<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 10-Q
(Mark One)
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| X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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OR
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| | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________
Commission File Number 1-9653
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Polaris Industries Partners L.P.
- - ---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2871657
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1225 Highway 169 North, Minneapolis, MN 55441
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(Address of principal executive offices) (Zip Code)
(612) 542-0500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
----- -----
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POLARIS INDUSTRIES PARTNERS L.P.
Table of Contents
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Part I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance Sheets Pg. 3
Statements of Operations Pg. 4
Statements of Cash Flows Pg. 5
Statement of Changes in Partners' Capital Pg. 6
Notes to Financial Statements Pg. 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Results of Operations Pg. 10
Cash Distributions Pg. 11
Liquidity and Capital Resources Pg. 11
Part II. OTHER INFORMATION Pg. 12
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults upon Senior Securities
Item 4 - Submission of Matters to a Vote
of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
SIGNATURE PAGE Pg. 13
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POLARIS INDUSTRIES PARTNERS L.P.
Part I. FINANCIAL INFORMATION
- - ------------------------------
Item 1 - Financial Statements
-----------------------------
POLARIS INDUSTRIES PARTNERS L.P.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
3/31/94 12/31/93
-------- ---------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and Cash Equivalents $ 7,042 $ 33,798
Trade Receivables 20,769 21,340
Inventories 73,253 52,057
Prepaid Expenses and Other 2,129 2,553
-------- ---------
Total Current Assets 103,193 109,748
-------- ---------
Property and Equipment, net of Accumulated
Depreciation of $31,904 and $27,486 40,787 39,731
-------- ---------
Cost in Excess of Net Assets of Business
Acquired, net of Amortization of
$5,158 and $4,968 25,520 25,710
Dealer Network, net of Amortization
of $41,380 and $39,811 2,620 4,189
Other Intangible Assets, net of
Amortization of $2,339 and $2,311 1,142 1,170
-------- ---------
Total Intangible Assets 29,282 31,069
-------- ---------
TOTAL ASSETS $173,262 $ 180,548
======== =========
LIABILITIES AND PARTNERS' CAPITAL:
Note Payable to Bank $ 0 $ 0
Accounts Payable 42,448 36,122
Distributions Payable 12,735 11,851
Accrued Expenses 38,031 50,082
-------- ---------
Total Current Liabilities 93,214 98,055
-------- ---------
Partners' Capital:
General Partner (8,264) (7,397)
Limited Partners
BACs 83,889 81,069
First Rights:
Assigned Capital Value 4,423 8,821
Deferred Compensation 0 0
-------- ---------
Total Partners' Capital 80,048 82,493
-------- ---------
TOTAL LIABILITIES AND CAPITAL $173,262 $ 180,548
======== =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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POLARIS INDUSTRIES PARTNERS L.P.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER UNIT DATA)
UNAUDITED
<TABLE>
<CAPTION>
1ST QTR 1ST QTR
ENDED ENDED
3/31/94 3/31/93
-------- --------
<S> <C> <C>
Sales $145,471 $107,115
Cost of Sales 114,211 81,367
-------- --------
GROSS PROFIT 31,260 25,748
Operating Expenses 21,422 18,305
-------- --------
OPERATING INCOME 9,838 7,443
Non Operating Expense, net 1,272 1,305
-------- --------
NET INCOME $ 8,566 $ 6,138
======== ========
Allocation of Net Income to:
General Partner $ 1,782 $ 1,277
Limited Partners 6,784 4,861
Net Income per Unit Data:
Net Income per Unit $ 0.42 $ 0.30
Weighted Average Number of BAC's
and BAC equivalents 16,307 16,126
Cash Distributions Declared per Unit $ 0.63 $ 0.625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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POLARIS INDUSTRIES PARTNERS L.P.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
1ST QTR 1ST QTR
ENDED ENDED
3/31/94 3/31/93
-------- --------
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income $ 8,566 $ 6,138
Adjustments to reconcile net income to
cash flow from operating activities:
Depreciation 4,418 3,544
Amortization 1,787 1,794
First Rights Compensation 1,786 1,373
-------- --------
16,557 12,849
Changes in current operating items -
Trade Receivables 571 1,474
Inventories (21,196) (6,014)
Accounts payable 6,326 9,778
Others, net (11,689) (7,755)
-------- --------
Cash flow from (used in) operating activities (9,431) 10,332
-------- --------
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Purchase of property and equipment (5,474) (4,080)
-------- --------
Cash flow from (used for) investing activities (5,474) (4,080)
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Note payable to bank 0 0
Cash distributions to partners (11,851) (11,127)
-------- --------
Cash flow from (used for) financing activities (11,851) (11,127)
Increase (Decrease) in cash and cash equivalents (26,756) (4,875)
-------- --------
Cash and cash equivalents, beginning 33,798 19,094
-------- --------
Cash and cash equivalents, ending $ 7,042 $ 14,219
======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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POLARIS INDUSTRIES PARTNERS L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FROM JANUARY 1, 1994 TO MARCH 31, 1994
(IN THOUSANDS, EXCEPT UNIT DATA)
UNAUDITED
<TABLE>
<CAPTION>
LIMITED PARTNERS' INTEREST
----------------------------------------------------------------
FIRST RIGHTS TOTAL
GENERAL -------------------- LIMITED
PARTNERS' ASSIGNED DEFERRED PARTNERS'
INTEREST BACs CAP VALUE COMP. INTEREST TOTAL
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 ($7,397) $ 81,069 $ 8,821 $0 $ 89,890 $ 82,493
First Rights conversion
to BACs - 6,122 (6,184) - (62) (62)
First Rights grants and
amortization - - 1,786 - 1,786 1,786
Net income for the period 1,782 6,784 - - 6,784 8,566
Cash distributions declared
at $0.63 per unit (2,649) (10,086) - - (10,086) (12,735)
--------- --------
Balance, March 31, 1994 ($8,264) $ 83,889 $ 4,423 $0 $ 88,312 $ 80,048
------- --------- -------- --------
Less General Partners' negative
account balance (8,264)
Amount available to the Limited
Partners' interests $ 80,048
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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POLARIS INDUSTRIES PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
---------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial statements and, therefore, do not include all information
and disclosures of results of operations, financial position and
changes in cash flow in conformity with generally accepted accounting
principles for complete financial statements. In the opinion of
management, such statements reflect all adjustments (which include
only normal recurring adjustments) necessary for a fair presentation
of the financial position, results of operations, and cash flows for
the periods presented.
NOTE 2. Cash Distributions and Allocation of Profits and Losses
-------------------------------------------------------
Cash distributions from operations:
Cash distributions from operations are determined at the discretion
of EIP Associates L.P., a Delaware limited partnership (the "General
Partner"), and are effectively to be allocated first 98.01 percent to
the limited partners and 1.99 percent to the General Partner to the
extent required for limited partners to receive a cumulative 15
percent return on their original $10 per unit investment, as adjusted
for the split. Thereafter, all distributions are allocated 79.2
percent to the limited partners and 20.8 percent to the General
Partner.
Allocation of profits and losses:
Polaris Industries Partners L.P., a Delaware limited partnership (the
"Partnership"), allocates income to the General and limited partners
in proportion to the cash distributions to them. Since the General
Partner has received a 20.8% share of the cash distributions for each
period presented, 20.8% of the income has been allocated to the
General Partner in each period. Management anticipates the limited
partners will continue to be allocated a 79.2% share of net income
for the remainder of 1994 because the General Partner will continue
to receive a 20.8% share of the planned distributions in 1994.
Net income per unit:
Net income per unit (which differs from taxable income) is calculated
based on the weighted average number of BACs and BAC equivalents
outstanding during each period. All periods presented have been
retroactively adjusted for a two-for-one BAC split which took place
in 1993. Effective with the cash distribution declared on February
27, 1992, 850,000 Second
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Polaris Industries Partners L.P.
Notes to Financial Statements
Page 2 of 3
NOTE 2. Cash Distributions and Allocation of Profits and Losses
-------------------------------------------------------
(cont'd)
Rights became BAC equivalents. BAC equivalents represent the number
of BACs issuable upon conversion of the First and Second Rights. All
850,000 Second Rights were converted to an equivalent number of BACs
on January 6, 1994.
NOTE 3. Inventories
-----------
The major components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
------------------- -----------------
<S> <C> <C>
Raw Materials $21,222 $21,571
Service Parts 22,409 23,379
Finished Goods 29,622 7,107
------- -------
$73,253 $52,057
======= =======
</TABLE>
NOTE 4. Financing Agreement
-------------------
Effective March 31, 1994, Polaris Industries L.P., a Delaware limited
partnership (the "Operating Partnership"), entered into an unsecured
bank line of credit arrangement to meet seasonal short-term financing
needs with a maximum available of $40,000,000. Interest is charged
at the prime interest rate, C.D.-based or LIBOR-based rates, and the
agreement expires March 31, 1995. The Operating Partnership holds
substantially all net assets of the Partnership and has agreed to
certain limitations on distributions to Partners.
NOTE 5. Distribution Payable
--------------------
On March 1, 1994, the General Partner declared a regular quarterly
distribution of $.63 per BAC to holders of record on March 15, 1994
and payable on or about May 16, 1994. This distribution will total
approximately $12,735,000.
NOTE 6. Commitments and Contingencies
-----------------------------
The Partnership has elected not to insure for product liability
losses. The costs resulting from any losses are charged to operating
expenses when it is probable a loss has been incurred and the amount
of the loss is determinable.
The Partnership is a defendant in lawsuits and subject to claims
arising in the normal course of business. While it is not feasible
to predict or determine the outcome of any of these cases, it is the
opinion of management that their outcomes will not have a material
adverse effect on the financial position or operations of the
Partnership.
-8-
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Polaris Industries Partners L.P.
Notes to Financial Statements
Page 3 of 3
NOTE 6. Commitments and Contingencies
-----------------------------
(cont'd)
In 1990, the Canadian income tax authorities proposed certain
adjustments, principally relating to the original purchase price
allocation to the Partnership's Canadian subsidiary and transfer
pricing matters, for additional income taxes payable by the Canadian
subsidiary for 1987 and 1988. The resolution of these proposed
adjustments may also affect the Partnership's Canadian income tax
expense for years subsequent to 1988. The Partnership was recently
informed of Revenue Canada's intent to initiate audits of the tax
years 1989 through 1992. Management intends to vigorously contest a
substantial amount of the proposed adjustments, and the ultimate
liability, if any, cannot be reasonably estimated. Management does
not believe that the outcome of this matter will have a materially
adverse impact on the financial position or operations of the
Partnership.
NOTE 8. Litigation
----------
EIP Capital Corporation (the Managing General Partner), its president
and two of its directors are among the defendants in a lawsuit filed
by a minority shareholder of the Managing General Partner which seeks
the replacement of these two directors and monetary damages of
unspecified amounts from the defendants. The lawsuit charges that
these two directors appropriated control and money, and that certain
of the defendants breached their fiduciary duties to the plaintiff in
connection with the original limited partnership offering. The
Managing General Partner believes the allegations are without merit
and intends to vigorously contest them. Claims in the litigation
involve only rights among holders in interest in the Managing General
Partner. No claims have been asserted in respect of the Class A
Limited Partnership Interests or the BACs. Accordingly, management
believes the litigation will not have any effect on the operations of
the Operating Partnership or distributions to BAC holders.
-9-
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POLARIS INDUSTRIES PARTNERS L.P.
Item 2
------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion pertains to the results of operations and
financial position of Polaris Industries Partners L.P., a Delaware limited
partnership (the "Company" or the "Partnership"), for the quarters ended
March 31, 1994 and 1993. Due to the seasonality of the snowmobile, all
terrain vehicle (ATV) and personal watercraft (PWC) business, and to
certain changes in production and shipping cycles, results of such periods
are not necessarily indicative of the results to be expected for the
complete year.
Results of Operations
---------------------
Historically, production and shipments during the first quarter of each
year have been devoted almost exclusively to ATVs. Late in the first
quarter of 1992, the Company commenced production and shipment of its first
PWC product. In 1993 and 1994, the Company has produced and shipped both
ATVs and PWC throughout the entire first quarter. The Company's success in
PWC sales growth continued in the first quarter of 1994 as evidenced by a
104% increase in PWC unit sales volume over the prior year first quarter.
PWC sales totalled $57.7 million for the first quarter of 1994, a 109%
increase over the $27.6 million recorded for the first quarter of 1993.
This growth in the PWC business is the principal cause for the $38.4
million increase in sales for the first quarter of 1994 to $145.5 million.
This represents a 36% increase in sales over the $107.1 million recorded in
the first quarter of 1993. The gross margin percentage decreased in the
first quarter of 1994 to 21.5% from 24.0% in the prior year first quarter.
This decrease is primarily due to changes in product mix and foreign
exchange rates. Operating expenses increased $3.1 million during the
quarter as a result of the sales volume increase, but as a percentage of
sales, decreased to 14.7% in 1994 compared to 17.1% in 1993. Non-operating
expense of $1.3 million recorded in the first quarter of 1994 is consistent
with that of the prior year.
Management currently anticipates that total year 1994 unit production and
sales for each of snowmobiles, ATVs and PWC will increase over 1993 levels.
Management currently believes that its operating results for the full year
1994 will be better than those of 1993, although there can be no assurance
in this regard. However, certain quarter-to-quarter comparisons may not be
comparable because of anticipated differences in the product mix and
shipment dates.
-10-
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POLARIS INDUSTRIES PARTNERS L.P.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations (cont'd)
Cash Distributions
- - ------------------
On March 1, 1994 EIP Associates L.P., a Delaware limited partnership (the
"General Partner"), declared a regular quarterly distribution to BAC holders of
$.63 per unit totalling $12.7 million. At March 31, 1994 the cumulative cash
distributions declared continue to exceed a 15% return on the original $10 per
unit investment as adjusted for the split. As provided for in the Partnership
Agreement, cash distributions have been, and will continue to be, allocated
79.2% to limited partners and 20.8% to the General Partner as long as such
distributions cumulatively exceed a 15% return on a quarterly basis.
Liquidity and Capital Resources
- - -------------------------------
The seasonality of production and shipments causes working capital requirements
to fluctuate during the year. At March 31, 1994 the Operating Partnership had no
short-term debt and had utilized its bank line to the extent of letters of
credit outstanding of $8.5 million related to purchase obligations for raw
materials. Effective March 31, 1994, the Operating Partnership entered into a
$40 million unsecured bank line of credit arrangement with interest charged at
the prime interest rate, C.D.-based or LIBOR-based rates, expiring March 31,
1995. The Operating Partnership has agreed to certain limitations on
distributions from the Operating Partnership to the Partnership in certain
circumstances.
Management believes that existing cash balances, cash flow to be generated from
operating activities and available borrowing capacity will be sufficient to fund
operations, regular quarterly distributions and capital requirements for 1994.
At this time, management is not aware of any factors that would have a
materially adverse impact on cash flows beyond 1994.
-11-
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POLARIS INDUSTRIES PARTNERS L.P.
PART II. OTHER INFORMATION
- - ---------------------------
Item 1 - Legal Proceedings
--------------------------
None.
Item 2 - Changes in Securities
------------------------------
None.
Item 3 - Defaults upon Senior Securities
----------------------------------------
None.
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
None.
Item 5 - Other Information
--------------------------
None.
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
Exhibit No. 11 - Computation of Net Income Per Unit
(b) Reports on Form 8-K
-------------------
None.
-12-
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POLARIS INDUSTRIES PARTNERS L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POLARIS INDUSTRIES PARTNERS L.P.
(Registrant)
By EIP ASSOCIATES L.P.,
General Partner
By EIP CAPITAL CORPORATION,
General Partner
Date: May , 1994 By: /s/Victor K. Atkins, Jr.
-------------------------
Victor K. Atkins, Jr.,
President (Chief Executive
Officer), Secretary,
Treasurer (Principal
Financial Officer and
Chief Accounting Officer)
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POLARIS INDUSTRIES PARTNERS L.P. EXHIBIT 11
COMPUTATION OF NET INCOME PER UNIT
UNAUDITED
<TABLE>
<CAPTION>
Quarter Ended
----------------------
March 31, March 31,
1994 1993
---------- ----------
<S> <C> <C>
Total net income for period $ 8,566,000 $ 6,138,000
Allocated to:
General partner 1,782,000 1,277,000
----------- -----------
Limited partners $ 6,784,000 $ 4,861,000
=========== ===========
Average A-BACs 15,965,000 14,899,000
Average First Rights 342,000 377,000
Average Second Rights 0 850,000
----------- -----------
Total BACs and
equivalents 16,307,000 16,126,000
=========== ===========
Income per unit: $.42 $.30
=========== ===========
</TABLE>
