Polaris Industries Inc.

Transcription

1 Polaris Industries Inc. Raymond James 30 th Annual Institutional Investors Conference Orlando, Florida March 11, 2009

2 Strong Business Foundation Percentage of Sales by Product line 2008 Snowmobile 10% ATVs Off-Road Vehicles (ORV) 67% Victory 5% Side-by-Sides PG&A 18% 1

3 Consistent Financial Performance Sales from Continuing Operations year CAGR 5.8% 10-year CAGR 9.0% Net Income Per Share from Continuing Operations Down 29% to 14% Dollars (in millions) $1,245 $1,327 $1,427 $1,468 $1,552 $1,773 $1,870 $1,657 $1,780 $1,984 Down 15% to 23% $1.64 Per Diluted Share $1.81 $1.99 $2.28 $2.58 $2.97 $3.15 $2.72 $3.10 $3.50 $2.50 to $ Cash Flow from Continuing Operations* Dividends (Per Share) year CAGR 6.1% $ year dividend payout $202 $198 $349 million Dollars (in millions) $151 $130 $120 $177 $179 $178 $189 $0.40 $0.44 $0.50 $0.56 $0.62 $0.92 $1.12 $1.24 $ % $1.52 $ * A reconciliation of the Company s calculation of cash flow provided to the most directly comparable cash flow measure, as required by Regulation G, appears in the appendix of this presentation. 2 Before Changes in Current Operating Items and Deferred Taxes

4 2008 Full Year Sales ($ in millions) 2007 $1, Total Company Total Company Sales +9% ORV +15% -17% Geographic Sales +17% Snow Victory PG&A 2008 $1, Total Company % Change in Total Company Sales -2% Volume +11% Product Mix & Price 0% Currency Sales by Product line +9% Total Int l +18% $304.2 Canada +18% $273.0 United States +6% $1,371.1 Victory $ % Snow +15% $205.3 PG&A +17% $343.6 ORV +9% $1,305.8 ORV (Off-Road Vehicles) = ATV & SxS Combined 3

5 2008 Full Year Earnings Net Income* Net Income as a Percent of Sales* $ % $ % 0.8% Gross Margin 0.1% Op Expense -1.5% 0.4% -0.3% 0.2% 6.0% Financial Services Interest Expense Non-Op Income Income Taxes Gross profit margins improved 80 basis points Financial Services income decreased $24.1 million Net margin expansion focal point for 2009 and beyond * From continuing operations. 4

6 2008 Summary Highlights: Record sales and EPS Sales up 9% EPS up 13% Share gains in every business International operations grew 18% Industry leading new products Sportsman XP; RZR S; RANGER HD; 800 Assault/Dragon Operational Excellence delivered Improved quality Increased speed to market MVP Dealer inventories declined by 7% Disappointments: Q4 retail sales decline Victory below expectations Credit environment Finance income down $24M Retail credit availability concerns Factory inventory Share price Gross profit margin expansion of 80 bpts 5

7 North American Retail Sales ATVs, Side by sides, Motorcycle and Snowmobiles, combined % change from prior year Industry Polaris Units First nine months ended September 30 Fourth quarter Full Year -11% -6% -19% -16% -9% -25% North American retail sales deteriorated throughout Q4 International also declined in Q4 Polaris gained market share in all businesses in 2008 for 2 nd year in row Note: Side-by-side industry retail sales are Polaris estimates 6

8 Ready for 2009 Aligned Strategy & Structure Off-Road Vehicle Division International Team Adjacencies Attacked Costs Workforce reductions announced Operating Expense reductions > $10M Manufacturing/Production costs reduced with volume Accelerated Operational Excellence Speed / Factory Adjustments Q production cuts Productivity +8% Value Engineering > $10M Focused on Dealers / Customers Product Innovation Process Innovation Rush, RZR 170, Much more MVP / Victory Go-to Market Prepared for a Tough Year Sales -15% to -23% Contingency Plans in place 7

9 2009 Full Year Total Company Sales Off Road Vehicles (ORV) Snowmobiles Victory Motorcycles PG&A Down 15% to 23% Down 17% to 25% Down 10% to 20% Down 25% to 40% Down 9% to 13% Gross Margins Up to 130 bpts improvement Operating expenses EPS Diluted from continuing operations Reduction > $10 million - up as a percent of sales $ $3.00 (-29% to -14%) 8

10 First Quarter 2009 Total Company Sales (in millions) Diluted EPS* (in millions) $388.7 $0.55 Actual Down 20% to 25% Down 73% to 55% $0.15 to $ Actual * From continuing operations. 9

11 Gross Profit Margin Percentage Trends Q Full Year Prior Period 22.0% 22.1% 22.9% Production volume adjustments Product mix Commodity/transporation costs Currency rates Higher selling prices Warranty costs Tooling amortization Sales promotional costs Current period 22.8% 22.9% up to 24.2% Change +80 bpts +80 bpts up to +130 bpts Improvement to gross margin % Impairment to gross margin % Neutral to gross margin % Flexible variable cost structure and timely execution drives gross margin expansion 10

12 Balance Sheet and Liquidity Profile $ In millions (except per share data) Total Debt at Year-end Net Debt at Year-end (debt less cash balances) Credit Facility (expires December 2011) Average debt outstanding Maximum debt outstanding Capital Expenditures Depreciation and amortization Cash Provided by Continuing Operations Stock buyback Dividend 2008 Actual $200.0 $172.9 $450.0 $283.0 $345.0 $76.6 $66.1 $176.2 $107.2 (2.5 million shares) $1.52 per share 2009 Approximately flat Improving $450.0 Similar Similar $50 to $60 $60 to $65 Expected to decrease approximately in line with net income Much more modest share repurchase activity to approximate benefit plan share issuances $1.56 per share (+3%) 11

13 Research & Development / New Product Tooling % of Total Company Sales 4.6% 4.6% 5.0% 5.4% 5.0% 5.4% About 5.7% 5.5% Flat Recent New Product Introductions: 5.7% 5.5% RANGER RZR Sportsman XP Research & Development New Product Tooling guidance RANGER HD Engineering and new product development is competitive advantage Objective: Best products and quality at the lowest cost Value engineering is key RUSH Victory Vision 12

14 Off-Road Vehicle Division Polaris Revenue ($000 s) +9% $1.306B $1.195B ATV -17% to -25% ATV ATV SXS SXS SXS % of Total Polaris Sales #1 Market Share in ORV in N.A. & Europe New Sportsman XP & Ranger selling well Consolidated into ORV Division Improve cost synergies & market effectiveness Weak N.A. core ATV industry (-26%) in 2008 side-by-side industry continued to grow up 4% N.A. Off-Road Vehicle Industry ATV ATV ATV -22% ATV -20% to -35% ATV SxS SxS SxS SxS SxS E 2009 Projection Note: Side-by-side industry retail sales are Polaris estimates 13

15 Snowmobile Division Polaris Revenue ($000 s) +15% $179M $205M -10% to -20% % of Total Polaris Sales Gained Share in 2008; #2 Significant Quality Improvement +20% Launched RUSH in 2009 Industries only progressive rate rear suspension Good snow conditions throughout NA Dealer Inventory down 4% STD N.A. Snowmobile Industry -11% -9% -7% +4% -20% E For season ended March 31 14

16 Victory Division Polaris Revenue ($000 s) $113M -17% $94M Retail 0% to -10% -25% to -40% 5% of Total Polaris Sales Industry leader in ownership satisfaction Gained share for 5 th year in a row Aggressive supply reduction to improve dealer business model Global expansion Australia, Germany Focused on retail acceleration + share N.A. Motorcycle Industry 1400cc+ +4% +6% -4% -9% -15% to -25% Projection 15

17 PG&A Division Polaris Revenue ($000 s) $293M +17% $344M -9% to -13% % of Total Polaris Sales Sales growth in all businesses; record sales Highest margin business Innovation continues: 260 new accessories in 2008 Expect to outperform WG sales in PG&A Revenue by Business Unit Snow 19% Other 8% Off-Road Vehicles 67% Victory 6% 16

18 International Division Polaris Revenue ($000 s) +18% $304M $258M Asia Latin 1% America 7% ME/Africa 14% Aus/NZ 9% -10% to -20% Europe 69% 16% of Total Polaris Sales #1 market share in ORV for Europe & gaining share Europe markets weak in 2008; expect same in 2009 Gaining share in Snow in 2008 Increased direct presence 50% in 2008 Victory global expansion Australia, Germany New structure focused on global expansion and EMEA Victory 3% Snow 12% PGA 17% ORV 68% 2008 Revenue by Geography 2008 Revenue by Business Unit 17

19 Financial Services Income Financial Services Income by category $45.3 Retail Portfolio HSBC and GE combined $ in millions 2008 Wholesale income down 5% Retail credit income down 80% Other activities income down 29% $ % 53% 38% 39% Q % 31% Down 50% Q4 Penetration Rate 2008 Approval Rate Q Retail Financing Wholesale Credit Other Activities Sheffield Financial added in February

20 Adjacencies Polaris Defense Revenues +50% to 100% +42% Military: New customer penetration Global expansion / after sale support Expanded business development resources Additional adjacency opportunities to be announced On-road and/or outside powersports Q Bobcat Alliance Q Additional adjacency announcement Additional organic opportunities in pipeline Focus: Global Outside powersports On road 19

21 Bobcat Strategic Alliance #1 Off-road vehicle manufacturer #1 Compact construction equipment manufacturer Alliance will leverage complementary strengths Technology sharing Co-development and supply of highly differentiated work vehicles New Vehicles available mid to late

22 Operational Excellence Units (all products) N.A. Dealer Inventory -11% Reduce -7% further in 2009 Continued dealer Inventory reduction in 2009 MVP go to market dealer business model Lean acceleration NPS improved in 3 of 4 - Industry-leading in Victory & SxS Goal Quality - Net Promoter Score (NPS) MODEL YEAR 2008 MODEL YEAR 2009 GOAL NPS % NPS % Industry Industry Product Change Change Place Place 08 vs vs 08 Snow Middle 20% 1st 5% ATV Middle - 7% 1st 10% SxS 1st 5% 1st 5% Victory 1st 6% 1st 5% Cost - Gross Profit Margin Expansion 22.9% 22.1% 21.7% Up to +130 bpts

23 Polaris 5-Year Strategic Objectives Best in Powersports PLUS 5-8% organic growth Growth through Adjacencies $ M growth Global Market Leadership >25% of Polaris Revenue Operations is a Competitive Advantage Op Ex drives >200bpts Operating Margin improvement Strong Financial Performance Sustainable, Profitable Growth A Great Future for All Stakeholders 22

24 Appendix Private Securities Litigation Reform Act of Polaris Industries Inc. Disclosure Litigation Statement Our presentation and responses to your questions may contain certain statements which may be considered forward looking for the purposes of the Private Securities Litigation Reform Act of We caution you that actual results could differ materially from those projected in a forward looking statement which by their nature involve risk that results may differ from those anticipated. Additional information concerning the factors that could cause results to differ materially from those anticipated may be found in Polaris annual report, 10-K, 8-K, 10-Q and form S-3 registration statements. Regulation G Reconciliation Cash Flow Provided by operating activities from continuing operations (dollars in millions) Changes in current operating items Net cash provided by operating activities Year Cash Flow Provided Deferred income taxes (25.9) (10.6) (8.7) (7.9) (1.5) (50.5) (26.3) (10.3) (1.0) (20.4)

25 Polaris Industries Inc. Thank you. Q & A 24