<PAGE> 1
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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, 2000
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.)
2100 Highway 55, Medina, MN 55340
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (763) 542-0500
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 8, 2000, 23,714,197 shares of Common Stock of the
issuer were outstanding.
--------------------------------------------------------------------------------
<PAGE> 2
POLARIS INDUSTRIES INC.
FORM 10-Q
For Quarter Period Ended September 30, 2000
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 Statements of Shareholder's 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....................................14
Inflation and Exchange Rates.......................................14
Item 3 - Quantitative and Qualitative Disclosures on Market Risk......15
Note regarding forward-looking statements.....................................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 6 Exhibits and Reports on Form 8-K
SIGNATURE PAGE................................................................17
<PAGE> 3
POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
Sept. 30, 2000 December 31, 1999
(Unaudited)
----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,854 $ 6,184
Trade receivables 82,702 53,293
Inventories 171,012 118,062
Prepaid expenses and other 7,165 6,175
Deferred tax assets 35,000 31,000
------ ------
Total current assets 301,733 214,714
Deferred Tax Assets 14,000 16,000
Property and Equipment, net 163,411 150,922
Investments in Affiliates 44,462 38,310
Intangible Assets, net 21,417 22,081
------ ------
Total Assets $545,023 $442,027
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable $126,189 $ 91,805
Accrued expenses 131,969 128,582
Income taxes payable 26,324 13,413
------ ------
Total current liabilities 284,482 233,800
Borrowings under credit agreement 70,000 40,000
------ ------
Total Liabilities 354,482 273,800
------- -------
Commitments and Contingencies (Notes 4, 6 and 7)
Shareholder's Equity:
Common stock 237 242
Additional paid-in capital 0 8,987
Deferred compensation (3,544) (7,818)
Compensation payable in common stock 0 5,975
Retained earnings 193,848 160,841
------- -------
Total shareholder's equity 190,541 168,227
------- -------
Total Liabilities and Shareholder's
Equity $545,023 $442,027
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
UNAUDITED
<TABLE>
<CAPTION>
Third Quarter For the Nine Months
Ended Sept. 30 Ended Sept. 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $396,962 $388,883 $1,010,738 $950,960
Cost of Sales 289,245 287,595 752,933 718,296
------- ------- ------- -------
Gross profit 107,717 101,288 257,805 232,664
Operating Expenses
Selling and marketing 44,124 40,698 112,322 100,215
Research and development 7,964 7,149 24,029 22,715
General and administrative 11,618 11,487 38,651 32,049
------ ------ ------ ------
Total operating expenses 63,706 59,334 175,002 154,979
------ ------ ------- -------
Operating income 44,011 41,954 82,803 77,685
Nonoperating Expense (Income)
Interest expense 2,416 1,188 5,931 3,562
Equity in (income) of (3,952) (2,447) (10,349) (6,380)
affiliates
Other expense (income), net 172 968 1,634 780
--- --- ----- ---
Income before taxes 45,375 42,245 85,587 79,723
Provision for Income Taxes 16,109 14,996 30,384 28,301
------ ------ ------ ------
Net income $29,266 $27,249 $55,203 $51,422
======= ======= ======= =======
Diluted Net Income Per Share $1.24 $1.10 $2.33 $2.05
===== ===== ===== =====
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
UNAUDITED
<TABLE>
<CAPTION>
For the Nine Months
Ended Sept. 30,
2000 1999
---- ----
<S> <C> <C>
Operating Activities:
Net income $55,203 $51,422
Adjustments to reconcile net income to net cash
Depreciation and amortization 34,443 29,587
Noncash compensation 8,729 8,517
Equity in (income) of affiliates (10,349) (6,380)
Deferred income taxes (2,000) (2,000)
Changes in current operating items
Trade receivables (29,409) (25,743)
Inventories (52,950) (37,631)
Accounts payable 34,384 36,914
Accrued expenses 3,387 1,470
Income taxes payable 12,911 18,267
Prepaid and others, net 299 (1,919)
------ -------
Net cash from operating activities 54,648 72,504
------ ------
Investing Activities:
Purchase of property and equipment (46,268) (39,204)
Investments in affiliates, net 4,197 (2,641)
-------- --------
Net cash used for investing activities (42,071) (41,845)
-------- --------
Financing Activities:
Borrowings under credit agreement 356,750 381,350
Repayments under credit agreement (326,750) (351,850)
Repurchase and retirement of common shares (27,368) (43,532)
Cash dividends to shareholders (15,539) (14,923)
-------- --------
Net cash from financing activities (12,907) (28,955)
-------- --------
Increase (decrease) in cash and cash equivalents (330) 1,704
Cash and Cash Equivalents, Beginning 6,184 1,466
-------- --------
Cash and Cash Equivalents, Ending $5,854 $3,170
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
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, 1999 $242 $8,987 ($7,818) $5,975 $160,841 $168,227
Employee stock compensation 4 11,715 4,274 (5,975) 0 10,018
Cash dividends declared 0 0 0 0 (15,539) (15,539)
Repurchase and retirement
of common shares (9) (20,702) 0 0 (6,657) (27,368)
Net income 0 0 0 0 55,203 55,203
- - - - ------ ------
Balance, September 30, 2000 $237 $0 $(3,544) $0 $193,848 $190,541
==== == ======== == ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 7
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, 1999, 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 millions):
September 30, 2000 December 31, 1999
------------------ -----------------
Raw Materials $33.2 $28.0
Parts, Garments & Accessories 51.2 50.6
Finished Goods 86.6 39.5
------ ------
$171.0 $118.1
====== ======
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" (6.93 percent at September 30, 2000) and
the arrangement expires on March 31, 2002 at which time the balance
is due. In addition, Polaris has an unsecured discretionary line of
credit arrangement with maximum available borrowings of $10.0
million. This arrangement expires on May 31, 2001.
7
<PAGE> 8
In 1999 and again in 2000, Polaris entered into interest rate swap
agreements to manage exposures to fluctuations in interest rates. The
effect of these agreements is to fix the interest rate at 5.80
percent for $20 million of borrowings under the credit line until
July 2002 and at 7.21 percent for $18 million of borrowings under the
credit line until June 2007. As of September 30, 2000, total
borrowings under the bank line of credit arrangement were $70.0
million and have been classified as long-term in the accompanying
consolidated balance sheets.
NOTE 4. Investments in Affiliates
A wholly owned subsidiary of Polaris is a partner with Transamerica
Distribution Finance ("TDF") in Polaris Acceptance. Polaris
Acceptance provides floor plan financing to dealer and distributor
customers of Polaris, and provides other financial services such as
retail credit, extended service contracts and insurance to dealers,
distributors and retail customers of Polaris. Polaris has a 50
percent equity interest in Polaris Acceptance and was responsible for
50 percent of the outstanding indebtedness of Polaris Acceptance. In
February 2000, the term of the partnership agreement was extended; in
consideration thereof, Polaris is no longer required to guarantee the
outstanding indebtedness of Polaris Acceptance.
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 nine months of 2000, Polaris paid $27.4 million to
repurchase and retire 886,200 shares of its common stock, with cash
on hand and borrowings under its line of credit. Polaris has
approximately 2.1 million remaining shares available to repurchase
under its current Board of Directors' authorization as of September
30, 2000.
The Polaris Board of Directors declared a regular cash dividend of
$0.22 per share payable to holders of record on August 1, 2000, which
was paid on August 15, 2000.
On October 19, 2000, the Polaris Board of Directors declared a
regular cash dividend of $0.22 per share payable on or about November
15, 2000, to holders of record on November 1, 2000.
8
<PAGE> 9
In May 2000, the Polaris Board of Directors adopted a shareholder
rights plan. Under the plan, a dividend of preferred stock purchase
rights will become excercisable if a person or group should acquire
15 percent or more of the company's stock. The dividend will consist
of one purchase right for each outstanding share of the Company's
common stock held by shareholders of record on June 1, 2000.
Net income per share for the periods ended September 30, 2000 and
1999 was calculated based on the weighted average number of common
and potential common shares outstanding.
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 Director plan and the
Employee Stock Ownership Plan (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 For Nine Months
Ended Sept. 30, Ended Sept. 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income available to common shareholders $29,266 $27,249 $55,203 $51,422
======= ======= ======= =======
Weighted average number of common 23,183 24,400 23,413 24,730
shares outstanding
Director Plan 26 24 27 23
ESOP 170 170 170 170
------ ------ ------- ------
Common shares outstanding - basic 23,379 24,594 23,610 24,923
====== ====== ====== ======
Dilutive effect of Option Plan 163 113 80 176
------ ------ ------ ------
Common and potential common shares
Outstanding 23,542 24,707 23,690 25,099
====== ====== ====== ======
Basic net income per share $1.25 $1.11 $2.34 $2.06
===== ===== ===== =====
Diluted net income per share $1.24 $1.10 $2.33 $2.05
===== ===== ===== =====
</TABLE>
9
<PAGE> 10
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.
Revenue Canada has assessed Polaris approximately $17.0 million in
taxes, penalties and interest for the period January 1, 1992 through
December 31, 1994 resulting from an income tax audit for that period.
Revenue Canada has asserted that Polaris over charged its Canadian
subsidiary for various goods and services during the audit period
primarily through improper intercompany transfer pricing policies.
Polaris disagrees with the assessment and is vigorously contesting
it.
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 and Australian subsidiaries use the United States
dollar as their functional currency. Canadian and Australian assets
and liabilities are translated at the foreign exchange rates in
effect at the balance sheet date, while 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 certain of its purchase commitments denominated in
foreign currencies including the Japanese yen, the Euro and the
Taiwan dollar as well as transfers of funds from its Canadian
subsidiary. Polaris does not use any financial contracts 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.
10
<PAGE> 11
At September 30, 2000, Polaris had open Canadian dollar foreign
exchange contracts with notional amounts totaling $3.0 million U.S.
dollars, open Japanese yen foreign exchange contracts with notional
amounts totaling $29.0 million U.S. dollars, and open Euro foreign
exchange contracts with notional amounts totaling $1.7 million U.S.
dollars, all of which mature throughout the remainder of 2000.
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 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, 2001. Polaris is in the process of quantifying the impacts of
adopting SFAS No. 133 on the financial statements and, currently,
does not expect it to have a material effect on its financial
statements.
EITF Issue No. 00-14
The Emerging Issues Task Force recently issued a consensus pertaining
to EITF Issue No. 00-14, "Accounting for Certain Sales Incentives."
EITF 00-14 establishes accounting and reporting standards for sales
incentives and promotions. EITF 00-14 requires promotional expense to
be recorded as a reduction of revenue or an increase in cost of sales
as opposed to sales and marketing expense. Polaris will be required
to adopt EITF 00-14 in the fourth quarter of 2000. Polaris has not
quantified the impact of adopting EITF 00-14. However, EITF 00-14 is
a classification change and will not effect net income.
11
<PAGE> 12
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 quarter and year to date periods ended September 30, 2000 and
1999. 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 $397.0 million in the third quarter of 2000, representing a two
percent increase from $388.9 million in sales for the same period in 1999.
North American sales of ATVs and related Parts, Garments, and Accessories
("PG&A") of $218.8 million for the third quarter 2000 were 14 percent higher
than $191.6 million for the comparable period in 1999. The increase is related
to increased unit sales reflecting the continuing growth in the ATV industry as
well as initial shipments of our youth ATVs partially offset by a product mix
driven average per unit sales price decrease.
North American sales of snowmobiles and related PG&A of $144.0 million for the
third quarter 2000 were 13 percent lower than $165.7 million for the comparable
period in 1999. The decrease is primarily due to lower unit shipments to dealers
after three consecutive winters of poor snow conditions. The average per unit
sales price for the quarter remained flat compared to third quarter 1999.
North American sales of PWC and related PG&A of $3.4 million for the third
quarter 2000 were 26 percent lower than $4.6 million for the comparable period
in 1999. The decrease is related to lower unit sales primarily due to the timing
of shipments, which are typically low in the third quarter due to model year
changeover.
North American sales of Victory motorcycles and related PG&A of $3.2 million for
the third quarter 2000 were 34 percent lower than $4.9 million for the
comparable period in 1999. The decrease relates to a reduction in Victory
shipments to dealers in 2000 in response to lower than expected retail sales.
Shipments in the third quarter are typically low due to model year changeover.
International sales of snowmobiles, ATVs, PWC, Victory motorcycles and related
PG&A of $27.6 million for the third quarter 2000 were 25 percent higher than
$22.1 million for the comparable period in 1999 primarily due to increased
shipments of ATVs and PG&A into markets outside of North America.
Sales increased to $1,010.7 million for the year-to-date period ended September
30, 2000, representing a six percent increase from $951.0 million sales for the
same period in 1999. The sales increase was primarily due to strong ATV demand
partially offset by lower snowmobile shipments.
12
<PAGE> 13
Gross profit of $107.7 million in the third quarter of 2000 represents a six
percent increase over gross profit of $101.3 million for the same period in
1999. This increase in gross profit dollars was the result of higher sales
volume and an increase in the gross profit margin percentage to 27.1 percent for
the third quarter of 2000 from 26.0 percent for the comparable 1999 period. The
increase in the gross profit margin percentage was primarily due to cost
reductions in the snowmobile product line and the sales mix benefit of an
increase in PG&A sales partially offset by the negative impact of Japanese yen
exchange rates during the third quarter 2000 when compared to the prior year
period.
Gross profit of $257.8 million in the year-to-date period ended September 30,
2000 represents an 11 percent increase over gross profit of $232.7 million for
the same period in 1999. This increase in gross profit dollars resulted
primarily from higher sales volumes in the current year period. The gross profit
margin increased to 25.5 percent for the year-to-date period ended September 30,
2000 as compared to 24.5 percent for the year-to-date period in 1999. This
increase in gross profit margin percentage is primarily due to improvements in
ATV product cost reductions, the sales mix benefits of an increase in higher
margin sales of PG&A items and lower warranty costs partially offset by the
negative impact of Japanese yen exchange rates and increased tooling cost
amortization.
Operating expenses in the third quarter of 2000 increased seven percent to $63.7
million from the comparable 1999 period, and as a percentage of sales increased
to 16.0 percent for the third quarter of 2000 compared to 15.3 percent for the
same period in 1999. Operating expenses in the year-to-date period ended
September 30, 2000 increased 13 percent to $175.0 million from the comparable
1999 period and as a percentage of sales increased to 17.3 percent for the nine
months ended September 30, 2000 compared to 16.3 percent for the same period in
1999. The higher levels of operating expenses are related to additional Victory
motorcycle and ATV advertising and sales promotion expenses as well as planned
increases in areas such as PG&A sales and marketing and information technology
during each of the 2000 periods.
Non-operating income increased in the third quarter of 2000 from the comparable
period in 1999 primarily as a result of higher income generated by the Company's
investment in Polaris Acceptance, which is the primary component of equity in
income of affiliates. This non-operating income increase is partially offset by
higher interest expense due to increased seasonal borrowing requirements.
Cash Dividends
The Polaris Board of Directors declared a regular cash dividend of $0.22 per
share payable to holders of record on August 1, 2000, which was paid on August
15, 2000.
On October 19, 2000, the Polaris Board of Directors declared a regular cash
dividend of $0.22 per share payable on or about November 15, 2000, to holders of
record on November 1, 2000.
13
<PAGE> 14
Liquidity and Capital Resources
The seasonality of production and shipments causes working capital requirements
to fluctuate during the year. 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" (6.93 percent at September 30, 2000)
and the arrangement expires on March 31, 2002 at which time the balance is due.
In addition, Polaris has an unsecured discretionary line of credit arrangement
with maximum available borrowings of $10.0 million. This arrangement expires on
May 31, 2001.
In 1999 and again in 2000, Polaris entered into interest rate swap agreements to
manage exposures to fluctuations in interest rates. The effect of these
agreements is to fix the interest rate at 5.80 percent for $20 million of
borrowings under the credit line until July 2002 and at 7.21 percent for $18
million of borrowings under the credit line until June 2007. As of September 30,
2000, total borrowings under this credit arrangement were $70.0 million and have
been classified as long-term in the accompanying consolidated balance sheets.
During the first nine months of 2000, Polaris paid $27.4 million to repurchase
and retire 886,200 shares of its common stock with cash on hand and borrowings
under its line of credit. As of September 30, 2000, Polaris has approximately
2.1 million remaining shares available to repurchase under its Board of
Directors' authorization.
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 the remainder of
2000. At this time, management is not aware of any factors that would have a
materially adverse impact in cash flow beyond 2000.
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 1999, purchases totaling 16 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 third quarter and year-to-date periods ended
September 30, 2000 was negatively impacted by the Japanese yen-U.S. dollar
exchange rate fluctuation when compared to the same period in 1999. 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 period of 2000 when
compared to the same period in 1999.
14
<PAGE> 15
Polaris operates in Canada through a wholly owned subsidiary. Since late in the
third quarter of 1999, strengthening of the Canadian dollar in relationship to
the U.S. dollar has resulted in higher gross margin levels on a comparable
basis. The fluctuation of the Canadian dollar exchange rate positively impacted
the gross margin achieved in the third quarter and year-to-date periods ended
September 30, 2000, when compared to the same periods in 1999. In view of the
foreign exchange hedging contracts currently in place, Polaris anticipates that
the Canadian dollar-U.S. dollar exchange rate will have a positive impact on
cost of sales during the remaining period of 2000 when compared to the same
period in 1999.
In the past, Polaris has been a party to, and in the future may enter into,
foreign exchange hedging contracts for each of the Japanese yen, Euro, Taiwan
dollar and Canadian dollar to minimize the impact of exchange rate fluctuations
within each year. At September 30, 2000, Polaris had open Japanese yen, Euro,
and Canadian dollar foreign exchange hedging contracts that mature in the fourth
quarter of 2000.
Item 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Refer to the Company's annual report on Form 10-K for the year ended December
31, 1999 for a complete discussion on the Company's market risk. There have been
no material changes to the market risk information included in the Company's
1999 annual report on Form 10-K.
Note Regarding Forward Looking Statements
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 or
audit 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
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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 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
16
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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 report to be signed on its behalf by the
undersigned thereunto duly authorized.
POLARIS INDUSTRIES INC.
(Registrant)
Date: November 8, 2000 /s/ Thomas C. Tiller
--------------------
Thomas C. Tiller
President and Chief Executive Officer
Date: November 8, 2000 /s/ Michael W. Malone
------------------------------------
Michael W. Malone
Vice President, Finance, Chief
Financial Officer, and Secretary
(Principal Financial and Chief
Accounting Officer)
17
