for the full year 2014.

Equity in loss of affiliates was $2.1 million for the fourth
quarter of 2015 compared to $1.2 million last year, which represents the
Company’s portion of the operating results related to the Polaris/Eicher
joint venture in India. In the third quarter of 2015, the Company began
production and consumer sales of the new jointly developed Multix™
personal vehicle in India. For the 2015 full year, equity in loss of
other affiliates was $6.8 million compared to $4.1 million for the full
year 2014.

Non-operating other expense, net, which primarily relates
to foreign currency exchange rate movements and the corresponding
effects on foreign currency transactions related to the Company’s
foreign subsidiaries, was $3.4 million in the fourth quarter of
2015 compared to $3.7 million in the fourth quarter of 2014. For the
2015 full year, non-operating other expense was $12.1 million compared
to $0.0 million for the full year 2014.

The provision for income taxes for the fourth quarter of 2015 was
$40.4 million or 26.7 percent of pretax income compared to $67.1 million
or 33.1 percent of pretax income for the fourth quarter of 2014. The
lower income tax provision rate in the fourth quarter 2015 is primarily
due to the extension of the research and development credit by the U.S.
Congress in the 2015 fourth quarter. The provision for income
taxes for the full year of 2015 was $230.4 million or 33.6 percent of
pretax income compared to $245.3 million or 35.1 percent of pretax
income for the full year of 2014.

Financial Position and Cash Flow

Net cash provided by operating activities was $440.2 million for the
year ended December 31, 2015, compared to $529.3 million for the same
period in 2014. The 17 percent decrease in net cash provided by
operating activities for the 2015 period was due to increased working
capital required as the Company reduced shipments in the 2015 fourth
quarter. Total debt at the end of 2015, including capital lease
obligations and notes payable, was $463.3 million. The Company’s
debt-to-total capital ratio was 32 percent at December 31, 2015,
compared to 21 percent a year ago. Cash and cash equivalents were $155.3
million at December 31, 2015, up from $137.6 million for the same period
in 2014.

Share Buyback Activity

During the fourth quarter 2015, the Company repurchased and retired
427,000 shares of its common stock for $45.8 million, bringing total
share repurchases to 2,179,000 shares or $293.6 million for the full
year 2015. As of December 31, 2015, the Company currently has
authorization from its Board of Directors to repurchase up to an
additional 2.9 million shares of Polaris stock.

Non-GAAP Measure - Constant Currency Reporting

This release and our related earnings call include a discussion of the
Company’s 2015 fourth quarter and full year results and 2016
expectations on a constant currency basis, which is a non-GAAP measure,
as well as on a GAAP basis. For purpose of comparison, the results on a
constant currency basis uses the respective prior year exchange rates
for the comparative period to enhance the visibility of the underlying
business trends, excluding the impact of translation arising from
foreign currency exchange rate fluctuations.

Fourth Quarter and Full Year Conference Call and Webcast Presentation

Today at 9:00 AM (CST) Polaris Industries Inc. will host a conference
call and webcast to discuss the 2015 results released this morning and
expectations for 2016. The call will be hosted by Scott Wine, Chairman
and CEO; Bennett Morgan, President and COO; Ken Pucel, Executive Vice
President – Operations, Engineering and Lean; and Mike Speetzen,
Executive Vice President – Finance and CFO. A slide presentation and
link to the webcast will be posted on the Polaris Investor Relations
website at http://ir.polaris.com.

To listen to the conference call by phone, dial 877-706-7543 in the U.S.
and Canada, or 973-200-3967 internationally. The Conference ID is #
95414234.

A replay of the conference call will be available approximately two
hours after the call for a one-week period by accessing the same link on
our website, or by dialing 855-859-2056 in the U.S. and Canada, or
404-537-3406 internationally.

About Polaris

Polaris Industries Inc. (NYSE: PII) is a global powersports leader with
annual 2015 sales of $4.7 billion. Polaris fuels the passion of riders,
workers and outdoor enthusiasts with our RANGER^®, RZR^®
and POLARIS GENERAL™ side-by-side off-road vehicles; our SPORTSMAN^®
and POLARIS ACE^® all-terrain off-road vehicles; VICTORY^®
and INDIAN MOTORCYCLE^® midsize and heavyweight motorcycles;
SLINGSHOT^® moto-roadsters; and Polaris RMK^®, INDY^®,
SWITCHBACK^® and RUSH^® snowmobiles. Polaris
enhances the riding experience with parts, garments and accessories sold
under multiple recognizable brands, and has a growing presence globally
in adjacent markets with products including military and commercial
off-road vehicles, quadricycles, and electric vehicles. www.polaris.com

Except for historical information contained herein, the matters set
forth in this news release, including management’s expectations
regarding 2016 and future sales, shipments, net income, and net income
per share, the research and development tax credit and operational
initiatives are forward-looking statements that involve certain risks
and uncertainties that could cause actual results to differ materially
from those forward-looking statements. Potential risks and
uncertainties include such factors as the Company’s ability to
successfully implement its manufacturing operations expansion
initiatives, product offerings, promotional activities and pricing
strategies by competitors; economic conditions that impact consumer
spending; acquisition integration costs; warranty expenses; impact of
changes in Polaris stock price on incentive compensation plan costs;
foreign currency exchange rate fluctuations; environmental and product
safety regulatory activity; effects of weather; commodity costs;
uninsured product liability claims; uncertainty in the retail and
wholesale credit markets; performance of affiliate partners; changes in
tax policy and overall economic conditions, including inflation,
consumer confidence and spending and relationships with dealers and
suppliers. Investors are also directed to consider other risks
and uncertainties discussed in documents filed by the Company with the
Securities and Exchange Commission. The Company does not
undertake any duty to any person to provide updates to its
forward-looking statements. Ariens^® and
Gravely^® are registered trademarks of Ariens
Company

(summarized financial data follows)

POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
(Unaudited)
		Three months ended December 31,								Years ended December 31,
		2015				2014				2015				2014
Sales		$	1,105,618			$	1,275,000			$	4,719,290			$	4,479,648
Cost of sales		795,344				907,427				3,380,248				3,160,470
Gross profit		310,274				367,573				1,339,042				1,319,178
Operating expenses:
Selling and marketing		76,159				87,134				316,669				314,449
Research and development		41,734				37,375				166,460				148,458
General and administrative		51,179				52,418				209,077				203,248
Total operating expenses		169,072				176,927				692,206				666,155
Income from financial services		17,958				19,354				69,303				61,667
Operating income		159,160				210,000				716,139				714,690
Non-operating expense:
Interest expense		2,608				2,553				11,456				11,239
Equity in loss of other affiliates		2,086				1,225				6,802				4,124
Other expense, net		3,368				3,746				12,144				10
Income before income taxes		151,098				202,476				685,737				699,317
Provision for income taxes		40,416				67,079				230,376				245,288
Net income		$	110,682			$	135,397			$	455,361			$	454,029
Basic net income per share		$	1.69			$	2.03			$	6.90			$	6.86
Diluted net income per share		$	1.66			$	1.98			$	6.75			$	6.65
Weighted average shares outstanding:
Basic		65,415				66,545				66,020				66,175
Diluted		66,592				68,540				67,484				68,229

POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
		December 31, 2015				December 31, 2014
Assets
Current Assets:
Cash and cash equivalents		$	155,349			$	137,600
Trade receivables, net		150,778				204,876
Inventories, net		710,001				565,685
Prepaid expenses and other		92,422				71,526
Income taxes receivable		46,175				2,691
Deferred tax assets		—				114,177
Total current assets		1,154,725				1,096,555
Property and equipment, net		650,678				555,428
Investment in finance affiliate		99,073				89,107
Deferred tax assets		166,538				41,201
Goodwill and other intangible assets, net		236,117				223,966
Other long-term assets		80,331				68,678
Total assets		$	2,387,462			$	2,074,935
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of debt, capital lease obligations and notes payable		$	5,059			$	2,528
Accounts payable		299,660				343,470
Accrued expenses:
Compensation		106,486				102,379
Warranties		56,474				53,104
Sales promotions and incentives		141,057				138,630
Dealer holdback		123,276				120,093
Other		88,030				79,262
Income taxes payable		6,741				11,344
Total current liabilities		826,783				850,810
Long term income taxes payable		23,416				10,568
Capital lease obligations		19,660				23,620
Long-term debt		438,560				200,000
Deferred tax liabilities		13,733				18,191
Other long-term liabilities		74,188				96,951
Total liabilities		$	1,396,340			$	1,200,140
Deferred compensation		9,645				13,528
Total shareholders’ equity		981,477				861,267
Total liabilities and shareholders’ equity		$	2,387,462			$	2,074,935

POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
		Years ended December 31,
		2015				2014
Operating Activities:
Net income		$	455,361			$	454,029
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		152,138				127,507
Noncash compensation		61,929				63,183
Noncash income from financial services		(29,405		)		(18,645		)
Deferred income taxes		(16,343		)		(50,388		)
Tax effect of share-based compensation exercises		(34,654		)		(36,966		)
Other, net		6,802				6,124
Changes in operating assets and liabilities:
Trade receivables		48,798				(24,174		)
Inventories		(148,725		)		(158,476		)
Accounts payable		(46,095		)		105,783
Accrued expenses		9,182				30,664
Income taxes payable/receivable		(247		)		45,324
Prepaid expenses and others, net		(18,510		)		(14,695		)
Net cash provided by operating activities		440,231				529,270
Investing Activities:
Purchase of property and equipment		(249,485		)		(205,079		)
Investment in finance affiliate, net		19,440				(1,245		)
Investment in other affiliates		(17,848		)		(12,445		)
Acquisition of businesses, net of cash acquired		(41,195		)		(28,013		)
Net cash used for investing activities		(289,088		)		(246,782		)
Financing Activities:
Borrowings under debt arrangements / capital lease obligations		2,631,067				2,146,457
Repayments under debt arrangements / capital lease obligations		(2,385,480		)		(2,228,587		)
Repurchase and retirement of common shares		(293,616		)		(81,812		)
Cash dividends to shareholders		(139,285		)		(126,908		)
Proceeds from stock issuances under employee plans		32,535				31,313
Tax effect of proceeds from share-based compensation exercises		34,654				36,966
Net cash used for financing activities		(120,125		)		(222,571		)
Impact of currency exchange rates on cash balances		(13,269		)		(14,565		)
Net increase in cash and cash equivalents		17,749				45,352
Cash and cash equivalents at beginning of period		137,600				92,248
Cash and cash equivalents at end of period		$	155,349			$	137,600

View source version on businesswire.com: http://www.businesswire.com/news/home/20160126005556/en/

Source: Business Wire
(January 26, 2016 - 6:00 AM EST)

News by QuoteMedia

www.quotemedia.com