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MarketScreener Homepage  >  Equities  >  Nyse  >  Polaris Inc.    PII

POLARIS INC.

(PII)
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POLARIS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/27/2020 | 12:54pm EST

The following discussion pertains to the results of operations and financial position of Polaris Inc., a Minnesota corporation, for the three and nine month periods ended September 30, 2020 compared to the three and nine month periods ended September 30, 2019. The terms "Polaris," the "Company," "we," "us," and "our" as used herein refer to the business and operations of Polaris Inc., its subsidiaries and its predecessors, which began doing business in 1954. We design, engineer and manufacture powersports vehicles, which include: Off-Road Vehicles ("ORV"), including all-terrain vehicles ("ATV") and side-by-side vehicles; snowmobiles; motorcycles; Global Adjacent Markets vehicles, including Commercial, Government, and Defense vehicles; boats; and related Parts, Garments and Accessories ("PG&A"), as well as Aftermarket accessories and apparel. Due to the seasonality of certain products 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. Unless otherwise noted, all "quarter" comparisons are from the third quarter of 2020 to the third quarter of 2019, and all "year-to-date" comparisons are from the nine month period ended September 30, 2020 to the nine month period ended September 30, 2019.

Overview

The global spread of the novel coronavirus (COVID-19) has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The impact of this pandemic has affected our business segments, employees, dealers, suppliers, and customers in a variety of ways. As a result of COVID-19, our sales and profitability during the first half of 2020 were negatively impacted by the temporary suspension of select plant operations, which reduced our manufacture and shipment of products, as well as the temporary closures of certain dealers. During this period, sales and profitability were also negatively impacted by a decline in economic activity related to certain of our end markets, such as those served by Global Adjacent Markets and Aftermarket. Going forward, we anticipate these end markets to be more negatively impacted by COVID-19 than our other markets due to the nature of their products and end customers.

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Beginning in the second quarter the Company began to see stronger than
anticipated retail demand for our Powersports products as they provided an
attractive social-distancing solution for new and existing Powersports
customers. Our unit retail sales of ORVs, snowmobiles, and motorcycles to
consumers in North America increased 57 percent and 15 percent in the second and
third quarters of 2020, respectively. Further, retail sales for Polaris boats
also increased significantly during the third quarter compared to the prior
year. Polaris North American dealer inventory as of September 30, 2020 was down
significantly as retail sales outpaced shipments. At this time, we expect
continued positive retail demand for the remainder of the calendar year.
During the third quarter we made significant progress managing operations as we
seek to satisfy retail demand. However, due to the dynamics of the COVID-19
pandemic and other natural disasters, our supply chain and manufacturing
operations experienced constraints caused by logistics and production-limiting
disruptions. Because of the significant economic uncertainty, we are continuing
to execute a cautionary approach to spending given the pandemic-generated
economic uncertainty. As the impact of the COVID-19 pandemic on the economy and
our operations evolves, we will continue to assess the impact on the Company and
respond accordingly.
Third quarter sales totaled $1,954.6 million, an increase of 10 percent from
last year's third quarter sales of $1,771.6 million. Our third quarter sales to
North American customers increased 11 percent and our sales to customers outside
of North America increased 9 percent. The increases were driven by increased ORV
and boat shipments, as well as higher PG&A sales.
Our gross profit of $534.6 million increased 22 percent from $436.5 million in
the comparable prior year third quarter. The increase in gross profit was driven
by higher sales and lower promotions, partially offset by increased costs
resulting from supply chain disruption. We reported net income of $166.8
million, or $2.66 per diluted share, compared to 2019 third quarter net income
of $88.4 million, or $1.42 per diluted share.
Looking ahead, adverse impacts to the economy and certain of the Company's
business segments, certain suppliers, dealers or customers as a result of
COVID-19 may affect the Company's future valuation of certain assets and
therefore may increase the likelihood of additional impairment charges,
write-offs, or reserves associated with such assets, including goodwill,
indefinite and finite-lived intangible assets, property and equipment,
inventories, accounts receivable, tax assets, and other assets.
We believe we are well positioned to mitigate the impacts of COVID-19. We will
continue to adjust mitigation measures as needed related to health and safety.
Those measures might include further suspensions of select plant operations,
modifying workspaces, continuing social distancing policies, implementing new
personal protective equipment or health screening policies at our facilities, or
such other industry best practices needed to continue to maintain a healthy and
safe environment for our employees amidst the pandemic. In addition, while we
have and will continue to enhance functionality and security of technology for
off-site functions, we are also planning for the eventual reintroduction of our
on-site workforce to our facilities.
The duration of these trends and the magnitude of such impacts cannot be
precisely estimated at this time, as they are affected by a number of factors
(some of which are outside management's control), including those presented in
Item 1A. Risk Factors of this Quarterly Report.
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Consolidated Results of Operations
The consolidated results of operations were as follows:

© Edgar Online, source Glimpses

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