Investor Presentation

Transcription

1 POLARIS INDUSTRIES INC. Investor Presentation May, 2018

2 POLARIS INDUSTRIES INC. A GLOBAL CORPORATION 1954 Year Polaris was Founded ~11,000 Employees Worldwide 16 Manufacturing Locations 5 Research & Development Centers ~1,800 Dealers In North America ~1,400 Dealers Outside North America >370,000 Units Shipped Worldwide in 2017 ORV/Snow 9% 2017 Sales* by Segment 66% 11% 20% 7% 16% Motorcycles 7% excl. Victory Adjacent Markets 16% Aftermarket 362% >100 Countries Polaris Products Sold *FY 2017 Sales results are adjusted; see Appendix for GAAP/Non-GAAP Reconciliation PII IR MAY

3 N.A. POWERSPORTS CONSOLIDATED MARKET SHARE Consolidated Market Share in Units Using Total Motorcycle Industry POWERSPORTS MARKET SHARE LEADER Honda Harley Yamaha Can Am Kawasaki Other PII IR MAY 2018 CLEAR #1 IN N.A. POWERSPORTS 3

4 PII IR MAY

5 POLARIS INDUSTRIES INC. First Quarter 2018 Earnings Results April 24, 2018

6 FIRST QUARTER 2018 SUMMARY Financial results exceeded expectations; record first quarter retail sales for ORV N.A. retail up 3%; ORV s up mid-single digits %; Side-by-side s up high-single digits % Indian motorcycle up low-single digits %; continued share gains All segments reported increased sales in Q1 Global Adjacent Markets performance strong; M&A opportunities robust New product introductions received positively; demand strong RFM for side-by-sides progressing, dealer inventory adequate, excl. snow Commodity, logistical and tariff cost pressures accelerating; working to offset PII IR MAY 2018 Solid Start to the Year Maintaining Full Year Outlook In Spite of Headwinds 6

7 NORTH AMERICAN POWERSPORTS RETAIL SALES Polaris Retail Sales Year-Over-Year Retail % Change (units) -6% Q Q % (+5% excl. snow) Motorcycles ORV Snowmobiles Polaris N.A. retail up 3% for Q1 18; up 5% excluding snow ORV strong; new products, improved Oil/Gas/Ag regions Indian retail up low-single digits; strong growth in Scout/Scout Bobber Q1 18 Retail Sales by Business (vs. Q1 17) POLARIS INDUSTRY Off-Road Vehicles mid-single digits % low-single digits % (estimated) Side-by-Sides ATVs high-single digits % low-single digits % Motorcycles low-single digits % mid-teens % (900cc & above) Indian Slingshot low-single digits % mid-single digits % Snow down high-single digits in Q1; down low-double digits season-end Polaris promotional expense down year-over-year in Q1 North American Industry retail down low-single digits % ORV up; motorcycles down Snowmobiles (season-end Mar 18) low-double digits % mid-single digits % Retails Sales Momentum Positive Innovation + Improved Dealer Engagement PII IR MAY

8 NORTH AMERICAN DEALER INVENTORY Polaris N.A. Total Dealer Inventory Q1 Total N.A. Dealer Inventory Year-over-year % Change in Units Rolling 4 Qtrs Ending Q1'17 Rolling 4 Qtrs Ending Q1'18 +6% +5% +1% +6% +6% +1% excl. snow -6% Q2 Q3 Q4 Q1 Q Existing ORV Models New ORV Models Snowmobiles Motorcycles Q Polaris Q N.A. dealer inventory up 6% vs. Q Snow up ~40%; weak snow, high competitive promotions ORV flat Indian Motorcycles & Slingshot up in preparation for riding season RFM for side-by-sides progressing Dealer Inventory Levels Adequate, Excluding Snow PII IR MAY

9 MULTI-YEAR STRATEGIC SOURCING PROJECT COST SAVINGS TARGET >$200 Million (annual gross savings at maturity) WAVE #1 ~$1 Billion Annual Spend SIGNIFICANT SUPPLIER RATIONALIZATION Supplier Research Conference Profiles Evaluation March 2018 Site Visits ALLIANCE AGREEMENT IMPROVED QUALITY <150 PPM REJECTS Fall 2017 COMPLETED Q IN-PROGRESS Over 1,600 attended conference (~900 suppliers, 3/4 th new to Polaris) $5 billion in spend over next 5 years; $1 billion first wave Q PII IR MAY 2018 Enables Improved Productivity, Quality, Innovation and Delivery 9

10 INNOVATION ($ in millions) % of Sales $ % R&D Investment $ % $ % 5.0% +25% $65 Up ~10% ~4.6% Q Expectations RZR RS1 RANGER XP 1000 Crew 6-Passenger Jack Daniel s Limited Edition Indian Scout Bobber 850 Patriot Engine 72 RZR XP TURBO S Youth RANGER 150 EFI with Geofencing technology Indian Chieftain Elite PII IR MAY 2018 Innovation Pipeline Robust 10

11 Q FINANCIAL RESULTS $ in millions, except EPS SALES NET INCOME EPS GAAP ($/% Change) $1,297 12% $56 N/M $0.85 N/M ADJUSTED* ($/% Change) $1,159 12% $1,297 $48 43% $69 $ % $1.06 Q Q Q Q Q Q Strong ORV, Adjacent Markets, PG&A & International sales growth Average selling price is up 4% (excluding Victory) Non-GAAP tax rate at 22.2% *See GAAP/Non-GAAP Reconciliation in Appendix. N/M = not meaningful Results Finished Ahead of Expectations PII IR MAY

12 OFF-ROAD VEHICLES (ORV) / SNOWMOBILES ($ millions) $724 Q ORV/Snow Segment Sales* 15% $833 Off-Road Vehicles 17% Snowmobiles 28% PG&A 5% RZR RS1 MSRP $13,999 MILLION Q Q All ORV categories grew sales and market share New product demand strong Promotional spending down vs. last year MY 19 snowcheck orders strong at a 17-year high Average selling price for ORV up 4%; Snowmobiles up 2% *Adjusted Results: See GAAP/Non-GAAP Reconciliation in Appendix Solid Growth Driven by New Product Introductions PII IR MAY

13 MOTORCYCLES ($ millions) Q Motorcycles Segment Sales* Indian Chieftain Elite MSRP $31,499 $120 $125 9% $132 4% $131 Indian & Slingshot 5% PG&A Flat MILLION Q GAAP* Q Adjusted* Q GAAP* Q Adjusted* Indian sales up double-digits; Slingshot shipments down Both Indian and Slingshot gained market share in a down market New Indian Jack Daniels Scout Bobber sold out in less than 10 minutes Average selling price down 5% (excl. Victory); mix impact *Adjusted Results: See GAAP/Non-GAAP Reconciliation in Appendix Indian Motorcycle Market Share Gains Continued PII IR MAY

14 GLOBAL ADJACENT MARKETS (GAM) ($ millions) Q GAM Segment Sales MRZR D4 MSRP ~$43,000 $92 24% $113 Commercial, Gov t/defense, & Aixam 25% PG&A 19% MILLION Q Q Growth driven by Aixam, Goupil and Government/Defense business Order backlog solid Polaris Adventures entering first full riding season Aixam, Goupil and Defense Driving Increase Growth in Adjacent Markets PII IR MAY

15 AFTERMARKET Q Aftermarket Segment Sales Transamercian Auto Parts ($ millions) $218 1% $220 TAP 1% Other Aftermarket 22% MILLION Q Q TAP wholesale sales down due to soft industry light-duty truck sales; sales at its retail stores remained strong year-over-year Other Aftermarket brands up strong driven by Klim/Premier New TAP leader in place internal promotion TAP Sales Impacted by Weak Light-duty Truck Sales Remains Market Leader PII IR MAY

16 INTERNATIONAL Q International Sales* ($ millions) $166 27% $211 GAM Motorcycles ORV / Snow 20% Motorcycles 42% $118 EMEA +38% (cc +25%) $163 ORV / Snow Q Q MILLION Global Adjacent Markets 32% Q Q All categories grew sales and market share in Q1 Polaris #1 in market share for ORV outside N.A. Opole productivity improved significantly Latin America $20-4% (cc -10%) $19 Asia Pacific (includes Australia/New Zealand) $28 +2% (cc -2%) $29 *Included in respective segments Q Q Q Q International Growing Ahead of Expectations PII IR MAY

17 PG&A ($ millions) Q Core Parts, Garments & Accessories (PG&A) Sales* $179 5% $188 ORV / Snow 5% Sales by Segment Motorcycles 8% MILLION Adjacent Markets 19% Q GAAP Q GAAP Sales by Category Strong accessory $/unit growth International PG&A up mid-teens % Parts lower - improving quality / fewer recalls Accessories 14% MILLION Apparel 9% Parts 3% *Included in respective segments Continued Growth in our Highest Margin Business PII IR MAY

18 FULL YEAR 2018 GUIDANCE $ millions, except EPS SALES (% of Prior Year) GROSS PROFIT MARGINS (% of Sales) OPERATING EXPENSE ($ & % of Sales) TAX RATE EPS 2017 Actuals Adjusted* $5, % $1,008 (18.6% of Sales) 30.1% $ Guidance** 4% to 6% (previous 3% to 5%) 40 to 60 bps 40 to 60 bps (% of Sales) ~23% $6.05 to $6.20 (+25% to +28%) (previous $6.00 to $6.20) Change in Guidance Increased Unchanged Unchanged Unchanged Narrowed (increased lower-end) Additional Expectations Financial Services up low-single digits % (increased) Share count up ~2%, dilutive impacts (unchanged) Interest expense up due to rising interest rates (unchanged) Foreign Exchange favorable at current spot rates *See GAAP/Non-GAAP Reconciliation in Appendix **See Appendix for discussion regarding non-gaap adjustments excluded from 2018 guidance Full Year 2018 EPS Guidance Narrowed PII IR MAY

19 2018 FULL YEAR GUIDANCE BY SEGMENT ($ billions) ORV/Snowmobiles Motorcycles Global Adjacent Markets ($ millions) ($ millions) ($ millions) Aftermarket $3.6B PG&A Snow mid-single digits % Increased PG&A Snow $574 PG&A high-single digits % Unchanged PG&A $397 PG&A high-single digits % Increased PG&A $885 mid-single digits % Lowered ORV ORV Indian Slingshot Indian Slingshot Commercial Gov t/defense Commercial Gov t/defense Aixam Aixam FY 2017 FY 2018 Guidance FY 2017 Adjusted* FY 2018 Guidance FY 2017 FY 2018 Guidance FY Guidance *See GAAP/Non-GAAP Reconciliation in Appendix Strength in ORV & GAM Driving Improved Sales Guidance PII IR MAY

20 GROSS PROFIT MARGIN GUIDANCE 21.0% Gross Profit Margin Q % 24.9% 25.4% Adjusted* Gross Profit Margin 2018 Guidance Increase up 40 to 60 bps Unchanged Q GAAP* Q Adjusted* Q GAAP* Q Adjusted* FY 2018 Adjusted Guidance VIP Warranty F/X Promos/Price Commodities/Freight Product Mix VIP Warranty F/X Promos/Price Commodities/Freight/Tariffs Product Mix Gross Profit Margin by Segment Q GAAP* Q Adjusted* Q GAAP* Q Adjusted* ORV/Snow 29.4% 29.4% 29.3% 29.3% Motorcycles (16.5%) 14.9% 12.6% 12.7% Adjacent Markets 30.7% 30.7% 27.6% 28.0% Aftermarket 19.1% 25.0% 26.6% 26.6% Gross Profit Margin by Segment ORV/Snow Motorcycles Adjacent Markets Aftermarket 2018 Expectations *See Appendix for discussion regarding non-gaap adjustments excluded from 2018 guidance KEY: Improvement Headwind Neutral 2018 Gross Margin Improvement Driven Primarily by Lower Warranty & VIP Savings, F/X PII IR MAY

21 Q FINANCIAL POSITION & 2018 EXPECTATIONS Cash Drivers ($ millions) ($ millions) $138 Cash YE $3 Operating Activities -$38 -$56 +$116 -$15 Dividends Capex Net Debt Share Repurchase +$24 Other $166 Cash Q Capital Summary March 2018 Variance to March 2017 Cash $ % Debt /Capital Lease Obligations $1,029-13% Shareholders Equity $ % Total Capital $2,002-1% Debt to Total Capital 51% -7% points ($ millions) $47 Operating Cash Flow -107% -$3 Q Q $580 Down about 10% FY 2017 FY 2018 Expectations Q Summary Operating cash flow down as expected Factory inventory up in preparation for higher selling seasonality FY 2018 Expectations Cash Flow expectations unchanged: Cap Ex higher than 2017; distribution/tooling Op cash flow lower; timing of accrual payments & higher w/c needs PII IR MAY 2018 Continued Strong Financial Position Net Debt Improving 21

22 Q CLOSING COMMENTS Good early momentum established for the year Commodity, freight and tariff cost increases more challenging Core markets remain competitive; innovative new products driving success Closed a chapter of intense but warranted scrutiny from regulators International business growing nicely Supply chain initiative progressing well; safety and quality remain key PII IR MAY 2018 Quickly Becoming a More Customer Centric, Highly Efficient Growth Company 22

23 SAFE HARBOR & NON-GAAP MEASURES Except for historical information contained herein, the matters set forth in this presentation, including management s expectations regarding 2018 future sales, shipments, net income, and net income per share, operational initiatives and impact of tax reform 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; product recalls, 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; freight and tariff 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. This presentation contains certain non-gaap financial measures, consisting of Adjusted sales, gross profit, income before taxes, net income and net income per diluted share as measures of our operating performance. Management believes these measures may be useful in performing meaningful comparisons of past and present operating results, to understand the performance of its ongoing operations and how management views the business. Reconciliations of Adjusted non-gaap measures to reported GAAP measures are included in the Appendix of this presentation. These measures, however, should not be construed as an alternative to any other measure of performance determined in accordance with GAAP. PII IR MAY

24 APPENDIX FY 2017 NON-GAAP RECONCILIATIONS FT 2017 NON-GAAP RECONCILIATIONS - SEGMENTS Q NON-GAAP RECONCILIATIONS Q NON-GAAP RECONCILIATIONS - SEGMENTS 2018 GUIDANCE ADJUSTMENTS Q ORGANIZATIONAL CHANGES POLARIS ADVENTURES POLARIS GLOBAL MANUFACTURING LOCATIONS PII IR MAY

25 FY 2017 NON-GAAP RECONCILIATIONS Reconciliation of GAAP "Reported" Results to Non-GAAP "Adjusted" Results (In Thousands, except per share data; Unaudited) Three months ended December 31, Years ended December 31, Sales $ 1,431,049 $ 1,217,789 $ 5,428,477 $ 4,516,629 Victory wind down (1) (2,364) (1,857) Restructuring & realignment (3) 1,048 1,048 Adjusted sales 1,429,733 1,217,789 5,427,668 4,516,629 Gross profit 367, ,772 1,324,651 1,105,623 Victory wind down (1) 2,874 57,844 TAP (2) 8,803 12,950 8,803 Restructuring & realignment (3) 2,463 12,980 Adjusted gross profit 373, ,575 1,408,425 1,114,426 Income before taxes 117,977 85, , ,251 Victory wind down (1) ,398 TAP (2) 3,463 21,454 26,921 21,454 Restructuring & realignment (3) 11,598 22,116 Adjusted income before taxes 133, , , ,705 Net income 31,475 62,581 $ 172, ,948 Victory wind down (1) (1,012) 52,366 TAP (2) 2,177 13,515 16,923 13,515 Restructuring & realignment (3) 7,291 13,902 Tax reform (4) 55,398 55,398 Adjusted net income (5) $ 95,329 $ 76,096 $ 311,081 $ 226,463 Key Definitions: Throughout this presentation, the word Adjusted is used to refer to GAAP results excluding: TAP inventory step-up purchase accounting, TAP integration expenses, impacts associated with the Victory Motorcycles wind down, restructuring and realignment costs, and impacts of the tax reform. Adjustments: (1) Represents adjustments for the wind down of Victory Motorcycles, including wholegoods, accessories and apparel (2) Represents adjustments for TAP integration expenses (3) Represents adjustments for corporate restructuring and network realignment costs (4) Represents an adjustment for impacts of a charge in its income tax provision due to the remeasurement of its deferred income tax positions at the new corporate income tax rate of 23.8 percent (from 37.1 percent) (5) The Company used its estimated statutory tax rate of 37.1% for the non-gaap adjustments, except for the non-deductible items and the tax reform related changes noted in Item Reclassified Results: 2016 sales and gross profit results for ORV/Snowmobiles, Motorcycles and Aftermarket are reclassified for the new Aftermarket reporting segment. Diluted EPS $ 0.49 $ 0.97 $ 2.69 $ 3.27 Victory wind down (1) (0.02) 0.82 TAP (2) Restructuring & realignment (3) Tax reform (4) Adjusted EPS (5) $ 1.47 $ 1.18 $ 4.85 $ 3.48 Q4 & FY'17 Earnings 25

26 FY 2017 NON-GAAP RECONCILIATIONS - SEGMENTS Non-GAAP Reconciliation of Segment Results (In Thousands; Unaudited) Three months ended December 31, Years ended December 31, SEGMENT SALES ORV/Snow segment sales $ 993,750 $ 880,905 $ 3,570,753 $ 3,283,890 Restructuring & realignment (3) 1,048 1,048 Adjusted ORV/Snow segment sales 994, ,905 3,571,801 3,283,890 Three months ended December 31, Years ended December 31, SEGMENT GROSS PROFIT ORV/Snow segment gross profit 278, ,521 1,054, ,597 Restructuring & realignment (3) 1,048 1,048 Adjusted ORV/Snow segment gross profit 279, ,521 1,055, ,597 Motorcycles segment sales 102, , , ,171 Victory wind down (1) (2,364) (1,857) Adjusted Motorcycles segment sales 100, , , ,171 Global Adjacent Markets (GAM) segment sales 116,612 98, , ,937 No adjustment Adjusted GAM segment sales 116,612 98, , ,937 Aftermarket segment sales 217, , , ,631 No adjustment Adjusted Aftermarket sales 217, , , ,631 Total sales 1,431,049 1,217,789 5,428,477 4,516,629 Total adjustments (1,316) (809) Adjusted total sales $ 1,429,733 $ 1,217,789 $ 5,427,668 $ 4,516,629 Motorcycles segment gross profit 5,108 1,063 16,697 87,538 Victory wind down (1) 2,874 57,844 Adjusted Motorcycles segment gross profit 7,982 1,063 74,541 87,538 Global Adjacent Markets (GAM) segment gross profit 29,623 28,986 94,920 95,149 Restructuring & realignment (3) ,932 Adjusted GAM segment gross profit 30,038 28, ,852 95,149 Aftermarket segment gross profit 60,777 28, ,498 46,289 TAP (2) 8,803 12,950 8,803 Adjusted Aftermarket segment gross profit 60,777 36, ,448 55,092 Corporate segment gross profit (6,240) 3,185 (67,021) (30,950) Restructuring & realignment (4) 1,000 1,000 Adjusted Corporate segment gross profit (5,240) 3,185 (66,021) (30,950) Adjustments: (1) Represents adjustments for the wind down of Victory Motorcycles, including wholegoods, accessories and apparel Total gross profit 367, ,772 1,324,651 1,105,623 Total adjustments 5,337 8,803 83,774 8,803 Adjusted total gross profit 373, ,575 1,408,425 1,114,426 (2) Represents adjustments for TAP integration expenses (3) Represents adjustments for corporate restructuring and network realignment costs (4) Represents adjustments for costs related to supply chain transformation Reclassified Results: 2016 sales and gross profit results for ORV/Snowmobiles, Motorcycles and Aftermarket are reclassified for the new Aftermarket reporting segment. Q4 & FY'17 Earnings 26

27 Q NON-GAAP RECONCILIATIONS Reconciliation of GAAP "Reported" Results to Non-GAAP "Adjusted" Results (In Thousands, Except Per Share Data; Unaudited) Three months ended March 31, Sales $ 1,297,473 $ 1,153,782 Victory wind down (1) (549) 5,104 Restructuring & realignment (3) 470 Adjusted sales 1,297,394 1,158,886 Gross profit 323, ,491 Victory wind down (1) 52 38,563 TAP (2) 12,897 Restructuring & realignment (3) 5,792 Adjusted gross profit 329, ,951 Income (loss) before taxes 73,692 (333) Victory wind down (1) ,580 TAP (2) 2,080 16,200 Restructuring & realignment (3) 6,197 EPPL impairment (5) 19,630 Brammo (6) (13,478) Adjusted income before taxes 88,790 73,447 Net income 55,714 (2,911) Victory wind down (1) ,021 TAP (2) 1,585 10,183 Restructuring & realignment (3) 4,721 EPPL impairment (5) 19,417 Brammo (6) (13,113) Tax reform (4) 270 Adjusted net income (7) $ 69,104 $ 48,293 Diluted EPS $ 0.85 $ (0.05) Victory wind down (1) TAP (2) Restructuring & realignment (3) 0.08 EPPL impairment (5) 0.30 Brammo (6) (0.20) Tax reform (4) Adjusted EPS (7) $ 1.06 $ 0.75 Key Definitions: Throughout this presentation, the word Adjusted is used to refer to GAAP results excluding: TAP inventory step-up purchase accounting / integration expenses, corporate restructuring, network realignment and supply chain transformation costs, EPPL impairment, gain on Brammo investment, and impacts associated with the Victory Motorcycles wind down. Adjustments: (1) Represents adjustments for the wind down of Victory Motorcycles, including wholegoods, accessories and apparel (2) Represents adjustments for TAP integration expenses and purchase accounting adjustments (3) Represents adjustments for corporate restructuring, network realignment costs, and supply chain transformation (4) Represents adjustments for the impacts of tax reform (5) Represents adjustments for the impairment of the Company's equity investment in Eicher-Polaris Private Limited (EPPL) (6) Represents a gain on the Company's investment in Brammo, Inc. (7) The Company used its estimated statutory tax rate of 23.8% and 37.1% for the non-gaap adjustments in 2018 and 2017, respectively, except for the nondeductible items and the tax reform related changes noted in Item 4 PII IR MAY

28 Q NON-GAAP RECONCILIATIONS - SEGMENTS Non-GAAP Reconciliation of Segment Results (In Thousands, Unaudited) Three months ended March 31, SEGMENT SALES ORV/Snow segment sales $ 832,564 $ 724,103 Restructuring & realignment (3) 470 Adjusted ORV/Snow segment sales 833, ,103 Three months ended March 31, SEGMENT GROSS PROFIT ORV/Snow segment gross profit $ 243,561 $ 212,959 Restructuring & realignment (3) 470 Adjusted ORV/Snow segment gross profit 244, ,959 Motorcycles segment sales 131, ,289 Victory wind down (1) (549) 5,104 Adjusted Motorcycles segment sales 131, ,393 Motorcycles segment gross profit 16,568 (19,881) Victory wind down (1) 52 38,563 Adjusted Motorcycles segment gross profit 16,620 18,682 Global Adjacent Markets (GAM) segment sales 113,327 91,555 No adjustment Adjusted GAM segment sales 113,327 91,555 Global Adjacent Markets (GAM) segment gross profit 31,258 28,098 Restructuring & realignment (3) 445 Adjusted GAM segment gross profit 31,703 28,098 Aftermarket segment sales 220, ,835 No adjustment Adjusted Aftermarket sales 220, ,835 Aftermarket segment gross profit 58,452 41,564 TAP (2) 12,897 Adjusted Aftermarket segment gross profit 58,452 54,461 Total sales 1,297,473 1,153,782 Total adjustments (79) 5,104 Adjusted total sales $ 1,297,394 $ 1,158,886 Corporate segment gross profit (26,358) (20,249) Restructuring & realignment (4) 4,877 Adjusted Corporate segment gross profit (21,481) (20,249) Adjustments: (1) Represents adjustments for the wind down of Victory Motorcycles, including wholegoods, accessories and apparel (2) Represents adjustments for TAP purchase accounting adjustments (3) Represents adjustments for network realignment costs (4) Represents adjustments for costs related to supply chain transformation Total gross profit 323, ,491 Total adjustments 5,844 51,460 Adjusted total gross profit $ 329,325 $ 293,951 PII IR MAY

29 2018 GUIDANCE ADJUSTMENTS 2018 guidance excludes the pre-tax effect of acquisition integration costs of approximately $10 million, supply chain transformation costs of approximately $10 million to $20 million, network realignment costs of approximately $5 million and the remaining impacts associated with the Victory wind down which is estimated to be in the range of $5 million to $10 million. Additionally, 2018 guidance excludes the pre-tax gain of $13 million related to the Company's investment in Brammo and charges of $20 million, including the impairment of the Company's equity investment in the Eicher-Polaris joint venture in India, both recorded in the 2018 first quarter. Additional costs associated with the wind down of the joint venture, if any, are expected to be immaterial for the remainder of adjusted sales guidance excludes any Victory wholegood, accessories and apparel sales and corresponding promotional costs as the Company is in the process of exiting the brand. The Company has not provided reconciliations of guidance for adjusted diluted net income per share, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include costs associated with the Victory wind down that are difficult to predict in advance in order to include in a GAAP estimate. PII IR MAY

30 ORGANIZATIONAL CHANGES Craig Scanlon President Transamerican Auto Parts (TAP) Effective April 9, 2018 Julie Gilbert Chief Customer Engagement and Growth Officer (newly created function) Effective April 12, years with Polaris Vice President Chief Marketing Officer / Chief Retail Officer, ORV Vice President Slingshot General Manager Side-by-Sides (2012) Director ORV Sales & Marketing (2010) 20+ years growing brands & businesses Founder & CEO of PreciouStatus, a mobile software company creating connections for professional care facilities, education, healthcare and the military ~10 years at Best Buy developing new markets; Senior Vice President building new businesses and markets Life-long rider of snowmobiles, motorcycles and ATVs PII IR MAY 2018 Further Strengthens Leadership to Drive Customer Centric Strategies 30

31 Unforgettable ride and drive experiences nationwide PII IR MAY

32 POLARIS GLOBAL MANUFACTURING Motorcycle Paint Spearfish, SD Motorcycles Snow, ATV, MRZR Roseau, MN Goupil Aixam Mega 1) Chanas & 2) Aix-les-Bains FRANCE Spirit Lake, IA Bourran, FRANCE ATV, SxS Timbersled Sandpoint, ID Engines Osceola, WI Opole, POLAND Hammerhead Shanghai, CHINA Taylor-Dunn, GEM Anaheim, CA Kolpin Cuyahoga Falls, OH TAP, Pro Armor Chula Vista, CA Transamerican Auto Parts Banning, CA SxS, Engines Monterrey, MEXICO SxS, Slingshot Huntsville, AL 16 In-House Manufacturing Facilities Worldwide PII IR MAY