<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 MARCH 31, 1998
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
POLARIS INDUSTRIES INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1790959
- -------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1225 HIGHWAY 169 NORTH, MINNEAPOLIS, MN 55441
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 542-0500
- -------------------------------------------------------------------------------
(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 May 7, 1998, 26,283,250 shares of Common Stock of the issuer were
outstanding.
<PAGE>
POLARIS INDUSTRIES INC.
FORM 10-Q
For Quarter Period Ended March 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
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 ...................................................... 12
Cash Dividends ............................................................. 13
Liquidity and Capital Resources ............................................ 13
Inflation and Exchange Rates ............................................... 15
Part II. OTHER INFORMATION................................................................. 16
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................................................................................. 17
</TABLE>
<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $961 $1,233
Trade receivables 24,103 42,593
Inventories 152,005 139,544
Prepaid expenses and other 4,783 5,088
Deferred tax assets 27,000 29,000
-------- --------
Total current assets 208,852 217,458
-------- --------
-------- --------
Deferred Tax Assets 25,000 26,000
Property and Equipment, net 104,993 98,020
Investments in Affiliates 20,341 19,767
Intangible Assets, net 23,282 23,501
-------- --------
Total Assets $382,468 $384,746
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $59,242 $61,027
Accrued expenses 79,449 113,867
Income taxes payable 16,445 16,217
-------- --------
Total current liabilities 155,136 191,111
Borrowings under credit agreement 53,600 24,400
-------- --------
Total Liabilities 208,736 215,511
-------- --------
Commitments and Contingencies (Notes 4, 6 and 7)
Shareholders' Equity:
Common stock 263 260
Additional paid-in capital 83,518 72,955
Deferred compensation (7,315) (3,133)
Compensation payable in common stock 1,774 7,346
Retained earnings 95,492 91,807
-------- --------
Total shareholders' equity 173,732 169,235
-------- --------
Total Liabilities and Shareholders' equity $382,468 $384,746
-------- --------
-------- --------
</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>
First Quarter First Quarter
Ended March 31, Ended March 31,
--------------- ---------------
1998 1997
--------------- ---------------
<S> <C> <C>
Sales $210,001 $224,634
Cost of Sales 163,197 175,142
-------- --------
Gross profit 46,804 49,492
Operating Expenses 35,179 31,847
-------- --------
Operating income 11,625 17,645
Nonoperating Expense (Income)
Interest expense 479 744
Equity in income of affiliates (1,549) (1,386)
Other expense (income), net (369) (492)
-------- --------
Income before income taxes 13,064 18,779
Provision for income taxes 4,703 6,760
-------- --------
Net income $8,361 $12,019
-------- --------
-------- --------
Basic and Diluted Net Income Per Share $0.32 $0.44
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
- 4 -
<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Thousands)
UNAUDITED
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------
1998 1997
-------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 8,361 $ 12,019
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 8,495 8,868
Noncash compensation 2,033 1,198
Equity in income of affiliates (1,549) (1,386)
Deferred income taxes 3,000 2,000
Changes in current operating items -
Trade receivables 18,490 11,283
Inventories (12,461) 6,985
Accounts payable (1,785) (2,897)
Accrued expenses (34,418) (29,383)
Income taxes payable 228 3,626
Others, net 387 830
-------- ---------
Net cash provided by (used for)
operating activities (9,219) 13,143
-------- ---------
Cash Flows From Investing Activities:
Purchase of property and equipment (15,249) (4,611)
Investments in affiliates, net 975 (8,723)
-------- ---------
Net cash used for investing activities (14,274) (13,334)
-------- ---------
Cash Flows From Financing Activities:
Borrowings under credit agreement 86,300 90,300
Repayments under credit agreement (57,100) (70,300)
Repurchase and retirement of common shares (1,303) (12,827)
Cash dividends to shareholders (4,676) (4,334)
-------- ---------
Net cash provided by financing activities 23,221 2,839
-------- ---------
Increase (decrease) in cash and cash equivalents (272) 2,648
Cash and Cash Equivalents, Beginning 1,233 5,812
-------- ---------
Cash and Cash Equivalents, Ending $ 961 $ 8,460
-------- ---------
-------- ---------
</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, 1997 $260 $72,955 ($3,133) $7,346 $91,807 $169,235
Employee stock compensation 2 10,025 (4,182) (3,709) 0 2,136
First Rights conversion to stock 1 1,841 0 (1,863) 0 (21)
Cash dividends declared 0 0 0 0 (4,676) (4,676)
Repurchase and retirement of common
shares 0 (1,303) 0 0 0 (1,303)
Net income 0 0 0 0 8,361 8,361
------- ---------- ------------ ------------- --------- --------
Balance, March 31, 1998 $263 $83,518 ($7,315) $1,774 $95,492 $173,732
------- ---------- ------------ ------------- --------- --------
------- ---------- ------------ ------------- --------- --------
</TABLE>
See Notes to Consolidated Financial Statements
- 6 -
<PAGE>
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 Company's annual report on
Form 10-K for the year ended December 31, 1997, previously filed
with the Securities and Exchange Commission. 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>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Raw Materials $ 32,869 $ 17,614
Service Parts 46,909 45,619
Finished Goods 72,227 76,311
-------- --------
$152,005 $139,544
-------- --------
-------- --------
</TABLE>
NOTE 3. FINANCING AGREEMENT
Polaris has an unsecured bank line of credit arrangement with
maximum available borrowings of $125.0 million. Interest is
charged at rates based on LIBOR or "prime" (6.16% at March 31,
1998) and the agreement expires on March 31, 2000, at which time
the balance is due. As of March 31, 1998, total borrowings under
this credit arrangement were $53.6 million and have been
classified as long-term in the accompanying consolidated balance
sheets.
-7-
<PAGE>
NOTE 4. INVESTMENTS IN AFFILIATES
A wholly-owned subsidiary of Polaris entered into a partnership
agreement with Transamerica Distribution Finance ("TDF") 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 TDF. At
March 31, 1998, Polaris' contingent liability with respect to the
guarantee was approximately $98.5 million.
Polaris has 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 three months of 1998,
Polaris paid $1.3 million to repurchase and retire 41,800 shares
of its common stock with cash on hand and borrowings under its
line of credit. Polaris has 981,300 shares available for
repurchase under this authorization as of March 31, 1998.
On January 22, 1998, the Polaris Board of Directors declared a
regular cash dividend of $0.18 per share payable on or about
February 16, 1998, to holders of record on February 2, 1998.
On April 16, 1998, the Polaris Board of Directors declared a
regular cash dividend of $0.18 per share payable on or about May
15, 1998, to holders of record on May 1, 1998.
-8-
<PAGE>
Net income per share for the periods ended March 31, 1998 and
1997 was calculated based on the weighted average number of
common and common equivalent shares outstanding.
Polaris adopted SFAS No. 128 "Earnings per share" effective
December 31, 1997. As a result, the prior period presented has
been restated to conform to the provisions of SFAS No. 128, which
requires the presentation of basic and diluted earnings per
share. Basic earnings per share is computed by dividing net
income available to common shareholders by the weighted average
number of common shares outstanding during each year, including
shares earned under the First Rights plan, the Director plan and
the ESOP. Diluted earnings per share is computed under the
treasury stock method and is calculated to reflect the dilutive
effect of the Option Plan. A reconciliation of these amounts is
as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
For Three Months
ended March 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
Net Income available to common
shareholders $ 8,361 $12,019
------- -------
------- -------
Weighted average number of common
shares outstanding 26,000 26,913
First Rights 53 265
Director Plan 15 9
ESOP 170 170
------- -------
Common shares outstanding - basic 26,238 27,357
------- -------
------- -------
Dilutive effect of Option Plan 47 0
------- -------
Common and potential common
shares outstanding - diluted 26,285 27,357
------- -------
------- -------
Basic and diluted net income
per share $ 0.32 $ 0.44
------- -------
------- -------
</TABLE>
-9-
<PAGE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
Polaris is subject to product liability claims in the normal
course of business and prior to June 1986 elected not to purchase
insurance for product liability losses. 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' engine suppliers. 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. Depending upon
the conclusion of the appeal, Polaris may require 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, it is not probable
that any legal proceedings pending against or involving Polaris
will have a material adverse effect on Polaris' financial
position or results of operations.
-10-
<PAGE>
NOTE 7. FOREIGN CURRENCY CONTRACTS
Polaris' Canadian subsidiary uses the United States dollar as its
functional currency. Canadian assets and liabilities are
translated at the foreign exchange rates in effect at the balance
sheet date. Revenues and expenses are translated at the average
foreign exchange rate in effect. Translation and exchange gains
and losses are reflected in the results of operations.
Polaris enters into foreign exchange contracts to manage currency
exposures of its purchase commitments denominated in foreign
currencies and transfers of funds from its Canadian subsidiary.
Polaris does not use any financial contract for trading purposes.
These contracts are accounted for as hedges, thus market value
gains and losses are recognized at the time of purchase or
transfer of funds, respectively. The criteria to determine if
hedge accounting is appropriate are (1) the designation of a
hedge to an underlying exposure, (2) whether or not overall risk
is reduced and (3) if there is a correlation between the value of
the foreign exchange contract and the underlying exposure. Gains
and losses related to purchase commitments are recorded as
adjustments to cost of sales while gains and losses related to
transfers of funds are recorded as other expense (income) on the
accompanying statement of operations. At March 31, 1998, Polaris
had open Japanese yen foreign exchange contracts with notional
amounts totaling $55.2 million United States dollars, and open
Canadian dollar foreign exchange contracts with notional amounts
totaling $86.1 million United States dollars which mature
throughout the remainder of 1998.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
SFAS 130
On January 1, 1998, Polaris adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS No. 130), which requires companies to report all changes in
equity during a period, except those resulting from investment by
owners and distribution to owners, in a financial statement for
the period in which they are recognized. Polaris has no other
elements of comprehensive income outside its reported net income,
thus net income is equivalent to comprehensive income for all
periods presented.
SFAS 131
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS No. 131)
in June 1997. SFAS No. 131 requires that public business
enterprises report information about operating segments in annual
financial statements and requires selected
-11-
<PAGE>
information in interim financial reports issued to
shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and
major customers and is effective for fiscal years beginning
after December 15, 1997. Polaris is currently evaluating the
impact of SFAS No. 131, which may effect disclosures in its
1998 annual financial statements.
SOP 98-5
In April 1998, the AICPA issued Statement of Position (SOP) No.
98-5, "Reporting on the Costs of Start-Up Activities," which
requires costs of start-up activities and organization costs to
be expensed as incurred. Polaris is required to adopt SOP 98-5 in
fiscal 1999 by recording the cumulative effect for this change in
accounting. If Polaris had adopted SOP 98-5 during fiscal 1998,
the change would have had no effect on reported net income per
share.
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 ended March 31, 1998 and 1997. 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 $210.0 million in the first quarter of 1998, representing a seven
percent decrease from $224.6 million in sales for the same period in 1997.
North American sales of snowmobiles and related Parts, Garments and
Accessories ("PG&A") of $17.4 million for first quarter 1998 were 19 percent
lower than $21.6 million for the comparable period in 1997. The decrease is
related to lower sales of PG&A resulting from poor snow conditions and warmer
than normal temperatures that shortened the snowmobile riding season this
past winter.
North American sales of ATVs and related PG&A of $165.6 million for first
quarter 1998 were 15 percent higher than $143.5 million for the comparable
period in 1997. The increase is related to increased unit sales reflecting
the continuing growth in the ATV industry.
-12-
<PAGE>
North American sales of PWC and related PG&A of $15.5 million for the first
quarter 1998 were significantly lower than $46.0 million for the comparable
period in 1997. The decrease is related to the Company's previously announced
decision to lower PWC production in response to the industry wide softening
in consumer demand.
Initial sales of Victory motorcycle related PG&A totaled $0.6 million for the
first quarter 1998. Victory motorcycles remain on schedule to begin
production in late spring, 1998.
International sales of snowmobiles, ATVs, PWC and related PG&A of $10.9
million for the first quarter 1998 were 19 percent lower than $13.5 million
for the comparable period in 1997.
Gross profit of $46.8 million in the first quarter of 1998 represents a five
percent decrease from gross profit of $49.5 million for the same period in
1997. The gross profit margin percentage increased to 22.3 percent for the
first quarter of 1998 from 22.0 percent for the comparable 1997 period. The
decrease in gross profit dollars for the first quarter is attributable to the
lower sales volume. The slight improvement in gross profit margin percentage
for the first quarter 1998 relates to reduced warranty costs and lower sales
of lower margin PWC product partially offset by lower sales of higher margin
PG&A and reduced pricing on the 1998 model ATVs implemented in the fall of
1997.
Operating expenses in the first quarter of 1998 increased 10 percent to $35.2
million from the comparable 1997 period, and as a percentage of sales,
increased to 16.8 percent for the first quarter of 1998 compared to 14.2
percent for the same period in 1997. The higher level of operating expenses
for the first quarter 1998 are related to a planned increase in advertising
expenditures across all product lines, start-up expenses for Victory
motorcycles, and increased research and development expenditures.
The improvement in nonoperating expense (income) in the first quarter of 1998
from the comparable period in 1997 is attributable to lower interest expense
on borrowings under the credit agreement and the continued positive financial
impact of the Company's equity in the income of Polaris Acceptance.
CASH DIVIDENDS
On January 22, 1998, the Polaris Board of Directors declared a regular cash
dividend of $0.18 per share payable on or about February 16, 1998, to holders
of record on February 2, 1998.
On April 16, 1998, the Polaris Board of Directors declared a regular cash
dividend of $0.18 per share payable on or about May 15, 1998, to holders of
record on May 1, 1998.
-13-
<PAGE>
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 maturing on March 31, 2000 under which it may
borrow up to $150.0 million until March 31, 1998 and up to $125.0 million
thereafter until maturity. Interest is charged at rates based on LIBOR or
"prime" and the agreement expires March 31, 2000. At March 31, 1998, Polaris
had borrowings under its bank line of credit arrangement of $53.6 million and
cash and cash equivalents of $1.0 million, compared to $24.4 million in
borrowings and cash and cash equivalents of $1.2 million at December 31, 1997.
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 three months of 1998, Polaris paid $1.3 million to
repurchase and retire 41,800 shares of its common stock with cash on hand and
borrowings under its line of credit arrangement. Polaris has 981,300 shares
available to repurchase under this authorization as of March 31, 1998.
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, and capital requirements
for 1998. At this time, management is not aware of any factors that would
have a materially adverse impact in cash flow beyond 1998.
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'
engine suppliers. 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. Depending upon
the conclusion of the appeal, Polaris may require additional reserves
associated with this litigation.
During 1997, Polaris evaluated its computer system year 2000 compliance
issues and began a conversion process to address necessary changes. In order
for a computer system to be year 2000 compliant, its time sensitive software
must recognize a date using "00" as the year 2000 rather than the year 1900.
Polaris has implemented a plan to make its computer systems critical to
managing the business year 2000 compliant by the end of 1998 and to make its
remaining computer systems year 2000 compliant by the end of 1999. Polaris
does not expect the level of expenses to be incurred under its conversion
program during the next two years to have a material effect on its financial
results of operations.
-14-
<PAGE>
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 have had a material
impact from time to time. In 1997, purchases totaling 17 percent of Polaris'
cost of sales were from yen-denominated suppliers. The strengthening of the
U.S. dollar in relation to the Japanese yen since late 1995 has resulted in
lower raw material purchase prices. Polaris' cost of sales in the first ended
March 31, 1998 was positively impacted by the Japanese yen-U.S. dollar
exchange rate fluctuation when compared to the same period in 1997. In view
of the foreign exchange hedging contracts currently in place, Polaris
anticipates that the Japanese yen-U.S. dollar exchange rate will continue to
have a positive impact on cost of sales during the remaining periods of 1998
when compared to the same periods in 1997.
Polaris operates in Canada through a wholly owned subsidiary. Polaris
utilizes foreign exchange hedging contracts to manage its exposure to the
Canadian dollar. Polaris' cost of sales in the first ended March 31, 1998 was
negatively impacted by the Canadian dollar exchange rate fluctuation when
compared to the same period in 1997. In view of the foreign exchange hedging
contracts currently in place, Polaris anticipates that the Canadian dollar
currency fluctuation will continue to have a negative impact on net income
during the remaining periods of 1998 when compared to the same periods in
1997.
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 March 31, 1998, Polaris had open Japanese yen and Canadian dollar foreign
exchange hedging contracts which mature throughout 1998.
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.
-15-
<PAGE>
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. 27 - Financial Data Schedule.
(b) REPORTS ON FORM 8 - K
None.
-16-
<PAGE>
POLARIS INDUSTRIES INC.
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 INC.
(Registrant)
Date: May 13, 1998 /s/ W. HALL WENDEL, JR.
-----------------------
W. Hall Wendel, Jr.
Chairman of the Board
and Chief Executive Officer
Date: May 13, 1998 /s/ MICHAEL W. MALONE
---------------------
Michael W. Malone
Vice President Finance, Chief Financial
Officer, Treasurer and Secretary (Principal
Financial and Chief Accounting Officer)
-17-
<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 MARCH 31, 1998, AND
THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS EQUITY, AND
CASH FLOWS FOR THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 961
<SECURITIES> 0
<RECEIVABLES> 24,103
<ALLOWANCES> 0
<INVENTORY> 152,005
<CURRENT-ASSETS> 208,852
<PP&E> 199,621
<DEPRECIATION> 94,628
<TOTAL-ASSETS> 382,468
<CURRENT-LIABILITIES> 155,136
<BONDS> 0
0
0
<COMMON> 263
<OTHER-SE> 173,469
<TOTAL-LIABILITY-AND-EQUITY> 173,732
<SALES> 210,001
<TOTAL-REVENUES> 210,001
<CGS> 163,197
<TOTAL-COSTS> 163,197
<OTHER-EXPENSES> 35,179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 479
<INCOME-PRETAX> 13,064
<INCOME-TAX> 4,703
<INCOME-CONTINUING> 8,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,361
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
