Polaris 2010 Annual Report Download - page 42

Gross Profit:
The following table reflects our gross profit in dollars and as a percentage of sales for the 2010, 2009 and
2008 year end periods:
($ in millions) 2010 2009
Change
2010 vs. 2009 2008
Change
2009 vs. 2008
For the Year Ended December 31,
Gross profit dollars ............... $530.2 $393.2 35% $445.7 ⫺12%
Percentage of sales ............. 26.6% 25.1% +150 basis points 22.9% +220 basis points
For 2010 gross profit dollars increased 35 percent to $530.2 million compared to 2009. Gross profit, as a
percentage of sales, improved 150 basis points to 26.6 percent compared to 25.1 percent for 2009. The increase in
gross profit dollars and the 150 basis points increase in the gross profit margin percentage in 2010 resulted primarily
from higher volume, continued product cost reduction efforts, higher selling prices and beneficial currency
movements. These increases were partially offset by manufacturing realignment costs as well as higher sales
promotion costs. For 2009 gross profit dollars decreased 12 percent to $393.2 million compared to 2008. Gross
profit, as a percentage of sales, improved 220 basis points to 25.1 percent compared to 22.9 percent for the full year
2008. The increase in gross profit margin percentage in 2009 resulted primarily from continued product cost
reduction efforts, lower commodity costs, product mix benefit and higher selling prices offset partially by
unfavorable currency movements.
Operating Expenses:
The following table reflects our operating expenses in dollars and as a percentage of sales for the 2010, 2009
and 2008 periods:
($ in millions) 2010 2009
Change
2010 vs. 2009 2008
Change
2009 vs. 2008
For the Year Ended December 31,
Selling and marketing .............. $142.4 $111.1 28% $137.0 ⫺19%
Research and development .......... 84.9 63.0 35% 77.5 ⫺19%
General and administrative .......... 99.0 71.2 39% 69.6 2%
Total operating expenses .......... $326.3 $245.3 33% $284.1 ⫺14%
Percentage of sales ............ 16.4% 15.7% +70 basis points 14.6% +110 basis points
Operating expenses for 2010 increased 33 percent to $326.3 million compared to $245.3 million for 2009.
Operating expenses as a percentage of sales increased 70 basis points to 16.4 percent compared to 15.7 percent in
2009. Operating expenses in absolute dollars and as a percentage of sales for 2010 increased primarily due to an
increase in performance-based incentive compensation plan expenses of $50.1 million over 2009 driven by the
higher profitability for 2010 and the recent higher stock price, which reflects our pay for performance compensation
philosophy. In addition, incremental investments made in global market expansion and new product development
initiatives contributed to the increase in operating expenses in 2010. Operating expenses for 2009 decreased
14 percent to $245.3 million compared to $284.1 million for 2008. Operating expenses in absolute dollars for 2009
decreased $38.8 million primarily due to continued operating cost control measures and the reduction in perfor-
mance-based incentive compensation plan expenses resulting from our lower profitability in 2009. Operating
expenses as a percentage of sales were 15.7 percent for 2009, an increase from 14.6 percent in 2008, due primarily to
lower sales volume during 2009, partially offset by the implementation of operating expense control measures.
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