American Motorcycle Dealer AMD 168 July 2013 | Page 6

Polaris profit up despite Victory sales being down
OLARIS Industries has reported record first quarter net income of $75.5 million for the quarter ended March 31, 2013. By comparison, 2012 first quarter net income was $60.1 million. Net sales for the first quarter 2013 totaled $745.9 million, which represents an increase of 11 percent from last year’s first quarter sales of $673.8 million. “We are pleased that consumers and enthusiasts around the world continued to make Polaris their brand and product of choice during the first quarter of 2013. While Off-Road Vehicles (ORVs) and motorcycles faced challenging 2012 comparisons, we were again able to outpace the industry and increase market share in both product lines,” said Scott Wine, Polaris’ Chairman and CEO. “Two key tenets of Polaris’ longterm strategy are growing globally and growing through adjacencies. Our acquisition earlier this month of Aixam Mega S.A.S., a profitable European onroad quadricycle business, aligns perfectly with those two objectives and furthers our penetration into the $4+ billion global small vehicles market. Aixam Mega broadens our product line portfolio, complements our GEM and Goupil businesses, boosts our European distribution network, and enhances our competitive advantage in small vehicles. Additionally, we finalized the location of our new European manufacturing facility, which will be located in Opole, Poland. This facility will add much needed ORV capacity and serve our European markets with locally designed and manufactured products. We expect to break ground during this year’s second quarter and the facility should be operational by

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the Fall of 2014.” Wine concluded: “Not unexpectedly, we saw a degree of timidity in some customer segments that corresponded with the payroll tax increases that took effect at the start of the year. We remain cautious of the economic risks in both North America and Europe, but believe our strong team and commercial plans, along with our near term product pipeline, headed by the new Indian motorcycle, will enhance growth in the second half of 2013. With our solid start to the year, we feel confident in raising our 2013 full year sales and earnings guidance.” On-Road Vehicle sales, comprised primarily of Victory motorcycles, but also including Indian motorcycles and GEM and Goupil electric vehicles, decreased three percent from the first quarter 2012 to $62.9 million. North American industry heavyweight cruiser and touring motorcycle retail sales decreased about ten percent during the first quarter 2013 when compared to a strong mid-teens percent increase in the 2012 first quarter, which was primarily driven by the unseasonably warm weather in 2012 and a late start to Spring in 2013. ver the same period, Victory North American unit retail sales decreased as well, albeit less than the overall industry, resulting in continued market share gains. This year marks the 15th anniversary of Victory motorcycles, and to commemorate the occasion, Victory introduced a limited edition 15th anniversary Cross Country Tour, inspired by the first Victory motorcycle ever built. Additionally, as Polaris moves towards the full re-launch of Indian motorcycles later this year, the Company unveiled the all new Thunder Stroke 111 engine that will

First Quarter Performance Summary (in thousands except per share data)
Three Months ended March 31 Product line sales On-Road Vehicles Total Sales Gross Profit Operating Expenses Operating Income Net Income 2013 62,856 $745,909 $216,648 $124,753 $101,969 $75,464 2012 64,656 $673,750 $194,963 $110,599 $91,547 $60,078 Change -3% 11% 11% 13% 11% 26%

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power the new model year 2014 Indian motorcycles. The engine features 111ci displacement and delivers the raw power and iconic styling that have long been hallmarks of the legendary Indian Motorcycle brand. The Company’s small vehicle business grew sales double digits percent during the 2013 first quarter through added distribution and improved sales efforts for GEM and Goupil electric vehicles. ross profit was 29 percent of sales for the first quarter of 2013, an inc rease of 10 basis points from the first quarter of 2012; while over the same period, gross profit dollars increased eleven percent to $216.6 million. The first quarter 2013 increase in gross profit dollars and margin percentage was driven by lower commodity costs, higher selling prices and production efficiencies, largely offset by unfavorable currency movements and higher promotional activities. Operating expenses for first quarter 2013 grew 13 percent to $124.8 million or 16.7 percent of sales, compared to $110.6 million or 16.4 percent of sales for the first quarter of 2012. Operating expenses in absolute

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dollars and as a percent of sales for the first quarter of 2013 rose primarily due to planned strategic investments, higher sales, marketing and advertising expenses primarily related to Indian motorcycles, and increased research and development activities related to new products under development. et cash provided by operating activities was $47.8 million for the first quarter ended March 31, 2013 compared to net cash used for operating activities of $0.7 million for the first quarter of 2012. The quarter over quarter change in net cash from operating activities is the result of higher net income for the quarter and decreased working capital requirements during the 2013 first quarter period primarily due to increased accounts payable. Total debt at the end of the first quarter 2013 was $106.4 million. During the 2013 first quarter, the Company increased its quarterly dividend payment for the 18th consecutive year by 14 percent to $0.42 per share and paid a total of $28.7 million in dividends to shareholders.

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