Polaris 2008 Annual Report Download - page 8

4 Polaris Industries Inc. 2008 Annual Report
• Victorybusiness: The overall motorcycle market slowed,
and we were no exception. Victory sales to dealers were
down 17 percent, and although we did gain market
share, our retail sales to consumers declined in 2008.
It put a slight damper on Victory’s 10th anniversary year,
but our motorcycle has proved to be a viable contender
in the American-made market, and that is something
worth celebrating. For the fifth consecutive year, we
are the industry leader in ownership satisfaction. We
have a focused plan to deliver an even stronger value
proposition to riders in the future, including offering an
unprecedented five-year warranty for a limited time on
any new Victory motorcycle.
• Creditcrisis: Our performance was not immune from the
credit crisis that hit the world economy in 2008. Our income
from financial services was down 53 percent. But we
reacted quickly to limit the impact on our customers and
sales. More than 50 percent of consumer loan applications
in 2008 were approved, and 39 percent of customers in the
United States financed their Polaris products through either
HSBC or GE, our retail credit partners. Both metrics were
improved from the prior year. Also beginning in 2009, we
added an additional retail credit provider, Sheffield Financial,
to provide another source of financing for customers.
• Volatilecommodityprices: The commodity cost
environment was a challenge for most of 2008. We faced
significant commodity cost increases at the peak escalation
point in 2008. However, we were able to mitigate some of
the cost increases of our commodity exposure. During the
2008 fourth quarter, commodity costs fell precipitously and
Product Innovation Is Front-end Advantage
Over the years, Polaris has become synonymous with product innovation. We’re
proud of that reputation and do all we can to nurture it. Our state-of-the-art Wyoming
R&D facility, opened in 2005, helps us reduce time to market with new ideas and
improve quality at the same time. Our biggest challenge is to outdo ourselves each
year, and in 2008 we did by announcing the biggest product launch in our history.
Our model year 2009 lineup includes off-road vehicle innovations that cater to every
type of rider, including the fast-growing youth market. Our entire Victory cruiser
line received enhancements to lighting, drivetrain, fuel pump, fuel tank and engine.
And in snowmobiles, we expanded selection of our high-value Shift models and
introduced an enhanced utility sled. For model year 2010, we introduced the terrain-
dominating RUSH snowmobile
— a taste of what to expect from Polaris in the future.
p
To mark the 10-year anniversary of Victory —
the first new American-made motorcycle company
in nearly 60 years — we introduced this limited-
edition touring model. All 100 bikes were spoken
for within minutes using an electronic application
process, proof of Victory’s loyal following.
A Letter from the CEO and COO (cont.)
we expect lower costs in 2009. Additionally, a few of the
innovative new products we introduced in 2008 came in at
higher cost levels than what we had targeted; they will be
a cost reduction opportunity for us in 2009.
• Netmarginperformance: Although our gross profit
percentage increased 80 basis points to 22.9 percent in a
tough economic environment, we did not extend that gain
to our net income margin. It declined 30 basis points from
2007 to 2008. We can and will do better.
STRATEGIES FOR 2009 AND BEYOND
Since joining the business in September as CEO, I have
had the opportunity to meet with many Polaris stakeholders,
from our dedicated employees and strong dealers to
shareholders, suppliers, political leaders and others who care
about Polaris. These meetings reinforced the importance of
innovation to this company, not only to attract customers but
also to keep employees motivated. Polaris has a culture built
on employees’ passion for performance. In tough years as
2009 is expected to be, it becomes apparent how much our
dedicated employees and culture contribute to our success.
We expect to continue leading the industry in 2009 and
beyond, based on an exciting vision and strategy that
focus on five key themes to drive growth, profitability and
shareholder value:
• BestinPowersportsPlus: We are proud of our powersports
standing and heritage, and are committed to product
leadership in every market we serve. To continue our
leading off-road position, we recently consolidated our