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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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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.
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(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
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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 August 6, 1997, 26,277,106 shares of Common Stock of the issuer
were outstanding.
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POLARIS INDUSTRIES INC.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets Pg. 3
Consolidated Statements of Operations Pg. 4
Consolidated Statements of Cash Flows Pg. 5
Consolidated Statement of Shareholders' Equity Pg. 6
Notes to Consolidated Financial Statements Pg. 7
SIGNATURE PAGE Pg. 11
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POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,897 $ 5,812
Trade receivables 30,614 36,158
Inventories 150,564 122,911
Prepaid expenses and other 3,282 3,524
Deferred tax assets 26,000 25,000
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Total current assets 216,357 193,405
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Deferred Tax Assets 29,000 30,000
Property and Equipment, net 91,307 93,513
Investments in Affiliates 20,008 10,421
Intangible Assets, net 23,940 24,378
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Total Assets $380,612 $351,717
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 75,898 $ 50,514
Accrued expenses 93,137 102,316
Income taxes payable 16,401 8,557
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Total current liabilities 185,436 161,387
Borrowings under credit agreement 47,000 35,000
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Total Liabilities 232,436 196,387
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Shareholders' Equity:
Common stock 264 270
Additional paid-in capital 85,715 102,946
Deferred compensation (2,816) (978)
Compensation payable in common stock 4,912 9,710
Retained earnings 60,101 43,382
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Total shareholders' equity 148,176 155,330
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Total Liabilities and Shareholders'
Equity $380,612 $351,717
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
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POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
Second Quarter For the Six Months
Ended June 30, Ended June 30,
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1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $249,888 $317,053 $474,522 $595,094
Cost of Sales 195,953 253,859 376,694 481,242
-------- -------- -------- --------
Gross profit 53,935 63,194 97,828 113,852
-------- -------- -------- --------
Operating Expenses
Selling and marketing 27,044 30,569 46,732 52,150
General and administrative 8,449 7,930 15,009 15,272
-------- -------- -------- --------
Total operating expenses 35,493 38,499 61,741 67,422
-------- -------- -------- --------
Operating income 18,442 24,695 36,087 46,430
Nonoperating Expense (Income)
Interest expense 1,110 1,154 1,854 1,977
Equity in income of affiliates (1,484) (1,037) (2,870) (1,037)
Other expense (income), net (1,956) (199) (2,448) (735)
--------- --------- -------- --------
Income before income taxes 20,772 24,777 39,551 46,225
Provision for Income Taxes 7,478 8,491 14,238 16,641
-------- -------- -------- --------
Net income $ 13,294 $ 16,286 $ 25,313 $ 29,584
-------- -------- -------- --------
-------- -------- -------- --------
Net Income Per Share $ 0.49 $ 0.58 $ 0.93 $ 1.06
-------- -------- -------- --------
-------- -------- -------- --------
Weighted Average Number of
Common and Common Equivalent
Shares Outstanding 26,967 28,070 27,209 28,026
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements
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POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
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1997 1996
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<S> <C> <C>
Cash Flows From Operating Activities
Net Income $25,313 $29,584
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 17,326 15,400
Noncash compensation 3,181 3,344
Equity in income of affiliates (2,870) (1,037)
Deferred income taxes 0 2,000
Changes in current operating items -
Trade receivables 5,544 (9,469)
Inventories (27,653) (46,047)
Accounts payable 25,384 20,543
Accrued expenses (9,179) (7,993)
Income taxes payable 7,844 6,752
Others, net 451 3,153
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Net cash provided by
operating activities 45,341 16,230
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Cash Flows From Investing Activities:
Purchase of property and equipment (14,682) (17,863)
Investments in affiliates, net (6,717) (10,493)
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Net cash used for investing activities (21,399) (28,356)
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Cash Flows From Financing Activities:
Borrowings under credit agreement 149,500 169,000
Repayments under credit agreement (137,500) (145,200)
Repurchase and retirement of common shares (27,263) -
Cash dividends to shareholders (8,594) (8,237)
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Net cash provided by (used for) financing
activities (23,857) 15,563
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Increase in cash and cash equivalents 85 3,437
Cash and Cash Equivalents, Beginning 5,812 3,501
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Cash and Cash Equivalents, Ending $ 5,897 $ 6,938
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-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
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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 1 2,858 ( 1,838) 2,412 - 3,433
Cash dividends declared - - - - (8,594) (8,594)
Repurchase and retirement of common shares (10) (27,253) - - - (27,263)
Net income - - - - 25,313 25,313
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Balance, June 30, 1997 $264 $85,715 ($2,816) $4,912 $60,101 $148,176
---- ------- -------- ------ ------- --------
---- ------- -------- ------ ------- --------
</TABLE>
See Notes to Consolidated Financial Statements
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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):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
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<S> <C> <C>
Raw Materials $ 25,675 $ 24,469
Service Parts 47,598 45,809
Finished Goods 77,291 52,633
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$150,564 $122,911
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</TABLE>
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" (6.00% at June 30, 1997) and the agreement
expires on March 31, 2000, at which time the balance is due. As of
June 30, 1997, total borrowings under this credit agreement were $47.0
million and have been classified as long-term in the accompanying
consolidated balance sheets.
NOTE 4. INVESTMENTS IN AFFILIATES
In February, 1996 a wholly-owned subsidiary of Polaris entered into a
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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 June 30,
1997, Polaris' contingent liability with respect to the guarantee
was approximately $122.0 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 six months of 1997, Polaris paid $27.3
million to repurchase and retire 1,033,000 shares of its common stock
with cash on hand and borrowings under its line of credit. Polaris
has 1,446,000 shares available to repurchase under this authorization
as of June 30, 1997.
On April 17, 1997, the Polaris Board of Directors declared a regular
cash dividend of $0.16 per share payable on May 15, 1997, to holders
of record on April 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.
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NOTE 6. COMMITMENTS AND CONTINGENCIES
Polaris is subject to product liability claims in the normal course of
business. Effective June 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 intends to appeal 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 June 30, 1997, the Company had open Japanese yen
foreign exchange contracts with notional amounts totaling $37.2
million United States dollars, and open Canadian dollar foreign
exchange contracts with notional amounts totaling $58.4 million United
States dollars which mature throughout 1997.
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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.
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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: August 20, 1997 /s/ W. Hall Wendel, Jr.
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W. Hall Wendel, Jr.
Chairman of the Board
and Chief Executive Officer
Date: August 20, 1997 /s/ Michael W. Malone
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Michael W. Malone
Vice President Finance, Chief Financial
Officer, Treasurer and Secretary
(Principal Financial and Chief
Accounting Officer)
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