<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
-----------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________________to_______________________
Commission File Number 1-11411
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POLARIS INDUSTRIES INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1790959
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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
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of November 10, 1997, 26,117,935 shares of Common Stock of the issuer
were outstanding.
<PAGE>
POLARIS INDUSTRIES INC.
FORM 10-Q
For Quarter Period Ended September 30, 1997
TABLE OF CONTENTS
PAGE
Part I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . 5
Consolidated Statement of Shareholders' Equity. . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations . . . . . . . . . . . . . . . . . . . . 11
Cash Dividends . . . . . . . . . . . . . . . . . . . . . . . 12
Liquidity and Capital Resources . . . . . . . . . . . . . . . 13
Inflation and Exchange Rates. . . . . . . . . . . . . . . . . 14
Part II. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 15
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $5,404 $5,812
Trade receivables 43,777 36,158
Inventories 163,531 122,911
Prepaid expenses and other 2,336 3,524
Deferred tax assets 27,000 25,000
-------- --------
Total current assets 242,048 193,405
-------- --------
Deferred Tax Assets 28,000 30,000
Property and Equipment, net 91,702 93,513
Investments in Affiliates 25,607 10,421
Intangible Assets, net 23,721 24,378
-------- --------
Total Assets $411,078 $351,717
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $83,495 $50,514
Accrued expenses 108,209 102,316
Income taxes payable 19,994 8,557
-------- --------
Total current liabilities 211,698 161,387
Borrowings under credit agreement 40,000 35,000
-------- --------
Total Liabilities 251,698 196,387
-------- --------
Shareholders' Equity:
Common stock 262 270
Additional paid-in capital 77,711 102,946
Deferred compensation (2,432) (978)
Compensation payable in common stock 6,294 9,710
Retained earnings 77,545 43,382
-------- --------
Total shareholders' equity 159,380 155,330
-------- --------
Total Liabilities and Shareholders'
Equity $411,078 $351,717
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
THIRD QUARTER FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------ ------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $293,428 $299,135 $767,950 $894,229
Cost of Sales 221,973 238,503 598,667 719,745
-------- -------- -------- --------
Gross profit 71,455 60,632 169,283 174,484
-------- -------- -------- --------
Operating Expenses
Selling and marketing 31,790 31,354 78,522 83,504
General and administrative 8,518 4,829 23,527 20,101
-------- -------- -------- --------
Total operating expenses 40,308 36,183 102,049 103,605
-------- -------- -------- --------
Operating income 31,147 24,449 67,234 70,879
Nonoperating Expense (Income)
Interest expense 630 1,097 2,484 3,074
Equity in income of affiliates (2,108) (1,154) (4,978) (2,191)
Other expense (income), net (1,188) (294) (3,636) (1,029)
-------- -------- -------- --------
Income before income taxes 33,813 24,800 73,364 71,025
Provision for Income Taxes 12,173 8,928 26,411 25,569
-------- -------- -------- --------
Net income $21,640 $15,872 $46,953 $45,456
-------- -------- -------- --------
-------- -------- -------- --------
Net Income Per Share $0.81 $0.57 $1.74 $1.63
-------- -------- -------- --------
-------- -------- -------- --------
Weighted Average Number of
Common and Common Equivalent
Shares Outstanding 26,601 27,826 27,006 27,959
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------------
1997 1996
------- -------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $46,953 $45,456
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 25,182 22,596
Noncash compensation 4,948 3,813
Equity in income of affiliates (4,978) (2,191)
Deferred income taxes 0 0
Changes in current operating items -
Trade receivables (7,619) (20,746)
Inventories (40,620) (68,966)
Accounts payable 32,981 19,011
Accrued expenses 5,893 16,728
Income taxes payable 11,437 1,342
Others, net 1,484 2,667
------- -------
Net cash provided by
operating activities 75,661 19,710
------- -------
Cash Flows From Investing Activities:
Purchase of property and equipment (22,714) (28,659)
Investments in affiliates, net (10,208) (10,997)
------- -------
Net cash used for investing activities (32,922) (39,656)
------- -------
Cash Flows From Financing Activities:
Borrowings under credit agreement 220,900 228,100
Repayments under credit agreement (215,900) (181,200)
Repurchase and retirement of common shares (35,357) (10,857)
Cash dividends to shareholders (12,790) (12,335)
------- -------
Net cash provided by (used for) financing activities (43,147) 23,708
------- -------
Increase (decrease) in cash and cash equivalents (408) 3,762
Cash and Cash Equivalents, Beginning 5,812 3,501
------- -------
Cash and Cash Equivalents, Ending $5,404 $7,263
------- -------
</TABLE>
See Notes to Consolidated Financial Statements
-5-
<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
ADDITIONAL COMPENSATION
COMMON PAID-IN DEFERRED PAYABLE IN RETAINED
STOCK CAPITAL COMPENSATION COMMON STOCK EARNINGS TOTAL
------ ---------- ------------ ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $270 $102,946 ($978) $9,710 $43,382 $155,330
First Rights conversion to stock 3 7,164 - (7,210) - (43)
Employee stock compensation 2 2,945 (1,454) 3,794 0 5,287
Cash dividends declared 0 0 0 0 (12,790) (12,790)
Repurchase and retirement of common shares (13) (35,344) 0 0 0 (35,357)
Net income 0 0 0 0 46,953 46,953
------- --------
Balance, September 30, 1997 $262 $77,711 ($2,432) $6,294 $77,545 $159,380
---- ------- ------- ------ ------- --------
---- ------- ------- ------ ------- --------
</TABLE>
See Notes to Consolidated Financial Statements
-6-
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated 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.
Accordingly, such statements should be read in conjunction with the
previously filed Form 10-K. 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. 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.
NOTE 2. INVENTORIES
The major components of inventories are as follows (in thousands):
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
Raw Materials $27,284 $24,469
Service Parts 44,289 45,809
Finished Goods 91,958 52,633
-------- --------
$163,531 $122,911
-------- --------
-------- --------
NOTE 3. FINANCING AGREEMENT
Polaris has an unsecured bank line of credit arrangement with maximum
available borrowings of $150.0 million. Interest is charged at rates
based on LIBOR or "prime" (6.04% at September 30, 1997) and the
agreement expires on March 31, 2000, at which time the balance is due.
As of September 30, 1997, total borrowings under this credit
arrangement were $40.0 million and have been classified as long-term
in the accompanying consolidated balance sheets.
-7-
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
NOTE 4. INVESTMENTS IN AFFILIATES
In February, 1996 a wholly-owned subsidiary of Polaris entered into a
partnership agreement with Transamerica Commercial Finance Corporation
("TCFC") to form Polaris Acceptance. Polaris Acceptance provides
floor plan financing to dealer and distributor customers of Polaris,
and may in the future provide other financial services to dealers,
distributors and retail customers of Polaris. In January 1997,
Polaris exercised its option to increase its equity interest in
Polaris Acceptance to 50 percent. Polaris has guaranteed 50 percent
of the outstanding indebtedness of Polaris Acceptance under a credit
agreement between Polaris Acceptance and TCFC. At September 30, 1997,
Polaris' contingent liability with respect to the guarantee was
approximately $137.7 million.
In February, 1995, Polaris entered into an agreement with Fuji Heavy
Industries Ltd. to form Robin Manufacturing, U.S.A. ("Robin"). Under
the agreement, Polaris has a 40 percent ownership interest in Robin,
which builds engines in the United States for recreational and
industrial products.
Investments in affiliates are accounted for under the equity method.
Polaris' allocable share of the income of Polaris Acceptance and Robin
has been included as a component of nonoperating expense (income) in
the accompanying consolidated statements of operations.
NOTE 5. SHAREHOLDERS' EQUITY
Polaris has a continuing authorization from its Board of Directors to
repurchase up to 3,000,000 shares of the Company's outstanding common
stock. During the first nine months of 1997, Polaris paid $35.4
million to repurchase and retire 1,306,000 shares of its common stock
with cash on hand and borrowings under its line of credit. Polaris
has 1,173,000 shares available to repurchase under this authorization
as of September 30, 1997.
On July 17, 1997, the Polaris Board of Directors declared a regular
cash dividend of $0.16 per share payable on August 15, 1997, to
holders of record on August 1, 1997.
On October 23, 1997, the Polaris Board of Directors declared a regular
cash dividend of $0.16 per share payable on or about November 17,
1997, to holders of record on November 6, 1997.
-8-
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
NOTE 6. COMMITMENTS AND CONTINGENCIES
Polaris is subject to product liability claims in the normal course of
business. Effective September 1996, Polaris purchased excess
insurance coverage for catastrophic product liability claims for
incidents occurring subsequent to the policy date that exceed a self
insured retention. The estimated costs resulting from any losses are
charged to expense when it is probable a loss has been incurred and
the amount of the loss is reasonably determinable.
Injection Research Specialists commenced an action in 1990 against
Polaris in Colorado Federal Court alleging various claims relating to
electronic fuel injection systems for snowmobiles. In April 1997, a
judgment was entered in favor of Injection Research Specialists,
before interest, for $24.0 million in compensatory damages and $10.0
million in punitive damages against Polaris, and $15.0 million in
compensatory damages and $8.0 million in punitive damages against Fuji
Heavy Industries, Ltd. ("Fuji"), one of Polaris' sources of supply of
engines. The judgment against Fuji was subsequently reduced on post
trial motions to $11.6 million in compensatory damages and no punitive
damages. Polaris has appealed the judgment against Polaris and has
been advised that Fuji has also appealed the judgment against it. As
a result of this process, the Company may record additional reserves
associated with this litigation on its financial statements.
In addition to the aforementioned matter, Polaris is a defendant in
lawsuits and subject to claims arising in the normal course of
business. In the opinion of management, these legal proceedings
pending against or involving Polaris will not have a material adverse
effect on Polaris' financial position or results of operations.
NOTE 7. FOREIGN CURRENCY CONTRACTS
The Company enters into foreign exchange contracts to hedge certain of
its purchase commitments denominated in foreign currencies and
transfers of funds from its Canadian subsidiary; market value gains
and losses are recognized at the time of purchase or transfer of
funds, respectively. The purpose of the Company's foreign exchange
contracts is to reduce the risk that the eventual dollar cash flows
resulting from the purchase commitments and transfers of funds from
its Canadian subsidiary will be adversely affected by changes in
exchange rates. At September 30, 1997, the Company had open Japanese
yen foreign exchange contracts with notional amounts totaling $15.6
million United States dollars, and open Canadian dollar foreign
exchange contracts with notional amounts totaling $28.1 million United
States dollars which mature throughout the remainder of 1997.
-9-
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", (SFAS128), which changes the way companies calculate their
earnings per share (EPS). SFAS 128 replaces primary EPS with basic
EPS. Basic EPS is computed by dividing reported earnings by weighted
average shares outstanding, excluding potentially dilutive securities.
Fully diluted EPS, termed diluted EPS under SFAS 128, is also to be
disclosed. Polaris is required to adopt SFAS 128 in the first quarter
of 1998 at which time all prior year EPS are to be restated in
accordance with SFAS 128.
-10-
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
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 Inc., a Minnesota corporation ("Polaris" or the
"Company"), for the quarters and nine-month periods ended September 30, 1997 and
1996. 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
Sales were $293.4 million in the third quarter of 1997, representing a 2 percent
decrease from $299.1 million in sales for the same period in 1996.
North American sales of snowmobiles and related Parts, Garments and Accessories
("PG&A") of $182.2 million for third quarter 1997 were slightly higher than
$180.0 million for the comparable period in 1996.
North American sales of ATVs and related PG & A of $94.7 million for third
quarter 1997 were seven percent lower than $101.6 million for the comparable
period in 1996. The decrease reflects the Company's continued effort to assist
dealers in managing their inventory levels.
North American sales of PWC and related PG & A of $3.6 million for the third
quarter 1997 were 36 percent lower than $5.6 million for the comparable period
in 1996. The minimal amount of third quarter sales reflect the seasonality of
the PWC market.
International sales of snowmobiles, ATVs, PWC and related PG&A of $12.9 million
for the third quarter 1997 were eight percent higher than $11.9 million for the
comparable period in 1996.
Sales decreased to $768.0 million for the year-to-date period ended September
30, 1997, representing a 14 percent decrease from $894.2 million in sales for
the same period in 1996. Personal watercraft sales contributed most
significantly to such decrease as a result of substantially lower production
levels of PWC in 1997 in response to increased dealer inventory remaining
from the 1996 season as a result of slower industry growth. Snowmobile sales
decreased to a lesser extent due to lower production levels during the
year-to-date 1997 period.
-11-
<PAGE>
POLARIS INDUSTRIES INC. FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FOR QUARTERLY PERIOD ENDED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEPTEMBER 30, 1997
CONTINUED . . .
Gross profit of $71.5 million in the third quarter of 1997 represents an 18
percent increase from gross profit of $60.6 million for the same period in 1996.
Gross profit of $169.3 million in the year-to-date period ended September 30,
1997 represents a three percent decrease from gross profit of $174.5 million for
the same period in 1996. The gross profit margin percentage increased to 24.4
percent for the third quarter of 1997 from 20.3 percent for the comparable 1996
period and to 22.0 percent for the year-to-date period ended September 30, 1997,
as compared to 19.5 percent for comparable 1996 period. The improvements in
gross profit dollars for the third quarter and gross profit margin percentage
for third quarter and year-to-date are primarily attributable to a) continued
cost reduction efforts, including expanded domestic engine production, b)
reduced warranty costs, c) decreases in costs of certain purchased components
because of the continued strengthening of the U.S. dollar in relation to the
Japanese yen when compared to the comparable 1996 period, and d) change in sales
mix with less sales of the lower margin PWC product when compared to the
comparable 1996 period.
Operating expenses in the third quarter of 1997 increased 11 percent to $40.3
million from the comparable 1996 period, and as a percentage of sales, increased
to 13.7 percent for the third quarter of 1997 compared to 12.1 percent for the
same period in 1996. Operating expenses in the year-to-date period ended
September 30, 1997 decreased two percent to $102.0 million from the comparable
1996 period, but as a percentage of sales increased to 13.3 percent for the nine
months ended September 30, 1997 compared to 11.6 percent for the same period in
1996. The percentage increases for the third quarter and year-to-date periods
are due primarily to an increased level of advertising and promotional costs
directed at assisting dealers in selling their remaining PWC inventory and to a
lesser extent, snowmobile inventory in the first quarter of 1997.
The improvement in nonoperating expense (income) in the third quarter and
year-to-date period of 1997 from the comparable periods in 1996 primarily
reflects the positive financial impact of the Company's equity in the income
of Polaris Acceptance which was formed late in the first quarter of 1996, as
well as the positive impact of the Canadian dollar exchange rate hedging
activity.
CASH DIVIDENDS
On July 17, 1997, the Polaris Board of Directors declared a regular cash
dividend of $0.16 per share payable on August 15, 1997, to holders of record on
August 1, 1997.
On October 23, 1997, the Polaris Board of Directors declared a regular cash
dividend of $0.16 per share payable on or about November 17, 1997, to holders of
record on November 6, 1997.
-12-
<PAGE>
POLARIS INDUSTRIES INC. FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FOR QUARTERLY PERIOD ENDED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEPTEMBER 30, 1997
CONTINUED . . .
LIQUIDITY AND CAPITAL RESOURCES
The seasonality of production and shipments causes working capital requirements
to fluctuate during the year. Polaris maintains an unsecured bank line of
credit arrangement with maximum available borrowings of $150.0 million.
Interest is charged at rates based on LIBOR or "prime" and the agreement expires
March 31, 2000. At September 30, 1997, Polaris had borrowings under its bank
line of credit arrangement of $40.0 million and cash and cash equivalents of
$5.4 million, compared to $35.0 million in borrowings and cash and cash
equivalents of $5.8 million at December 31, 1996.
Polaris has a continuing authorization from its Board of Directors to repurchase
up to 3,000,000 shares of the Company's outstanding common stock. During the
first nine months of 1997, Polaris paid $35.4 million to repurchase and retire
1,306,000 shares of its common stock with cash on hand and borrowings under its
line of credit arrangement. Polaris has 1,173,000 shares available to
repurchase under this authorization as of September 30, 1997.
Injection Research Specialists commenced an action in 1990 against Polaris in
Colorado Federal Court alleging various claims relating to electronic fuel
injection systems for snowmobiles. In April 1997, a judgment was entered in
favor of Injection Research Specialists, before interest, for $24.0 million in
compensatory damages and $10.0 million in punitive damages against Polaris, and
$15.0 million in compensatory damages and $8.0 million in punitive damages
against Fuji Heavy Industries, Ltd.("Fuji"), one of Polaris' sources of supply
of engines. The judgment against Fuji was subsequently reduced on post trial
motions to $11.6 million in compensatory damages and no punitive damages.
Polaris has appealed the judgment against Polaris and has been advised that Fuji
has also appealed the judgment against it.
Management believes that existing cash balances and bank borrowings, cash flow
to be generated from operating activities and available borrowing capacity under
the line of credit arrangement will be sufficient to fund operations, regular
dividends, share repurchases, potential outcomes of litigation matters and
capital requirements for the next four quarters.
INFLATION AND EXCHANGE RATES
Polaris does not believe that inflation has had a material impact on the
results of its recent operations. However, the changing relationships of the
U.S. dollar to the Japanese yen and Canadian dollar has a material impact
from time to time. Over the past several years, weakening of the U.S. dollar
in relation to the yen has resulted in higher raw material purchase prices.
In 1996, purchases totaling 22 percent of Polaris' cost of sales were from
yen-denominated suppliers. Management believes that such cost increases also
affect its principal competitors in ATVs and, to varying degrees, some of
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<PAGE>
POLARIS INDUSTRIES INC. FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FOR QUARTERLY PERIOD ENDED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEPTEMBER 30, 1997
CONTINUED . . .
its snowmobile and PWC competitors. The strengthening of the U.S. dollar in
relation to the yen over the past 24 months has reversed this trend.
Polaris' cost of sales in the third quarter and year-to-date period ended
September 30, 1997 was favorably impacted by the yen-dollar exchange rate
fluctuation when compared to the comparable periods of 1996. In view of the
foreign exchange hedging contracts currently in place, Polaris anticipates
that the yen-dollar exchange rate will continue to have a favorable impact on
cost of sales during the remainder of 1997 when compared to the same periods
in 1996.
Polaris operates in Canada through a wholly-owned subsidiary. Over the past
several years, strengthening of the U.S. dollar in relation to the Canadian
dollar has resulted in lower gross margin levels on a comparable basis.
However, the fluctuation of the Canadian dollar exchange rate did not have a
significant impact on the gross margin achieved in the third quarter of 1997 or
the year-to-date period ended September 30, 1997 when compared to the same
periods in 1996.
In the past, Polaris has been a party to, and in the future may enter into,
foreign exchange hedging contracts for both the Japanese yen and the Canadian
dollar to minimize the impact of exchange rate fluctuations within each year.
At September 30, 1997, Polaris had open Japanese yen and Canadian dollar foreign
exchange hedging contracts which mature throughout 1997.
Certain matters discussed in this report are "forward-looking statements"
intended to qualify for the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These "forward-looking statements" can
generally be identified as such because the context of the statement will
include words such as the Company or management "believes", "anticipates",
"expects", "estimates" or words of similar import. Similarly, statements
that describe the Company's future plans, objectives or goals are also
forward-looking. Shareholders, potential investors and others are cautioned
that all forward-looking statements involve risks and uncertainty that could
cause results to differ materially from those anticipated by some of the
statements made herein. In addition to the factors discussed above, among the
other factors that could cause actual results to differ materially are the
following: product offerings and pricing strategies by competitors; future
conduct of litigation and the judicial appeals processes; warranty expenses;
foreign currency exchange rate fluctuations; environmental and product safety
regulatory activity; effects of weather; uninsured product liability claims;
and overall economic conditions, including inflation and consumer confidence
and spending.
-14-
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
POLARIS INDUSTRIES INC.
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 Per Share Earnings.
Exhibit No. 27 - Financial Data Schedule.
(b) REPORTS ON FORM 8 - K
---------------------
None.
-15-
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1997
POLARIS INDUSTRIES INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment to its report to be signed on its
behalf by the undersigned thereunto duly authorized.
POLARIS INDUSTRIES INC.
(Registrant)
Date: November 10, 1997 /S/ W. HALL WENDEL, JR.
-------------------------------
W. Hall Wendel, Jr.
Chairman of the Board
and Chief Executive Officer
Date: November 10, 1997 /S/ MICHAEL W. MALONE
-------------------------------
Michael W. Malone
Vice President Finance, Chief Financial
Officer, Treasurer and Secretary (Principal
Financial and Chief Accounting Officer)
-16-
<PAGE>
<TABLE>
EXHIBIT 11
POLARIS INDUSTRIES INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THIRD QUARTER ENDED FOR NINE MONTHS ENDED
------------------- ---------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net Income for the Period $21,640 $15,872 46,953 45,458
------- ------- ------- -------
------- ------- ------- -------
Weighted Average Number of Outstanding:
Common Shares 26,298 27,327 26,663 27,429
Rights 97 431 153 466
Deferred compensation plan for directors 13 6 11 5
Stock option plan 23 62 9 59
Employee stock ownership plan 170 - 170 -
------- ------- ------- -------
Total common and common
equivalent shares 26,601 27,826 27,006 27,959
------- ------- ------- -------
Net Income Per Share $ 0.81 $ 0.57 $ 1.74 $ 1.63
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF POLARIS INDUSTRIES INC. AS OF SEPTEMBER 30, 1997,
AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS EQUITY, AND
CASH FLOWS FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,404
<SECURITIES> 0
<RECEIVABLES> 43,777
<ALLOWANCES> 0
<INVENTORY> 163,531
<CURRENT-ASSETS> 242,048
<PP&E> 185,567
<DEPRECIATION> 93,865
<TOTAL-ASSETS> 411,078
<CURRENT-LIABILITIES> 211,698
<BONDS> 40,000
0
0
<COMMON> 262
<OTHER-SE> 159,118
<TOTAL-LIABILITY-AND-EQUITY> 411,078
<SALES> 767,950
<TOTAL-REVENUES> 767,950
<CGS> 598,667
<TOTAL-COSTS> 598,667
<OTHER-EXPENSES> 102,049
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,484
<INCOME-PRETAX> 73,364
<INCOME-TAX> 26,411
<INCOME-CONTINUING> 46,953
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,953
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.74
</TABLE>
