Investor Presentation

Transcription

1 POLARIS INDUSTRIES INC. Investor Presentation November, 2015

2 Polaris at a Glance Off-Road Vehicles 2014 Sales ~8,100 Employees Worldwide 15 Manufacturing Locations 5 Research & Development Centers of Excellence ~1,850 Dealers In North America ~1,400 Dealers Outside North America >380,000 Units Shipped Worldwide 2014 >100 Countries Polaris Products Sold 62% PG&A 17% Motorcycles 8% Snowmobiles 7% Global Adjacent Markets 6% 2

3 N.A. Powersports Consolidated Share Consolidated Market Share in Units (Using Total Motorcycle Industry) Honda Harley Yamaha Can Am Kawasaki Other E #1 N.A. Powersports OEM Extending Lead 3

4 Polaris 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 global enterprise by We will make the best off-road and on-road vehicles and products for recreation, transportation and work supporting consumer, commercial and military applications. Our winning advantage is our innovative culture, operational speed and flexibility, and passion to make quality products that deliver value to our customers. Guiding Principles Best People, Best Team Safety & Ethics Always Customer Loyalty Strategic Objectives Best in Powersports PLUS Global Market Leadership Strong Financial 5-8% annual organic growth >33% of Polaris revenue Performance Growth Through Adjacencies LEAN Enterprise is Sustainable, profitable growth Net Income Margin >10% >$2B from acquisitions & new markets Competitive Advantage Significant Quality, Delivery & Cost Improvement Performance Priorities Growth Margin Expansion Product & Quality Leadership LEAN Enterprise GROW SALES >$8 Billion by % CAGR INCREASE NET INCOME >10% of Sales by % CAGR 4

5 Q Sales and Income Q3 Sales ($ millions) ($ millions) Q3 Net Income $1,302.3 $1,456.0 $140.8 $155.2 Q Q Q Q Record 3 rd quarter sales, operating income and net income Sales of Motorcycles +154%; Snowmobiles up 14% Sales in Latin America +50%, Asia Pacific/EMEA down due to currency Earnings per share increased 12% to $2.30 Gross profit margin down 126 bps from negative currency hit Delivered Solid Quarter Overcoming a Difficult Environment 5

6 Full Year 2015 Guidance ($ millions) Total Company Sales $4,480 Up 10% to 11% $4,920 to $4,970 $6.65 Diluted EPS Up 11% to 12% $7.37 to $ Actual FY 2015 Guidance 2014 Actual FY 2015 Guidance Narrowing Sales and EPS Guidance; maintaining upper-end of EPS guidance range North American retail sales growth and market share gains on-going Industry growth trends moderating Dealer inventory growth rates tracking towards year-end expectations Net income margin projected to remain above long-term goal of 10% Narrowing FY 2015 Sales & EPS Guidance; Another Record Year 6

7 Off-Road Vehicles ORV Sales ORV Market share 2015 year-to-date 19 New MY 16 vehicles introduced todate, more coming ($ millions) $2,522 $2,793 +5% $2,158 Up mid-single digits % FY 2013 FY 2014 Q Reclassified* YTD FY 2015 Guidance #1 Market Share Position Growing *2014 reclassified to exclude Defense and Commercial Sales 7

8 Motorcycles American Performance & Exhilaration Original American. Power. New Level of Freedom & Fun in On-road Driving Moto-Roadster Est Acquired 2011 Est N.A. Retail sales up strong YTD Paint throughput increased; product availability increasing ($ millions) Motorcycle Sales +88% $460 $349 Up 70% to 80% Significant order backlog remains $220 FY 2013 FY 2014 Q YTD FY 2015 Guidance Motorcycles Growing Significantly; Product Availability Improving 8

9 Snowmobiles Acquired April 2015 Polaris 800 PRO-RMK 155 Best New Mountain Sled Best Mountain Sled Polaris season-to-date market share Product line-up strongest & broadest ever Carefully monitoring headwinds El Nino weather pattern, weak Canadian economy and Int l currencies ($ millions) $302 $322 Snowmobile Sales +19% $219 FY 2013 FY 2014 Q YTD Down low-single digits % FY 2015 Guidance Solid #2 Growing Market Share & Continuous Quality Improvement 9

10 PG&A Core Brands Aftermarket Brands Q YTD by Product Line & Category Accessories Parts Off-Road Vehicles Motorcycles Adjacent Markets ($ millions) $611 PG&A Sales $ % $585 Similar to Total Company Sales Growth Snow Industry-leading Polaris Engineered & Aftermarket Lifestyle Brands Garments Other FY 2013 FY 2014 Q YTD FY 2015 Guidance 10

11 Global Adjacent Markets Work & Transportation Military New 16 GEM e6 MRZR 4 AIXAM Coupé GTi ($ millions) Global Adjacent Markets Sales $221 $273 +4% $193 About Flat FY 2013 (Reclassified) FY 2014 (Reclassified) Q YTD FY 2015 Guidance Building Business for Future Growth / Profitability *2014 reclassified to include Defense and Commercial Sales 11

12 International Q3 15 YTD Worldwide Sales Q3 15 YTD Int l Sales by Product/Geography 78% United States *+20% 9% 13% Canada *-11% (+4%) International *-4% (+12%) ORV PG&A Adjacent Markets Motorcycles Snow Europe Aus/ NZ Latin America Asia ME/ Africa *% Change: Reported (Constant Currency) International Sales ($ millions) Europe, M.East & Africa Asia/Pacific Latin America $685 $592-4% $470 Down low-single digits % Focused on Execution in Challenging Markets and F/X Pressures Sportsman 570 SP FY 2013 FY 2014 Q YTD FY 2015 Guidance 12

13 Safe Harbor Except for historical information contained herein, the matters set forth in this document, including but not limited to management s expectations regarding 2015 and 2016 sales, shipments, margins, currencies, net income and cash flow, the opportunities for expansion and diversification of the Company s business and the Company s guidance on earnings per share 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 product offerings, promotional activities and pricing strategies by competitors; manufacturing operation expansion initiatives; acquisition integration costs; warranty expenses; 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 our 2014 annual report and Form 10-K 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. The data source for retail sales figures included in this presentation is registration information provided by Polaris dealers in North America and compiled by the Company or Company estimates. The Company must rely on information that its dealers supply concerning retail sales, and other retail sales data sources and this information is subject to revision. 13

14 Appendices Page Consistent Financial Performance 15 N.A. Retail Sales Q N.A. Dealer Inventory Q Full Year Guidance Full Year Gross Profit Margin Guidance 19 Foreign Currencies Exposures for Polaris 20 Financial Position Q3 YTD 21 Income from Financial Services Q New Segments Disclosure Q Global Manufacturing Operations 24 Spirit Lake Motorcycle Production 25 Huntsville Update 26 Polaris-Eicher JV Product - MULTIX 27 14

15 Consistent Financial Performance 240% 5-Year Total Return Oct. 26, 2010 Oct. 26, 2015 (Including Dividend Yield) 14% 94% 87% 79% Dividends (Per Share) 5-year dividend payout $457 million 5-year CAGR >20% $0.80 $0.90 $1.48 $1.68 $1.92 $2.12 Polaris Peer Avg. S&P 500 S&P Midcap 400 DJIA Expectation Return on Assets ( ) Return on Invested Capital ( ) 20% 23% 24% 24% 33% 41% 42% 42% 42% 16% 13% 21% 9% 7% 9% 9% 11% 12% 15% 14% 6% 6% 7% 12% 6% 4% 6% 7% 8% 6% Polaris Peer Average (ACAT, BC, DE, HOG, WGO, TTC) S&P 500 Average 15

16 N.A. Powersports Retail Sales Q Polaris Quarterly N.A. Retail Sales Growth 15% 12% 13% 11% 7% 8% 7% Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Motorcycles ORV Snow TOTAL N.A. Powersports Industry retail slowed to low-single digits % - Oil / Ag / Canada ATVs ; SxS Polaris N.A. retail 7% for Q and 9% YTD 2015 ORV market share in Q3 despite intense competitive pressure, promotions/product Polaris ORV depth/breadth drove share gains again Motorcycle Q3 retail remained very strong product availability improved Indian and gaining share Victory low product availability Slingshot growth remains above expectations Industry Pressured by Oil / Ag; Polaris Outperforming Market 16

17 N.A. Dealer Inventory Q % +15% Existing ORV Models 1% New ORV Models 4% Snowmobiles 5% Slingshot/Indian 2% New Dealers _2% +14% Expectation to be up mid-single digits % by year-end Q1 Q2 Q3 Q4 Polaris dealer inventory growth moderating, as expected. YoY Q3 15 Inventory change: ORV about 10% - improving to mid-single digits by year-end Motorcycles about 30% still too low, but improving: Indian, Slingshot, Victory Snowmobiles mid-20% ahead of retail selling season Adjacent markets mid-single digits % appropriate ATV RFM business model significantly improved Improving system model mix and flexibility/nimbleness, reducing RFM lead-time by 25% On-track for mid-single digit % growth by 2015 year-end Dealer Inventory Tracking to Expectations 17

18 2015 Full Year Guidance METRIC GUIDANCE Sales Components Off-Road Vehicles Up mid-single digits % (reclassified 2014 actuals) Snowmobiles Down low-single digits % Motorcycles Up 70% to 80% Global Adjacent Markets PG&A About Flat (reclassified 2014 actuals) Up similar to total Company sales growth International Down low-single digits % Total Company sales Up 10% to 11% Gross profit margin Down 40 to 60 bps as a % of sales Operating expenses (% of sales) Down 50 to 60 bps as a % of Sales Income from financial services Up about 10% Income taxes 34.25% to 34.75% of pretax income Net income Up 10% to 11% EPS, diluted $7.37 to $7.42 (+11% to +12%) Change in Guidance Increased/ favorable Decreased/ unfavorable Unchanged Narrowed FY 2015 Guidance Held, Narrowed 18

19 2015 Gross Profit Margin Guidance Actual Actual Guidance METRIC Q Q FY 2015 Prior period 30.4% 29.8% 29.4% Production volume/capacity Product cost reduction efforts Commodity costs Currency rates Higher selling prices Product mix Motorcycle Production Constraints N/A New plant start-up costs Warranty costs Depreciation/Tooling amortization Sales promotional costs Current period 29.8% 28.5% 28.8 to 29.0% Change -55 bps -126 bps Down 40 to 60 bps Improvement to gross profit margin % Impairment to gross profit margin % Neutral to gross profit margin % 19

20 Foreign Currency Exposures for Polaris F/X Impacts vs ($ in millions) Actual Q FY 2015 Expectations* (Guidance Unchanged) Sales ($53) ($150 - $170) Gross Profit ($27) ($75 - $85) Operating Expenses $4 $15 - $17 Other Income (Expenses) $1 ($10 - $12) Pretax Income ($22) ($70 - $80) *Assumes exchange rates remain in about same range as of the end of Q3. Pretax income expectations for 2015 include the impact of existing F/X hedging contracts below. Open 2015 F/X Hedging Contracts as of September 30, 2015 FY2015 Guidance Foreign Currency Hedging Contracts Currency Impact on Net Income % of Q4 Notional Avg. Exchange Compared to Prior Year Period Currency 2015 Cash Flow Amounts Rate of Open Est. Q4 Foreign Currency Position Exposure Hedged (US $ in Millions) Contracts Q of 2015 Canadian Dollar (CAD) Long 85% $127 $0.78 to 1 CAD Negative Negative Australian Dollar (AUD) Long 85% $13 $0.76 to 1 AUD Negative Negative Euro (EUR) Long 0% - - Negative Negative Japanese Yen (JPY) Short 60% $9 118 Yen to $1 Positive Positive Mexican Peso (MXN) Short 70% $33 15 Peso to $1 Positive Positive Significant Impact in Q3 2015, Expected to Persist into Q

21 Polaris Financial Position Cash Drivers ($ millions) ($ millions) $138 $464 $105 $149 $248 $96 $29 $225 Capital Summary Sept Fav/(Unfav) Sept Cash $ % Debt /Capital Lease Obligations $ (39%) Shareholders Equity $ % Cash YE 2014 Operating Activities Dividends Capex Share Repurchase Net Borrowings Other Cash Q Total Capital $1, % Debt to Total Capital 25% (3%) Operating Cash Flow ($ millions) $ % $464 ROIC* 37% 35% Strong operating cash flow performance 22% Lower working capital Increased share repurchases given current stock price Q3'14 YTD Q3'15 YTD Q3'14 Q3'15 On-going capital spending to support growth * Defined as trailing 12 months net income divided by average total assets, minus average current liabilities Strong Balance Sheet and Cash Flow 21

22 Income from Financial Services Q Income from Financial Services ($ millions) ($ millions) +12% $19.1 Retail Financing Wholesale Credit Retail Financing Wholesale Credit Other Q FY Expectations Wholesale Credit PA Receivables Up +34% about 10% $ % $1,321.1 $1,072.4 Q Q Retail Credit Approval Rate Penetration Rate 60% 61% 32% 33% Q Q Q Q Full Year income from financial services expected to increase about 10% Higher retail credit income GE announced sale of commercial lending and leasing business to Wells Fargo Includes Polaris Acceptance (P.A.) JV receivables Wells Fargo is part of Polaris bank group good relationship Current P.A. agreement expires February 2017; plan to extend Ample Financing Availability Satisfactory P.A. Portfolio Buyer 22

23 New Segments Disclosure Q Three segments based on Company strategic objectives: ORV/Snowmobiles Motorcycles Global Adjacent Markets PG&A sales and gross profit included in each reportable segment Remaining income statement reported on a consolidated basis, as before Segment Information* Three Months ended September 30, Nine Months ended September 30, ($ in thousands) Sales ORV/Snowmobiles $ 1,193,514 $ 1,151,410 $ 2,846,901 $ 2,689,353 Motorcycles 188,679 83, , ,327 Global Adjacent Markets 73,807 67, , ,968 Total Sales 1,456,000 1,302,343 3,613,672 3,204,648 Gross Profit ORV/Snowmobiles 388, , , ,900 Motorcycles 28,424 9,076 73,236 43,075 Global Adjacent Markets 21,200 15,717 61,988 58,867 Corporate (22,543) (14,202) (34,259) (27,237) Total Gross Profit $ 415,623 $ 388,274 $ 1,028,768 $ 951,605 *Source: Polaris Q Form 10-Q Note 10 New Disclosures to Enhance Understanding of Polaris Businesses 23

24 Manufacturing Locations Spirit Lake & Milford IOWA Motorcycles, SxS, ACE, GEM Spearfish SOUTH DAKOTA Motorcycle Paint Roseau MINNESOTA Snow, ATV, SxS Osceola WISCONSIN Engines Bourran FRANCE Goupil Chanas & Aix-les-Bains FRANCE Aixam Mega Opole POLAND ATV, SxS Shanghai, CHINA Hammerhead Sandpoint IDAHO Timbersled Riverside, CALIFORNIA Pro Armor Cuyahoga Falls OHIO Kolpin Monterrey MEXICO SxS, Engines Huntsville ALABAMA (2016) SxS Jaipur INDIA Eicher JV Adding LEAN Capacity to Supply Future Consumer Demand 24

25 Spirit Lake Motorcycle Production Motorcycle Paint Capacity Q Motorcycle Capacity by System Q Q Expectation Paint Capacity Remaining Backlog Backlog Reduction Retail Demand New Spirit Lake System Spearfish Legacy Spirit Lake System Outsourced Operational performance at Spirit Lake improved considerably in Q3 Heavyweight output ~20% Order to ship time >30% - heavyweight Indian and Victory Purchased paint facility in Spearfish, South Dakota; +10% paint capacity Additional +30% capacity planned for 2016 to meet expected demand and right size inventories Good Improvement Trend; Working Plan Aggressively 25

26 Polaris Huntsville Update Need pic Future Huntsville Plant Rendering 90% of floor poured, 80% of columns erected, 50% of walls in place 725,000 sq. ft. manufacturing plant primarily ORV Start of Production Q ~1,700 employees at capacity ~$150 million investment Lean design, value stream focused Project is Progressing on Schedule 26

27 Polaris-Eicher JV Product - MULTIX MULTIX Multi-Role Personal Vehicle 3 models to start 511cc diesel engine MSRP ~ $3,600 - $4,500 Street legal in India ~30 dealers at launch >200 by 2020 Started production July 2015 Target market potential >60 million people Small/micro business owners in India JV Overview Signed July /50 Joint Venture in India Factory in Jaipur, India 200,000 sq. ft. JV expected to be profitable by 2018 Replaces Unique Vehicle Platform Designed Specifically for the Multi-Role Consumer IR Sep