<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, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND 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 of (IRS Employer
incorporation or organization Identification No.)
1225 Highway 169 North, Minneapolis, MN 55441-5078
- --------------------------------------------------------------------------------
(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, 1999, 25,204,614 shares of Common Stock of the issuer
were outstanding.
<PAGE>
POLARIS INDUSTRIES INC.
FORM 10-Q
For Quarter Period Ended March 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <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 Statements 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...........................................................12
Year 2000.................................................................................13
Inflation and Exchange Rates..............................................................13
Part II OTHER INFORMATION.........................................................................15
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults upon Senior Securities
Item 4 Exhibits and Reports on Form 8-K
SIGNATURE PAGE..........................................................................................16
</TABLE>
<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
(Unaudited)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 2,717 $ 1,466
Trade receivables 39,121 43,035
Inventories 164,420 107,436
Prepaid expenses and other 4,986 2,903
Deferred tax assets 28,000 29,000
--------- ---------
Total current assets 239,244 183,840
Deferred Tax Assets 20,000 21,000
Property and Equipment, net 128,550 124,254
Investments in Affiliates 24,675 26,636
Intangible Assets, net 22,748 22,967
--------- ---------
Total Assets $ 435,217 $ 378,697
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts Payable $ 102,484 $ 77,258
Accrued expenses 84,259 120,695
Income taxes payable 15,140 7,011
--------- ---------
Total Current Liabilities 201,883 204,964
Borrowings under credit agreement 86,800 20,500
--------- ---------
Total Liabilities 288,683 225,464
--------- ---------
Commitments and Contingencies (Notes 4, 6 and 7)
Shareholder's Equity:
Common Stock 251 253
Additional paid-in capital 42,972 48,622
Deferred compensation (6,149) (6,726)
Compensation payable in common stock 1,172 6,844
Retained earnings 108,288 104,240
--------- ---------
Total shareholder's equity 146,534 153,233
--------- ---------
Total Liabilities and Shareholder's Equity $ 435,217 $ 378,697
--------- ---------
--------- ---------
</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
Ended March 31
1999 1998
---------------------------
<S> <C> <C>
Sales $ 237,769 $ 210,001
Cost of Sales 181,296 163,197
--------- ---------
Gross Profit 56,473 46,804
Operating Expenses
Selling and marketing 27,898 21,803
Research and development 7,333 6,444
General and administrative 8,931 7,652
--------- ---------
Total operating expenses 44,162 35,179
Operating Income 12,311 11,625
Non-Operating Expense (Income)
Interest Expense 823 479
Equity in income of affiliates (2,005) (1,549)
Other expense (income), net (564) (369)
--------- ---------
Income before taxes 14,057 13,064
Provision for income taxes 4,990 4,703
--------- ---------
Net income $ 9,067 $ 8,361
--------- ---------
--------- ---------
Basic and Diluted Net Income Per Share $ 0.36 $ 0.32
--------- ---------
--------- ---------
</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,
1999 1998
--------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 9,067 $ 8,361
Adjustments to reconcile net income to net cash
Depreciation and amortization 7,348 8,495
Non-cash compensation 1,974 2,033
Equity in income of affiliates (2,005) (1,549)
Deferred income taxes 2,000 3,000
Changes in current operating items
Trade receivables 3,914 18,490
Inventories (56,984) (12,461)
Accounts payable 25,226 (1,785)
Accrued expenses (36,436) (34,418)
Income taxes payable 8,129 228
Others, net (1,673) 387
--------- --------
Net cash used for operating activities (39,440) (9,219)
--------- --------
Cash Flows from Investing Activities:
Purchase of property and equipment (11,425) (15,249)
Investments in affiliates, net 3,967 975
--------- --------
Net cash used for investing activities (7,458) (14,274)
--------- --------
Cash Flows From Financing Activities:
Borrowings under credit agreement 137,900 86,300
Repayments under credit agreement (71,600) (57,100)
Repurchase and retirement of common shares (13,132) (1,303)
Cash dividends to shareholders (5,019) (4,676)
--------- --------
Net cash provided by financing activities 48,149 23,221
--------- --------
Increase (decrease) in cash and cash equivalents 1,251 (272)
Cash and Cash Equivalents, Beginning 1,466 1,233
--------- --------
Cash and Cash Equivalents, Ending $ 2,717 $ 961
--------- --------
--------- --------
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S 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, 1998 $ 253 $ 48,622 ($6,726) $ 6,844 $ 104,240 $ 153,233
Employee Stock Compensation 2 7,155 577 (5,386) 0 2,348
First Rights Conversion to Stock 0 323 0 (286) 0 37
Cash dividends declared 0 0 0 0 (5,019) (5,019)
Repurchase and Retirement of common shares (4) (13,128) 0 0 0 (13,132)
Net Income 0 0 0 0 9,067 9,067
----- -------- ------- ------- --------- ---------
Balance, March 31, 1999 $ 251 $ 42,972 $(6,149) $ 1,172 $ 108,288 $ 146,534
----- -------- ------- ------- --------- ---------
----- -------- ------- ------- --------- ---------
</TABLE>
6
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
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, 1998, 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), personal watercraft (PWC) and motorcycle
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, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Raw Materials $39,159 $32,235
Service Parts 42,946 41,085
Finished Goods 82,315 34,116
-------- --------
$164,420 $107,436
-------- --------
-------- --------
</TABLE>
NOTE 3. FINANCING AGREEMENT
Polaris has an unsecured bank line of credit arrangement with
maximum available borrowings of $175.0 million until March 31,
2000 and up to $150.0 million thereafter until maturity. Interest
is charged at rates based on LIBOR or "prime" (5.18% at March 31,
1998) and the agreement expires on March 31, 2002 at which time
the balance is due. As of March 31, 1999, total borrowings under
this credit arrangement were $86.8 million and have been
classified as long-term in the accompanying consolidated balance
sheets.
7
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
NOTE 4. INVESTMENTS IN AFFILIATES
In February 1996, a wholly-owned subsidiary of Polaris entered
into a partnership agreement with Transamerica Distribution
Finance ("TDF) to form Polaris Acceptance. In January 1997,
Polaris increased its equity interest in Polaris Acceptance to 50
percent. Polaris Acceptance provides floor plan financing to
dealer and distributor customers of Polaris, and provides other
financial services such as retail credit, leasing and extended
service contracts to dealers, distributors and retail customers of
Polaris. Polaris has guaranteed 50 percent of the outstanding
indebtedness of Polaris Acceptance under a credit agreement
between Polaris Acceptance and TDF. At March 31, 1999, Polaris'
contingent liability with respect to the guarantee was
approximately $131.2 million.
Polaris is a partner with Fuji Heavy Industries Ltd. in Robin
Manufacturing, U.S.A. ("Robin"). 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
non-operating expense (income) in the accompanying consolidated
statements of operations.
NOTE 5. SHAREHOLDER'S EQUITY
During the first three months of 1999, Polaris paid $13.1 million
to repurchase and retire 437,700 shares of its common stock with
cash on hand and borrowings under its line of credit. Polaris has
1,494,900 remaining shares available to repurchase under its
current Board of Directors' authorization as of March 31, 1999.
The Polaris Board of Directors declared a regular cash dividend of
$0.20 per share payable to holders of record on February 1, 1999,
which was paid on February 15, 1999.
On April 23, 1999, the Polaris Board of Directors declared a
regular cash dividend of $0.20 per share payable on or about May
17, 1999, to holders of record on May 3, 1999.
Net income per share for the periods ended March 31, 1999 and 1998
was calculated based on the weighted average number of common and
potential common shares outstanding.
8
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
Basic earnings per share using SFAS No. 128 "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,
1999 1998
------- -------
<S> <C> <C>
Net Income available to common shareholders $ 9,067 $ 8,361
------- -------
------- -------
Weighted average number of common
shares outstanding 24,996 26,000
First Rights 0 53
Director Plan 21 15
ESOP 170 170
------- -------
Common shares outstanding - basic 25,187 26,238
------- -------
------- -------
Dilutive effect of Option Plan 37 47
------- -------
Common and potential common shares
outstanding 25,224 26,285
------- -------
------- -------
Basic and diluted net income per share $ 0.36 $ 0.32
------- -------
------- -------
</TABLE>
9
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
NOTE 6. COMMITMENTS AND CONTINGENCIES
Polaris is subject to product liability claims in the normal
course of business and prior to June 1996 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 exceeds 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.
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.
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, 1999, Polaris had open
Japanese yen foreign exchange contracts with notional amounts
totaling $50.2 million United States dollars, and open Canadian
dollar foreign exchange contracts with notional amounts totaling
$84.5 million United States dollars which mature throughout the
remainder of 1999.
NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS
SFAS 133
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) in June 1998.
SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be
10
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in
the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that
receive hedge accounting.
Polaris will be required to adopt SFAS No. 133 no later than
January 1, 2000. Polaris has not quantified the impacts of
adopting SFAS No. 133 on the financial statements and has not
determined the timing of adoption of SFAS No. 133. However, SFAS
No. 133 could increase volatility in earnings and other
comprehensive income.
ITEM 2
MANAGEMENT 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, 1999 and 1998. Due to the
seasonality of the snowmobile, all terrain vehicle (ATV), personal watercraft
(PWC), and motorcycle 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 $237.8 million in the first quarter of 1999, representing a
13 percent increase from $210.0 million in sales for the same period in 1998.
North American sales of snowmobiles and related Parts, Garments and Accessories
("PG&A) of $15.9 million for the first quarter 1999 were nine percent lower than
$17.4 million for the comparable period in 1998. The decrease is due to lower
snowmobile unit shipments in 1999.
North American sales of ATVs and related PG&A of $179.8 million for the first
quarter 1999 were nine percent higher than $165.6 million for the comparable
period in 1998. The increase is related to increased unit sales reflecting the
continuing growth in the ATV industry.
North American sales of PWC and related PG&A of $18.4 million for the first
quarter 1999 were 19 percent higher than $15.5 million for the comparable period
in 1998. The increase is related to a return to a more normal shipping year in
1999.
Sales of Victory motorcycles and related PG&A of $10.3 million for the first
quarter 1999 were significantly higher than $.6 million for the comparable
period in 1998. Victory motorcycle production and shipments began in July 1998.
11
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
International sales of snowmobiles, ATVs, PWC and related PG&A of $13.4 million
for the first quarter 1999 were 23 percent higher than $10.9 million for the
comparable period in 1998 primarily as a result of stronger ATV unit shipments.
Gross profit of $56.5 million in the first quarter of 1999 represents a 21%
increase from gross profit of $46.8 million for the same period in 1998. This
increase in gross profit dollars resulted primarily from higher sales volume
in the current year period. The gross profit margin percentage increased to
23.8 percent for the first quarter of 1999 from 22.3 percent for the
comparable 1998 period. This increase in gross profit margin percentage is
primarily due to lower warranty expenses and increased sales of higher margin
PG&A partially offset by increased production of Victory motorcycles,
negative impact of Canadian dollar and Japanese yen exchange rates and ATV
sales mix changes.
Operating expenses in the first quarter of 1999 increased 26% to $44.2
million from the comparable 1998 period and as a percentage of sales,
increased to 18.6 percent for the first quarter of 1999 compared to 16.8
percent for the same period in 1998. The higher levels of operating expenses
as a percentage of sales are related to a planned increase in advertising
expenditures and sales/marketing expenses to support the Company's growth and
brand recognition initiatives.
CASH DIVIDENDS
On January 21, 1999, the Polaris board of Directors declared a regular cash
dividend of $0.20 per share payable to holders of record on February 1, 1999,
which was paid on February 15, 1999.
On April 23, 1999, the Polaris Board of Directors declared a regular cash
dividend of $0.20 per share payable on or about May 17, 1999, to holders of
record on May 3, 1999.
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, 2002 under which it may borrow up to $175.0
million. Interest is charged at rates based on LIBOR or "prime". At March 31,
1999, Polaris had borrowings under its bank line of credit arrangement of $86.8
million and cash and cash equivalents of $2.7 million.
During the first three months of 1999, Polaris paid $13.1 million to repurchase
and retire 437,700 shares of its common stock with cash on hand and borrowings
under its line of credit arrangement. Polaris has 1,494,900 remaining shares
available to repurchase under its current Board of Directors' authorization as
of March 31, 1999.
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 1999. At this time,
management is not aware of any factors that would have a materially adverse
impact in cash flow beyond 1999.
12
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
YEAR 2000
During 1999, Polaris has continued with its company-wide program to prepare the
company's computer systems for Year 2000 compliance. 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' project is
divided into two major areas: internal information systems and embedded
manufacturing systems/third party suppliers.
Polaris has implemented a plan to make its internal information systems Year
2000 compliant by mid-1999. As of March 31, 1999, approximately 95% of the
programming requirements for the Company's manufacturing systems were complete
and 85% of the programming for the sales, distribution and finance systems had
been completed. The systems are being tested when programming modifications are
completed, with testing expected to continue throughout 1999.
Polaris has completed inventories of equipment and machines with embedded
systems that are used at each of the facilities. Polaris is in the process of
assessing whether the critical equipment will be Year 2000 compliant through
simulations and testing of the equipment as well as Year 2000 compliance letters
from vendors. Polaris has identified its critical suppliers and sent them
questionnaires to address their Year 2000 plans and progress. As of March 31,
1999, Polaris has received responses from 95% of these suppliers and is in the
process of tabulating the results.
The cost of the Year 2000 initiatives (which are expensed as incurred) are not
expected to be material to Polaris' financial position. The total cost is
estimated to be approximately $1.5 million of which $1.0 million has been
incurred to date.
Polaris has begun a comprehensive analysis of the operational issues and costs
that would most likely result from failure by the company or third parties to
achieve Year 2000 compliance on a timely basis. Although the company has not yet
identified the most likely worst case scenario, the risk would be primarily
delivery timing to customers in January 2000. Polaris believes it will have
sufficient time to recover, although some delayed deliveries may result in
cancellations of orders.
Polaris is in the process of developing contingency plans to protect the
business from Year 2000 related interruptions and anticipates their completion
by the third quarter of 1999.
The costs of the project and the date when Polaris believes it will complete the
Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events. However, there can be
no guarantee these estimates will be achieved and actual results could differ
materially from those anticipated.
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.
13
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
In 1998, purchases totaling 14 percent of Polaris' cost of sales were from
yen-denominated suppliers. The weakening of the U.S. dollar in relation to the
Japanese yen since mid 1998 has resulted in higher raw material purchase prices.
Polaris' cost of sales in the first quarter ended March 31, 1999 was negatively
impacted by the Japanese yen-U.S. dollar exchange rate fluctuation when compared
to the same period in 1998. 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 negative impact on cost of sales during
the remaining periods of 1999 when compared to the same periods in 1998.
Polaris operates in Canada through a wholly owned subsidiary. Over the past
several years, strengthening of the U.S. dollar in relationship to the Canadian
dollar has resulted in lower gross margin levels on a comparable basis. The
fluctuation of the Canadian dollar exchange rate negatively impacted the gross
margin achieved in the first quarter of 1999 and when compared to the same
period in 1998. In view of the foreign exchange hedging contracts currently in
place, Polaris anticipates that the Canadian dollar-U.S. dollar exchange rate
will continue to have a negative impact on cost of sales during the remaining
periods of 1999 when compared to the same periods in 1998.
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, 1999, Polaris had open Japanese yen and Canadian dollar foreign
exchange hedging contracts, which mature throughout 1999.
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
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
MARCH 31, 1999
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
15
<PAGE>
FORM 10-Q
FOR QUARTERLY PERIOD ENDED
MARCH 31, 1999
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 7, 1999 /s/ W. Hall Wendel, Jr.
-------------------------------------
W. Hall Wendel, Jr.
Chairman of the Board and
Chief Executive Officer
Date: May 7, 1999 /s/ Michael W. Malone
-------------------------------------
Michael W. Malone
Vice President, Finance, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial and
Chief Accounting Officer)
16
<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, 1999, AND
THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS EQUITY AND CASH
FLOWS FOR THE QUARTER ENDED MARCH 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,717
<SECURITIES> 0
<RECEIVABLES> 39,121
<ALLOWANCES> 0
<INVENTORY> 164,420
<CURRENT-ASSETS> 239,244
<PP&E> 240,907
<DEPRECIATION> 112,357
<TOTAL-ASSETS> 435,217
<CURRENT-LIABILITIES> 201,883
<BONDS> 0
0
0
<COMMON> 251
<OTHER-SE> 146,283
<TOTAL-LIABILITY-AND-EQUITY> 435,217
<SALES> 237,769
<TOTAL-REVENUES> 237,769
<CGS> 181,296
<TOTAL-COSTS> 181,296
<OTHER-EXPENSES> 44,162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 823
<INCOME-PRETAX> 14,057
<INCOME-TAX> 4,990
<INCOME-CONTINUING> 9,067
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,067
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
</TABLE>
