Financial and Operational Highlights
Second quarter reported and adjusted sales decreased 15%
to $1,512 million and $1,510 million, respectively
Second quarter reported net loss was $3.82 per share;
adjusted net income for the same period was $1.30 per share
North American retail sales increased 57% for the quarter
compared to last year with both ORV and Motorcycle retail sales up
significantly
Dealer inventory levels decreased 47% given the strong
retail sales growth and lower shipments resulting from the COVID-19
related temporary suspension of production during the quarter
Evaluation of the Company's Aftermarket goodwill and other
intangibles resulted in a pre-tax $379 million non-cash
impairment charge taken during the quarter
Operating expenses excluding the impairment charge,
decreased 15% given the substantial reduction in discretionary and
non-essential spending in response to the pandemic crisis
Polaris' liquidity profile remains solid with debt/EBITDA
below 3 times and total liquidity of $1.2 billion at quarter
end
Polaris re-initiated full year 2020 sales and adjusted
earnings guidance with full year adjusted earnings in the range
of $6.40 to $6.60 per diluted share and full year sales in the
range of $6.650 billion to $6.750 billion
Polaris Inc. (NYSE: PII):
Key Financial Data
(in millions, except per share data)
INCOME STATEMENT - Q2 June 30,
2020
Reported
YOY % Chg.
Adjusted*
YOY % Chg.
Sales
$
1,511.8
(15)%
$
1,510.1
(15)%
Net income (loss) attributable to
Polaris
$
(235.4
)
NM
$
80.9
(25)%
Diluted EPS
$
(3.82
)
NM
$
1.30
(25)%
BALANCE SHEET - June 30, 2020
Reported
YOY % Chg.
Cash and cash equivalents
$
544.4
466%
Inventories, net
$
1,026.4
(9)%
Total debt, finance lease obligations and
notes payable
$
1,928.0
2%
Shareholders' equity
$
753.0
(21)%
CASH FLOW - YTD Q2 June 30,
2020
Reported
YOY % Chg.
Net cash provided by operating
activities
$
309.7
53%
Purchase of property & equipment
$
88.1
(36)%
Repurchase and retirement of common
shares
$
49.3
NM
Cash dividends to shareholders
$
76.0
2%
NM = Not meaningful
*Note: the results and guidance in this
release, including the highlights above, include references to
non-GAAP operating measures, which are identified by the word
“adjusted” preceding the measure. A reconciliation of GAAP /
non-GAAP measures can be found at the end of this release.
CEO Commentary
Polaris’ second quarter results significantly outperformed
expectations, once again demonstrating the resiliency and
dedication of our global team. We overcame a near complete shutdown
of both our dealers and the U.S. economy early in the quarter to
capitalize on unprecedented retail demand for our Off-Road Vehicles
and Motorcycles through May, June and now July. Our broad array of
best-in-class products provided an attractive social-distancing
solution for both existing, and encouragingly, a wide range of new
Powersports customers. During the quarter, we navigated a level of
uncertainty and unrest that is unparalleled in our nation’s
history, beginning with rapidly and successfully restarting our
production facilities, while protecting the health and safety of
our employees. And importantly, following the death of George Floyd
here in Minnesota, we united to do our part to bridge divides and
drive meaningful change. From executive leadership to our
production line employees, we are working under a shared goal of
positively impacting our company and communities. Despite social
turbulence and softness in our Adjacent Markets businesses, between
ongoing strong consumer demand and historically low dealer
inventory levels, we are well-positioned for the second half of the
year. I am fortunate to work with an extremely talented team and am
confident that we will navigate this pandemic, engender a more
welcoming and inclusive Powersports industry, and continue building
an even better and stronger business.
-- Scott Wine, Chairman and Chief Executive Officer of Polaris
Inc.
Second Quarter Performance Summary
(Reported)
(in millions, except per share data)
Three months ended June
30,
2020
2019
Change
Sales
$
1,511.8
$
1,779.3
(15
)
%
Gross profit
332.7
436.4
(24
)
%
% of Sales
22.0
%
24.5
%
-252 bpts
Total operating expenses
653.5
321.1
104
%
% of Sales
43.2
%
18.0
%
Income from financial services
25.4
19.8
28
%
% of Sales
1.7
%
1.1
%
+56 bpts
Operating income (loss)
(295.4
)
135.1
NM
% of Sales
(19.5
)
%
7.6
%
Net income (loss) attributable to
Polaris
(235.4
)
88.2
NM
% of Sales
(15.6
)
%
5.0
%
Diluted net income (loss) per
share
$
(3.82
)
$
1.42
NM
NM = Not meaningful
Polaris Inc. (NYSE: PII) (the "Company") today released second
quarter 2020 results with reported sales of $1,512 million, down 15
percent from reported sales of $1,779 million for the second
quarter of 2019. The Company reported a second quarter 2020 net
loss of $235 million, or $(3.82) per diluted share, compared with
net income of $88 million, or $1.42 per diluted share, for the 2019
second quarter. The 2020 second quarter net loss includes a $379
million pre-tax, non-cash goodwill and other intangible asset
impairment charge related to the Company's Aftermarket business,
principally Transamerican Auto Parts (TAP). Adjusted net income for
the quarter ended June 30, 2020 was $81 million, or $1.30 per
diluted share compared to $108 million, or $1.73 per diluted share
in the 2019 second quarter.
Retail demand accelerated throughout the quarter benefiting
Company performance as both new and existing customers took
advantage of off-road vehicles and motorcycles to enjoy the
outdoors while maintaining social distancing etiquette, partially
mitigating the COVID-19 driven economic slowdown.
Gross profit decreased 24 percent to $333 million for the
second quarter of 2020 from $436 million in the second quarter of
2019. Reported gross profit margin was 22.0 percent of sales for
the second quarter of 2020, down 252 basis points compared to 24.5
percent of sales for the second quarter of 2019. Adjusted gross
profit for the second quarter 2020 was $348 million, or 23.0
percent of adjusted sales compared to the second quarter of 2019
adjusted gross profit of $443 million, or 24.9 percent of sales.
Adjusted gross profit for the second quarter of 2020 excludes the
negative impact of $15 million of restructuring and realignment
costs, and adjusted gross profit for the second quarter of 2019
excludes the negative impact of $7 million of restructuring and
realignment costs.
Operating expenses increased 104 percent for the second
quarter of 2020 to $654 million from $321 million in the same
period in 2019. Operating expenses increased primarily due to the
non-cash impairment of goodwill and other intangible assets
associated with the Company's Aftermarket segment, primarily TAP,
given the impact of the pandemic-driven downturn on the outlook for
the TAP business. The impairment charge was partially offset by
reductions in discretionary and non-essential spending as well as
lower compensation costs during the quarter.
Income from financial services was $25 million for the
second quarter of 2020, up 28 percent compared with $20 million for
the second quarter of 2019. The increase was primarily due to the
strong North American retail sales demand during the quarter.
Non-Operating Expenses
(Reported)
(in millions)
Three months ended June
30,
2020
2019
Change
Interest expense
$
17.9
$
20.6
(13)
%
Equity in loss of other affiliates
$
—
$
0.5
NM
Other (income) expense, net
$
0.8
$
(0.3)
NM
Provision for income taxes
$
(78.7)
$
26.2
NM
NM = Not meaningful
Interest expense was $18 million for the second quarter
of 2020 compared to $21 million for the same period last year due
to lower interest rates.
Other (income) expense, net, was $0.8 million of expense
in the second quarter of 2020 compared to $0.3 million of income in
the second quarter of 2019. Other (income) expense is the result of
foreign currency exchange rate movements and the corresponding
effects on foreign currency transactions related to the Company’s
foreign subsidiaries.
The provision for income taxes for the second quarter of
2020 was a tax benefit $79 million, compared with tax expense of
$26 million for the second quarter of 2019. The favorable change in
the tax provision from the second quarter of 2019 is primarily
related to $90 million of deferred tax benefits arising from the
significant pretax loss from the impairment of goodwill and other
intangible assets, as well as the release of certain income tax
reserves.
Product Segment Highlights
(Reported)
(in millions)
Sales
Gross Profit
Q2 2020
Q2 2019
Change
Q2 2020
Q2 2019
Change
Off-Road Vehicles / Snowmobiles
$
952.9
$
1,049.3
(9)
%
$
251.7
$
297.7
(15)
%
Motorcycles
$
141.3
$
196.8
(28)
%
$
4.4
$
22.9
(81)
%
Global Adjacent Markets
$
77.9
$
121.9
(36)
%
$
16.8
$
33.6
(50)
%
Aftermarket
$
207.5
$
228.9
(9)
%
$
47.6
$
55.2
(14)
%
Boats
$
132.2
$
182.4
(28)
%
$
18.6
$
40.5
(54)
%
NM = Not meaningful
Off-Road Vehicles (“ORV”) and
Snowmobiles segment sales, including PG&A, totaled
$953 million for the second quarter of 2020, down nine percent
compared to $1,049 million for the second quarter of 2019 due to a
decline in side-by-side sales. PG&A sales for ORV and
Snowmobiles combined increased 17 percent in the second quarter of
2020 compared to the second quarter last year. Gross profit
decreased 15 percent to $252 million in the second quarter of 2020,
compared to $298 million in the second quarter of 2019. Gross
profit percentage decreased 195 basis points during the 2020 second
quarter compared to the prior year.
ORV wholegood sales for the second
quarter of 2020 decreased 14 percent. Polaris North American ORV
retail sales increased over 60 percent for the quarter with both
side-by-side vehicles and ATV vehicles up significantly. Despite
the strong retail sales, Polaris ORV wholegood sales were down
driven by the COVID-19 related temporary suspension of production
that impacted shipments in April and to some extent May. The North
American ORV industry was up over 60 percent compared to the second
quarter last year.
Snowmobile wholegood sales in the
second quarter of 2020 were $12 million compared to $16 million in
the second quarter last year. Snowmobile sales in the Company's
second quarter are routinely low as it is the off-season for
snowmobile retail sales and shipments.
Motorcycles segment sales,
including PG&A, totaled $141 million, down 28 percent compared
to the second quarter of 2019, driven by decreased sales of both
Indian Motorcycle and Slingshot. Polaris motorcycles segment sales
were down driven by the COVID-19 related temporary suspension of
production that impacted shipments primarily in April. Gross profit
for the second quarter of 2020 was $4 million compared to $23
million in the second quarter of 2019.
North American consumer retail sales for Indian Motorcycle
increased mid-teens percent during the second quarter of 2020 in a
weak mid to heavy-weight two-wheel motorcycle industry that was
down high-teens percent. North American consumer retail sales for
Polaris' motorcycle segment, including both Indian Motorcycle and
Slingshot, increased low-twenties percent during the second quarter
of 2020, while the North American motorcycle industry retail sales
for mid to heavy-weight motorcycles including three-wheel vehicles,
was down high-teens percent in the second quarter of 2020. Despite
the strong retail sales, Polaris Motorcycles segment sales were
down driven by COVID-19 related temporary suspension of production
during the quarter.
Global Adjacent Markets
segment sales, including PG&A, decreased 36 percent to $78
million in the 2020 second quarter compared to $122 million in the
2019 second quarter driven by industrial, educational, government
and rental organizations reducing or suspending purchases during
the pandemic. Gross profit decreased 50 percent to $17 million or
21.6 percent of sales in the second quarter of 2020, compared to
$34 million or 27.6 percent of sales in the second quarter of
2019.
Aftermarket segment sales of
$208 million in the 2020 second quarter decreased nine percent
compared to $229 million in the 2019 second quarter. Transamerican
Auto Parts (TAP) sales of $189 million in the second quarter of
2020 decreased 10 percent compared to $210 million in the second
quarter of 2019. The Company's other aftermarket brands sales were
approximately flat. Gross profit decreased 14 percent to $48
million in the second quarter of 2020, compared to $55 million in
the second quarter of 2019.
Boats segment sales
decreased 28 percent to $132 million in the 2020 second quarter
compared to $182 million in the 2019 second quarter. Gross profit
decreased 54 percent to $19 million or 14.1 percent of sales in the
second quarter of 2020, compared to $41 million or 22.2 percent of
sales in the second quarter of 2019.
Supplemental Data:
Parts, Garments, and Accessories
(“PG&A”) sales increased eight percent for the 2020 second
quarter.
International sales to customers
outside of North America, including PG&A, totaled $190 million
for the second quarter of 2020, down 18 percent from the same
period in 2019.
Financial Position and Cash
Flow
(in millions)
Six months ended June
30,
2020
2019
Change
Cash and cash equivalents
$
544.4
$
96.1
466
%
Net cash provided by operating
activities
$
309.7
$
202.9
53
%
Repurchase and retirement of common
shares
$
49.3
$
6.5
NM
Cash dividends to shareholders
$
76.0
$
74.4
2
%
Total debt, finance lease obligations and
notes payable
$
1,928.0
$
1,898.1
2
%
Debt to Total Capital Ratio
72
%
67
%
NM = Not meaningful
Net cash provided by operating activities was $310
million for the six months ended June 30, 2020, compared to $203
million for the same period in 2019. Total debt at June 30, 2020,
including finance lease obligations and notes payable, was $1,928
million. The Company’s debt-to-total capital ratio was 72 percent
at June 30, 2020 compared to 67 percent at June 30, 2019. Cash and
cash equivalents were $544 million at June 30, 2020, up from $96
million at June 30, 2019.
2020 Business Outlook
The Company re-initiated its sales and adjusted earnings
guidance for the full year 2020. Adjusted net income is expected to
be in the range of $6.40 to $6.60 per diluted share for the full
year 2020 compared to adjusted net income of $6.32 per diluted
share for 2019. Sales are now expected to be in the range of $6.650
billion to $6.750 billion, flat to down two percent compared to
2019 adjusted sales of $6,783 million, due to the pandemic driven
plant shut-down in the second quarter 2020.
2019 Reclassified Segment Gross Profit Results
Beginning in the first quarter of 2020 certain costs, primarily
incentive-based compensation costs, previously classified as
"Corporate" in the Company's segment gross profit results were
allocated to their respective operating segments results. The
comparative 2019 reported and adjusted gross profit results for
ORV/Snowmobiles, Motorcycles, Global Adjacent Markets, Aftermarket,
Boats, and Corporate were reclassified for comparability.
Reclassified historical reported and adjusted gross profit results
can be found at ir.polaris.com/investors/financial-information.
Non-GAAP Financial Measures
This press release and our related earnings call contain 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 reported GAAP measures to adjusted
non-GAAP measures are included in the financial schedules contained
in this press release. These measures, however, should not be
construed as an alternative to any other measure of performance
determined in accordance with GAAP.
Earnings Conference Call and Webcast
Today at 9:00 AM (CT) Polaris Inc. will host a conference call
and webcast to discuss the 2020 second quarter results released
this morning. The call will be hosted by Scott Wine, Chairman and
CEO; and Mike Speetzen, Executive Vice President and CFO. The
earnings presentation and link to the webcast will be posted on the
Polaris Investor Relations website at ir.polaris.com. To listen to
the conference call by phone, dial 1-877-883-0383 in the U.S., or
1-412-902-6506 internationally. The Conference ID is 5291631. A
replay of the conference call will be available by accessing the
same link on our website.
About Polaris
As the global leader in Powersports, Polaris Inc. (NYSE: PII)
pioneers product breakthroughs and enriching experiences and
services that have invited people to discover the joy of being
outdoors since our founding in 1954. With annual 2019 sales of $6.8
billion, Polaris’ high-quality product line-up includes the Polaris
RANGER®, RZR® and Polaris GENERAL™ side-by-side off-road vehicles;
Sportsman® all-terrain off-road vehicles; Indian Motorcycle®
mid-size and heavyweight motorcycles; Slingshot® moto-roadsters;
snowmobiles; and deck, cruiser and pontoon boats, including
industry-leading Bennington pontoons. Polaris enhances the riding
experience with parts, garments, and accessories, along with a
growing aftermarket portfolio, including Transamerican Auto Parts.
Polaris’ presence in adjacent markets includes military and
commercial off-road vehicles, quadricycles, and electric vehicles.
Proudly headquartered in Minnesota, Polaris serves more than 100
countries across the globe. www.polaris.com
Forward-looking Statements
Except for historical information contained herein, the matters
set forth in this news release, including management’s expectations
regarding the impact of the COVID-19 pandemic and the Company’s
ability to manage the economic environment resulting from the
COVID-19 pandemic, 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 severity and
duration of the COVID-19 pandemic and the resulting impact on the
Company’s business and the global economy; the Company’s ability to
successfully implement its manufacturing operations expansion and
supply chain initiatives, product offerings, promotional activities
and pricing strategies by competitors; economic conditions that
impact consumer spending; disruptions in manufacturing facilities;
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 (tariff relief
or ability to mitigate tariffs); changes to international trade
policies and agreements; uninsured product liability claims;
uncertainty in the retail and wholesale credit markets; performance
of affiliate partners; changes in tax policy; relationships with
dealers and suppliers; and the general overall economic, social and
political environment. 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. The data source for retail sales
figures included in this release is registration information
provided by Polaris dealers in North America compiled by the
Company or Company estimates and other industry data sources. The
Company must rely on information that its dealers supply concerning
retail sales, and other retail sales data sources related to
Polaris and the powersports industry, and this information is
subject to revision. Retail sales references to total Company
retail sales includes only ORV, snowmobiles and motorcycles in
North America unless otherwise noted.
(summarized financial data follows)
CONSOLIDATED STATEMENTS OF
INCOME (LOSS)
(In Millions, Except Per Share
Data) (Unaudited)
Three months ended June
30,
Six months ended June
30,
2020
2019
2020
2019
Sales
$
1,511.8
$
1,779.3
$
2,917.0
$
3,275.0
Cost of sales
1,179.1
1,342.9
2,291.4
2,486.1
Gross profit
332.7
436.4
625.6
788.9
Operating expenses:
Selling and marketing
119.6
140.6
269.8
269.9
Research and development
66.8
76.4
145.2
143.5
General and administrative
87.9
104.1
166.4
197.0
Goodwill and other intangible asset
impairments
379.2
—
379.2
—
Total operating expenses
653.5
321.1
960.6
610.4
Income from financial services
25.4
19.8
45.1
38.5
Operating income (loss)
(295.4
)
135.1
(289.9
)
217.0
Non-operating expense:
Interest expense
17.9
20.6
34.1
41.0
Equity in loss of other affiliates
—
0.5
—
1.1
Other (income) expense, net
0.8
(0.3
)
1.7
(3.8
)
Income (loss) before income taxes
(314.1
)
114.3
(325.7
)
178.7
Provision for income taxes
(78.7
)
26.2
(84.9
)
42.2
Net income (loss)
(235.4
)
88.1
(240.8
)
136.5
Net loss attributable to noncontrolling
interest
—
0.1
—
0.1
Net income (loss) attributable to Polaris
Inc.
$
(235.4
)
$
88.2
$
(240.8
)
$
136.6
Net income (loss) per share attributable
to Polaris Inc. common shareholders:
Basic
$
(3.82
)
$
1.44
$
(3.90
)
$
2.23
Diluted
$
(3.82
)
$
1.42
$
(3.90
)
$
2.20
Weighted average shares outstanding:
Basic
61.6
61.4
61.7
61.4
Diluted
61.6
62.2
61.7
62.1
CONSOLIDATED BALANCE
SHEETS
(In Millions), (Unaudited)
June 30, 2020
June 30, 2019
Assets
Current assets:
Cash and cash equivalents
$
544.4
$
96.1
Trade receivables, net
195.2
224.5
Inventories, net
1,026.4
1,130.3
Prepaid expenses and other
103.5
112.9
Income taxes receivable
14.2
7.0
Total current assets
1,883.7
1,570.8
Property and equipment, net
873.7
889.8
Investment in finance affiliate
72.0
97.3
Deferred tax assets
184.7
92.6
Goodwill and other intangible assets,
net
1,092.0
1,508.7
Operating lease assets
105.4
108.0
Other long-term assets
101.2
97.0
Total assets
$
4,312.7
$
4,364.2
Liabilities and Equity
Current liabilities:
Current portion of debt, finance lease
obligations and notes payable
$
536.5
$
66.5
Accounts payable
545.6
418.9
Accrued expenses:
Compensation
127.1
140.2
Warranties
134.2
132.8
Sales promotions and incentives
132.6
182.1
Dealer holdback
138.6
138.7
Other
249.8
212.0
Current operating lease liabilities
35.3
35.1
Income taxes payable
7.9
6.1
Total current liabilities
1,907.6
1,332.4
Long-term income taxes payable
20.0
28.4
Finance lease obligations
14.2
15.8
Long-term debt
1,377.3
1,815.8
Deferred tax liabilities
3.3
5.3
Long-term operating lease liabilities
72.4
75.5
Other long-term liabilities
150.5
128.3
Total liabilities
$
3,545.3
$
3,401.5
Deferred compensation
14.2
10.6
Equity:
Total shareholders’ equity
753.0
951.9
Noncontrolling interest
0.2
0.2
Total equity
753.2
952.1
Total liabilities and equity
$
4,312.7
$
4,364.2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions), (Unaudited)
Six months ended June
30,
2020
2019
Operating Activities:
Net income (loss)
$
(240.8
)
$
136.5
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
127.1
111.9
Noncash compensation
31.7
34.2
Noncash income from financial services
(11.9
)
(15.5
)
Deferred income taxes
(92.6
)
(5.9
)
Goodwill and other intangible asset
Impairments
379.2
—
Other, net
—
1.1
Changes in operating assets and
liabilities:
Trade receivables
(6.2
)
(26.9
)
Inventories
91.8
(159.1
)
Accounts payable
95.3
72.0
Accrued expenses
(77.8
)
19.0
Income taxes payable/receivable
12.0
30.8
Prepaid expenses and other, net
1.9
4.8
Net cash provided by operating
activities
309.7
202.9
Investing Activities:
Purchase of property and equipment
(88.1
)
(137.2
)
Investment in finance affiliate, net
50.6
10.2
Acquisition of businesses, net of cash
acquired
—
(1.8
)
Net cash used for investing activities
(37.5
)
(128.8
)
Financing Activities:
Borrowings under debt arrangements /
finance lease obligations
1,288.7
1,788.6
Repayments under debt arrangements /
finance lease obligations
(1,054.9
)
(1,853.5
)
Repurchase and retirement of common
shares
(49.3
)
(6.5
)
Cash dividends to shareholders
(76.0
)
(74.4
)
Proceeds from stock issuances under
employee plans
6.9
6.2
Net cash provided by (used for) financing
activities
115.4
(139.6
)
Impact of currency exchange rates on cash
balances
(3.1
)
(0.1
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
384.5
(65.6
)
Cash, cash equivalents and restricted cash
at beginning of period
196.3
193.1
Cash, cash equivalents and restricted
cash at end of period
$
580.8
$
127.5
The following presents the classification
of cash, cash equivalents and restricted cash within the
consolidated balance sheets:
Cash and cash equivalents
$
544.4
$
96.1
Other long-term assets
36.4
31.4
Total
$
580.8
$
127.5
NON-GAAP RECONCILIATION OF
RESULTS
(In Millions, Except Per Share
Data), (Unaudited)
Three months ended June
30,
Six months ended June
30,
2020
2019
2020
2019
Sales
$
1,511.8
$
1,779.3
$
2,917.0
$
3,275.0
Restructuring & realignment (3)
(1.7
)
—
(1.7
)
—
Adjusted sales
1,510.1
1,779.3
2,915.3
3,275.0
Gross profit
332.7
436.4
625.6
788.9
Restructuring & realignment (3)
14.8
6.6
20.1
13.3
Adjusted gross profit
347.5
443.0
645.7
802.2
Income (loss) before taxes
(314.1
)
114.3
(325.7
)
178.7
Impairment charges (1)
379.2
—
379.2
—
Acquisition-related costs (2)
—
2.4
—
3.5
Restructuring & realignment (3)
22.9
6.6
34.7
13.3
Intangible amortization (4)
8.7
10.3
18.7
20.5
Class action litigation expenses (5)
4.4
6.1
7.6
12.5
Adjusted income before taxes
101.1
139.7
114.5
228.5
Net income (loss) attributable to
Polaris Inc.
(235.4
)
88.2
(240.8
)
136.6
Impairment charges (1)
289.0
—
289.0
—
Acquisition-related costs (2)
—
1.8
—
2.7
Restructuring & realignment (3)
17.5
5.1
26.5
10.2
Intangible amortization (4)
6.6
7.7
14.1
15.4
Class action litigation expenses (5)
3.2
4.7
5.7
9.5
Adjusted net income attributable to
Polaris Inc. (6)
80.9
107.5
94.5
174.4
Diluted EPS attributable to Polaris
Inc.
$
(3.82
)
$
1.42
$
(3.90
)
$
2.20
Weighted average shares outstanding
adjustment (7)
0.02
—
0.03
—
Impairment charges (1)
4.66
—
4.64
—
Acquisition-related costs (2)
—
0.03
—
0.04
Restructuring & realignment (3)
0.28
0.08
0.43
0.16
Intangible amortization (4)
0.11
0.12
0.23
0.25
Class action litigation expenses (5)
0.05
0.08
0.09
0.16
Adjusted EPS attributable to Polaris
Inc. (6)
$
1.30
$
1.73
$
1.52
$
2.81
(1) Represents impairment charges related
to goodwill and other intangible assets associated with the
Company's Aftermarket segment
(2) Represents adjustments for integration
and acquisition-related expenses and purchase accounting
adjustments
(3) Represents adjustments for corporate
restructuring, network realignment costs, and supply chain
transformation
(4) Represents amortization expense for
acquisition-related intangible assets
(5) Represents adjustments for class
action litigation-related expenses
(6) The Company used its estimated
statutory tax rate of 23.8% for the non-GAAP adjustments in 2020
and 2019, except for non-deductible items
(7) For the three months ended June 30,
2020, the Company used 61.6 million and 62.1 million weighted
average shares outstanding to determine Diluted EPS attributable to
Polaris Inc. and Adjusted EPS attributable to Polaris Inc.,
respectively, and for the six months ended June 30, 2020, the
Company used 61.7 million and 62.3 million weighted average shares
outstanding to determine Diluted EPS attributable to Polaris Inc.
and Adjusted EPS attributable to Polaris Inc., respectively. The
differences are the result of the exclusion of additional
outstanding stock options and certain shares issued under the
Omnibus Plan from the Diluted EPS attributable to Polaris Inc.
calculation because their effect would have been anti-dilutive as a
result of the Company's net loss during the periods.
NON-GAAP RECONCILIATION OF SEGMENT RESULTS
(In Millions), (Unaudited)
Three months ended June
30,
Six months ended June
30,
SEGMENT SALES
2020
2019
2020
2019
ORV/Snow segment sales
$
952.9
$
1,049.3
$
1,776.6
$
1,916.8
No adjustment
—
—
—
—
Adjusted ORV/Snow segment sales
952.9
1,049.3
1,776.6
1,916.8
Motorcycles segment sales
141.3
196.8
267.9
314.7
No adjustment
—
—
—
—
Adjusted Motorcycles segment sales
141.3
196.8
267.9
314.7
Global Adjacent Markets (GAM) segment
sales
77.9
121.9
176.2
226.9
No adjustment
—
—
—
—
Adjusted GAM segment sales
77.9
121.9
176.2
226.9
Aftermarket segment sales
207.5
228.9
409.6
449.4
No adjustment
—
—
—
—
Adjusted Aftermarket segment sales
207.5
228.9
409.6
449.4
Boats segment sales
132.2
182.4
286.7
367.2
Restructuring & realignment (1)
(1.7
)
—
(1.7
)
—
Boats segment sales
130.5
182.4
285.0
367.2
Total sales
1,511.8
1,779.3
2,917.0
3,275.0
Total adjustments
(1.7
)
—
(1.7
)
—
Adjusted total sales
$
1,510.1
$
1,779.3
$
2,915.3
$
3,275.0
Three months ended June
30,
Six months ended June
30,
SEGMENT GROSS PROFIT
2020
2019
2020
2019
ORV/Snow segment gross profit
$
251.7
$
297.7
$
453.4
$
537.8
No adjustment
—
—
—
—
Adjusted ORV/Snow segment gross profit
251.7
297.7
453.4
537.8
Motorcycles segment gross
profit
4.4
22.9
3.4
26.6
Restructuring & realignment (1)
—
—
0.7
—
Adjusted Motorcycles segment gross
profit
4.4
22.9
4.1
26.6
Global Adjacent Markets (GAM) segment
gross profit
16.8
33.6
43.7
63.2
No adjustment
—
—
—
—
Adjusted GAM segment gross profit
16.8
33.6
43.7
63.2
Aftermarket segment gross
profit
47.6
55.2
93.9
111.7
No adjustment
—
—
—
—
Adjusted Aftermarket segment gross
profit
47.6
55.2
93.9
111.7
Boats segment gross profit
18.6
40.5
48.3
76.7
Restructuring & realignment (1)
11.1
—
11.1
—
Boats segment gross profit
29.7
40.5
59.4
76.7
Corporate segment gross profit
(6.4
)
(13.5
)
(17.1
)
(27.1
)
Restructuring & realignment (1)
3.7
6.6
8.3
13.3
Adjusted Corporate segment gross
profit
(2.7
)
(6.9
)
(8.8
)
(13.8
)
Total gross profit
332.7
436.4
625.6
788.9
Total adjustments
14.8
6.6
20.1
13.3
Adjusted total gross profit
$
347.5
$
443.0
$
645.7
$
802.2
NON-GAAP ADJUSTMENTS Second Quarter
2020 Results & Full Year Guidance
Restructuring, Realignment and Acquisition Related
Costs
Polaris announced in 2017 that it was making changes to its
network to consolidate production and distribution of like products
and better leverage plant capacity and embarked on a multi-phase
supply chain transformation initiative to continue to leverage its
supply chain as a strategic asset. Additionally, the Company has
recorded acquisitions and integration related costs associated with
the TAP and Boat Holdings acquisitions. Currently, the Company is
also executing certain corporate restructuring across the
organization to increase efficiency and focus its business
including the wind-down of the Rinker, Striper and Larson FX boat
brands. For the second quarter of 2020, the Company has recorded
combined costs totaling $23 million which was included as a
NON-GAAP adjustment.
Impairment Charges
For the second quarter of 2020, the Company has recorded
non-cash impairment charges totaling $379 million (pretax) which
was included as a NON-GAAP adjustment. The charges included a $270
million impairment of accounting goodwill associated with the
Company's Aftermarket segment and a $109 million impairment of
trade names associated with TAP.
Intangible amortization related to acquisitions
As a result of the Boat Holdings acquisition, Polaris'
amortization of intangible assets increased significantly on an
annual basis. Given the significant increase in non-cash
amortization associated with this acquisition along with intangible
amortization from prior acquisitions, the Company has moved to an
adjusted net income metric, excluding intangible amortization from
all acquisitions. The Company believes this treatment will provide
additional transparency into the true, ongoing earnings performance
of its business. For the second quarter of 2020, Polaris included
$9 million of intangible amortization related to acquisitions as a
NON-GAAP adjustment.
2020 Adjusted Guidance
2020 guidance excludes the pre-tax effect of supply chain
transformation, restructuring and network realignment costs of
approximately $35 million to $40 million, and approximately $20
million to $25 million for class action litigation-related
expenses. Intangible amortization of approximately $35 million
related to all acquisitions has also been excluded, along with the
$379 million non-cash impairment charge related to the Company's
Aftermarket segment. 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
restructuring and realignment costs and acquisition integration
costs that are difficult to predict in advance in order to include
in a GAAP estimate.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200728005340/en/
Investor Contact: Richard Edwards 763-513-3477 Media Contact:
Jess Rogers 763-513-3445
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