Polaris 2011 Annual Report Download - page 50

Gross Profit:
The following table reflects our gross profit in dollars and as a percentage of sales for the 2011, 2010 and
2009 year end periods:
For the Year Ended December 31,
($ in millions) 2011 2010
Change
2011 vs. 2010 2009
Change
2010 vs. 2009
Gross profit dollars ................ $740.6 $530.2 40% $393.2 35%
Percentage of sales ............. 27.9% 26.6% +130 basis points 25.1% +150 basis points
For 2011, gross profit dollars increased 40 percent to $740.6 million compared to 2010. Gross profit, as a
percentage of sales, increased 130 basis points to 27.9 percent compared to 26.6 percent for 2010. The increase in
gross profit dollars and the 130 basis points increase in the gross profit margin percentage in 2011 resulted
primarily from continued product cost reduction efforts, production efficiencies on increased volumes, and
higher selling prices, partially offset by increasing commodity costs and unfavorable product mix. For
2010, gross profit dollars increased 35 percent to $530.2 million compared to 2009. Gross profit, as a percentage
of sales, improved 150 basis points to 26.6 percent compared to 25.1 percent for 2009. The increase in gross
profit dollars and the 150 basis points increase in the gross profit margin percentage in 2010 resulted primarily
from higher volume, continued product cost reduction efforts, higher selling prices and beneficial currency
movements. These increases were partially offset by manufacturing realignment costs as well as higher sales
promotion costs.
Operating Expenses:
The following table reflects our operating expenses in dollars and as a percentage of sales for the 2011, 2010
and 2009 periods:
For the Year Ended December 31,
($ in millions) 2011 2010
Change
2011 vs. 2010 2009
Change
2010 vs. 2009
Selling and marketing ................. $178.7 $142.4 25% $111.1 28%
Research and development ............. 105.6 84.9 24% 63.0 35%
General and administrative ............. 130.4 99.0 32% 71.2 39%
Total operating expenses ........... $414.7 $326.3 27% $245.3 33%
Percentage of sales ........... 15.6% 16.4% -80 basis points 15.7% +70 basis points
Operating expenses for 2011 increased 27 percent to $414.7 million compared to $326.3 million for 2010.
Operating expenses as a percentage of sales decreased 80 basis points to 15.6 percent compared to 16.4 percent
in 2010. Operating expenses in absolute dollars for 2011 increased primarily due to an increase in performance-
based incentive compensation plan expenses over 2010 driven by the higher profitability for 2011 and the 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 and acquisitions made in
2011 contributed to the increase in operating expenses in 2011. Operating expenses as a percentage of sales
decreased in 2011 compared to 2010 due to leverage achieved from the increased sales volume during the year.
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 over 2009 driven by the higher profitability
for 2010 and the higher stock price, which reflects our pay for performance compensation philosophy and
incremental investments made in global market expansion and new product development initiatives.
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