<PAGE> 1
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 JUNE 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
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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)
(763) 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 August 8, 2000, 23,898,117 shares of Common Stock of the
issuer were outstanding.
<PAGE> 2
POLARIS INDUSTRIES INC.
FORM 10-Q
For Quarter Period Ended June 30, 2000
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 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...................................................................... 11
Cash Dividends............................................................................. 13
Liquidity and Capital Resources............................................................ 13
Inflation and Exchange Rates............................................................... 14
Part II OTHER INFORMATION.......................................................................... 15
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 6 Exhibits and Reports on Form 8-K
SIGNATURE PAGE.......................................................................................... 16
</TABLE>
<PAGE> 3
POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31,
(Unaudited) 1999
---------------------------- --------------------------------- ------------------------ -----------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 5,560 $ 6,184
Trade receivables 51,293 53,293
Inventories 169,158 118,062
Prepaid expenses and other 7,676 6,175
Deferred tax assets 32,000 31,000
-------- --------
Total current assets 265,687 214,714
Deferred Tax Assets 15,000 16,000
Property and Equipment, net 161,087 150,922
Investments in Affiliates 36,598 38,310
Intangible Assets, net 21,639 22,081
-------- --------
Total Assets $500,011 $442,027
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts Payable $110,373 $ 91,805
Accrued expenses 105,895 128,582
Income taxes payable 24,386 13,413
-------- --------
Total Current Liabilities 240,654 233,800
Borrowings under credit agreement 90,000 40,000
-------- --------
Total Liabilities 330,654 273,800
-------- --------
Commitments and Contingencies (Notes 4, 6 and 7)
Shareholder's Equity:
Common Stock 238 242
Additional paid-in capital 0 8,987
Deferred compensation (4,236) (7,818)
Compensation payable in common stock 0 5,975
Retained earnings 173,355 160,841
-------- --------
Total shareholder's equity 169,357 168,227
-------- --------
Total Liabilities and Shareholder's Equity $500,011 $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>
Second Quarter For the Six Months
Ended June 30 Ended June 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $342,785 $324,308 $613,776 $562,077
Cost of Sales 257,291 249,405 463,688 430,701
-------- -------- -------- --------
Gross Profit 85,494 74,903 150,088 131,376
Operating Expenses
Selling and marketing 40,057 31,619 68,198 59,517
Research and development 8,101 8,233 16,065 15,566
General and administrative 13,852 11,631 27,033 20,562
-------- -------- -------- --------
Total operating expenses 62,010 51,483 111,296 95,645
-------- -------- -------- --------
Operating Income 23,484 23,420 38,792 35,731
Non-Operating Expense (Income)
Interest Expense 2,164 1,551 3,515 2,374
Equity in income of affiliates (3,272) (1,928) (6,397) (3,933)
Other expense (income), net (505) 376 1,462 (188)
-------- -------- -------- --------
Income before taxes 25,097 23,421 40,212 37,478
Provision for income taxes 8,909 8,315 14,275 13,305
-------- -------- -------- --------
Net income $ 16,188 $ 15,106 $ 25,937 $ 24,173
======== ======== ======== ========
Diluted Net Income Per Share $ 0.68 $ 0.60 $ 1.09 $ 0.96
======== ======== ======== ========
</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 Six Months
Ended June 30,
2000 1999
---- ----
<S> <C> <C>
Operating Activities:
Net Income $ 25,937 $ 24,173
Adjustments to reconcile net income to net cash
Depreciation and amortization 22,536 18,514
Non-cash compensation 6,571 5,665
Equity in income of affiliates (6,397) (3,933)
Changes in current operating items
Trade receivables 2,000 6,509
Inventories (51,096) (56,875)
Accounts payable 18,568 32,032
Accrued expenses (22,687) (23,088)
Income taxes payable 10,973 15,765
Prepaid and others, net (686) (2,266)
-------- --------
Net cash from operating activities 5,719 16,496
-------- --------
Investing Activities:
Purchase of property and equipment (32,259) (22,932)
Investments in affiliates, net 8,109 5,162
-------- --------
Net cash used for investing activities (24,150) (17,770)
-------- --------
Financing Activities:
Borrowings under credit agreement 222,500 264,625
Repayments under credit agreement (172,500) (224,025)
Repurchase and retirement of common shares (21,792) (19,720)
Cash dividends to shareholders (10,401) (9,987)
-------- --------
Net cash from financing activities 17,807 10,893
-------- --------
Increase (decrease) in cash and cash equivalents (624) 9,619
Cash and Cash Equivalents, Beginning 6,184 1,466
-------- --------
Cash and Cash Equivalents, Ending $ 5,560 $ 11,085
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(In Thousands)
UNAUDITED
<TABLE>
<CAPTION>
Compensation
Additional Payable in
Common Paid-In Deferred Common Retained
Stock Capital Compensation 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 3 9,776 3,582 (5,975) 0 7,386
Cash Dividends Declared 0 0 0 0 (10,401) (10,401)
Repurchase and Retirement
of Common Shares (7) (18,763) 0 0 (3,022) (21,792)
Net Income 0 0 0 0 25,937 25,937
-------- -------- -------- -------- -------- --------
Balance, June 30, 2000 $ 238 $ 0 $(4,236) $ 0 $173,355 $169,357
======== ======== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 7
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
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):
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Raw Materials $ 31.8 $ 28.0
Service Parts 52.0 50.6
Finished Goods 85.4 39.5
---- ----
$169.2 $118.1
====== ======
</TABLE>
NOTE 3. Financing Agreement
Polaris has an unsecured bank line of credit arrangement with
maximum available borrowings of $150.0 million. Interest is
charged at rates based on LIBOR or "prime" (6.99 percent at June
30, 2000) and the agreement expires on March 31, 2002 at which
time the balance is due. 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 June 30, 2000, total borrowings under this credit
arrangement were $90.0 million and have been classified as
long-term in the accompanying consolidated balance sheets.
7
<PAGE> 8
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
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 six months of 2000, Polaris paid $21.8 million to
repurchase and retire 720,000 shares of its common stock, with
cash on hand and borrowings under its line of credit. Polaris has
approximately 2.2 million remaining shares available to repurchase
under its current Board of Directors' authorization as of June 30,
2000.
The Polaris Board of Directors declared a regular cash dividend of
$0.22 per share payable to holders of record on May 1, 2000, which
was paid on May 15, 2000.
On July 20, 2000, the Polaris Board of Directors declared a
regular cash dividend of $0.22 per share payable on or about
August 15, 2000, to holders of record on August 1, 2000.
Net income per share for the periods ended June 30, 2000 and 1999
was calculated based on the weighted average number of common and
potential common shares outstanding.
8
<PAGE> 9
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
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 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 Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income available to common shareholders $16,188 $15,106 $25,937 $24,173
======= ======= ======= =======
Weighted average number of common 23,389 24,796 23,529 24,896
shares outstanding
Director Plan 27 23 27 22
ESOP 170 170 170 170
------- ------- ------- -------
Common shares outstanding - basic 23,586 24,989 23,726 25,088
======= ======= ======= =======
Dilutive effect of Option Plan 56 379 38 208
------- ------- ------- -------
Common and potential common shares
Outstanding 23,642 25,368 23,764 25,296
======= ======= ======= =======
Basic net income per share $ 0.69 $ 0.60 $ 1.09 $ 0.96
======= ======= ======= =======
Diluted net income per share $ 0.68 $ 0.60 $ 1.09 $ 0.96
======= ======= ======= =======
</TABLE>
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.
9
<PAGE> 10
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
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. 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. At June 30, 2000, Polaris had open Canadian dollar
foreign exchange contracts with notional amounts totaling $44.4
million U.S. dollars, open Japanese yen foreign exchange contracts
with notional amounts totaling $31.8 million U.S. dollars, open
Euro foreign exchange contracts with notional amounts totaling
$5.5 million U.S. dollars and open Taiwan dollar foreign exchange
contracts with notional amounts totaling $5.7 million U.S.
dollars, all of which mature throughout the remainder of 2000.
10
<PAGE> 11
FORM 10-Q
For the Quarterly Period Ended
June 30, 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 has not quantified the impacts of
adopting SFAS No. 133 on the financial statements. However, SFAS
No. 133 could increase volatility in earnings and other
comprehensive income.
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 third
quarter of 2000. Polaris has not quantified the impact of adopting
EITF 00-14. However, EITF 00-14 is a classification change only
and will not effect net income.
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 June 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 $342.8 million in the second quarter of 2000, representing a six
percent increase from $324.3 million in sales for the same period in 1999.
11
<PAGE> 12
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
North American sales of ATVs and related Parts, Garments, and Accessories
("PG&A") of $208.6 million for the second quarter 2000 were 11 percent higher
than $187.8 million for the comparable period in 1999. The increase is related
to increased unit sales reflecting the continuing growth in the ATV industry.
North American sales of snowmobiles and related PG&A of $92.5 million for the
second quarter 2000 were three percent lower than $94.8 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.
North American sales of PWC and related PG&A of $18.8 million for the second
quarter 2000 were 36 percent higher than $13.8 million for the comparable period
in 1999. The increase is primarily related to higher dealer shipments in 2000 as
compared to the prior year period.
North American sales of Victory motorcycles and related PG&A of $5.8 million for
the second quarter 2000 were significantly lower than $14.1 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.
International sales of snowmobiles, ATVs, PWC and related PG&A of $17.1 million
for the second quarter 2000 were 24 percent higher than $13.8 million for the
comparable period in 1999 primarily as a result of increased unit shipments of
ATVs, PG&A and PWC.
Sales increased to $613.8 million for the year-to-date period ended June 30,
2000, representing a nine percent increase from $562.1 million sales for the
same period in 1999. The sales increase was primarily due to strong ATV demand.
Gross profit of $85.5 million in the second quarter of 2000 represents a 14
percent increase over gross profit of $74.9 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 margin percentage to 24.9 percent for the second
quarter of 2000 from 23.1 percent for the comparable 1999 period. The increase
in the gross profit margin percentage was primarily due to margin expansion in
the ATV product line and the sales mix benefit of the increase in PG&A sales
partially offset by the negative impact of Japanese yen exchange rates during
the second quarter 2000 when compared to the prior year period.
Gross profit of $150.1 million in the year-to-date period ended June 30, 2000
represents a 14 percent increase over gross profit of $131.4 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 24.5 percent for the year-to-date period ended June 30, 2000 as
compared to 23.4 percent for the year-to-date period in 1999. This increase in
gross profit margin percentage is primarily due to improvements in ATV and
Victory product lines driven by product cost reductions partially offset by the
negative impact of Japanese yen exchange rates and increased tooling cost
amortization.
12
<PAGE> 13
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
Operating expenses in the second quarter of 2000 increased 20 percent to $62.0
million from the comparable 1999 period, and as a percentage of sales increased
to 18.1 percent for the second quarter of 2000 compared to 15.9 percent for the
same period in 1999. Operating expenses in the year-to-date period ended June
30, 2000 increased 16 percent to $111.3 million from the comparable 1999 period
and as a percentage of sales increased to 18.1 percent for the six months ended
June 30, 2000 compared to 17.0 percent for the same period in 1999. The higher
levels of operating expenses are related to additional Victory advertising and
sales promotion expenses as well as planned increases in areas such as PG&A
sales and marketing and information technology.
Non-operating income increased in the second 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.
Cash Dividends
The Polaris Board of Directors declared a regular cash dividend of $0.22 per
share payable to holders of record on May 1, 2000, which was paid on May 15,
2000.
On July 20, 2000, the Polaris Board of Directors declared a regular cash
dividend of $0.22 per share payable on or about August 15, 2000, to holders of
record on August 1, 2000.
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" (6.99 percent at June 30, 2000) and
the agreement expires on March 31, 2002 at which time the balance is due. 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 June 30,
2000, total borrowings under this credit arrangement were $90.0 million and have
been classified as long-term in the accompanying consolidated balance sheets.
During the first six months of 2000, Polaris paid $21.8 million to repurchase
and retire 720,000 shares of its common stock with cash on hand and borrowings
under its line of credit. As of June 30, 2000, Polaris has approximately 2.2
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.
13
<PAGE> 14
FORM 10-Q
For the Quarterly Period Ended
June 30, 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 second quarter and year-to-date periods ended June
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 periods of 2000 when compared to
the same periods in 1999.
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 second quarter and year-to-date periods ended
June 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 periods of 2000 when compared to the same periods 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 June 30, 2000, Polaris had open Japanese yen, Euro, Taiwan
dollar and Canadian dollar foreign exchange hedging contracts that mature
throughout 2000.
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.
14
<PAGE> 15
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
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 The
company held its annual meeting of shareholders on May 18, 2000.
Proxies for matters to be voted upon at the Annual Meeting were
solicited pursuant to Regulation 14 under the Securities Exchange
Act of 1934, as amended. The following matters were voted upon at
the Annual Meeting:
1. To elect the following nominees as Class III Directors for a
new term of three years and until their successors are duly
elected and qualified:
<TABLE>
<CAPTION>
Votes For Withheld Authority
--------- ------------------
<S> <C> <C>
Gregory R. Palen 20,381,011 238,544
W. Hall Wendel, Jr. 20,367,567 251,989
Richard A. Zona 20,364,622 254,934
</TABLE>
The terms of the following directors continued after the meeting:
Andris A. Baltins, Raymond A. Biggs, Beverly F. Dolan, Robert S.
Moe, Bruce A. Thomson and Thomas C. Tiller.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On May 25, 2000 the Company filed a Current Report on
Form 8-K announcing that its Board of Directors had
adopted a shareholder rights plan on May 18, 2000.
15
<PAGE> 16
FORM 10-Q
For the Quarterly Period Ended
June 30, 2000
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: August 8, 2000 ---------------------------------
Thomas C. Tiller
President and Chief Executive Officer
Date: August 8, 2000 ---------------------------------
Michael W. Malone
Vice President, Finance, Chief
Financial Officer, and Secretary
(Principal Financial and Chief
Accounting Officer)
16
