Polaris 2013 Annual Report Download - page 51

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion pertains to the results of operations and financial position of the Company for each
of the three years in the period ended December 31, 2013, and should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included elsewhere in this report.
Overview
In 2013, we had record sales and net income from continuing operations, with our fourth straight year of sales
growth exceeding 15 percent and net income growth exceeding 20 percent. This growth is fueled by award-
winning innovative new products leading to continued market share leadership in side-by-side vehicles and
ATV’s. In 2013, we also experienced growth in our motorcycles, international and adjacent market businesses.
The overall North American powersports industry continued its positive trend with mid-single digit percentage
growth in 2013. Our North America retail sales to consumers increased 10 percent in 2013, helping to drive
total full year Company sales up 18 percent to a record $3.78 billion. Despite the global economy remaining
difficult, our international sales increased 29 percent due to continued market share growth in all product
categories and strong results by our recent European acquisitions.
Full year earnings reflect the success of our margin expansion efforts, as we delivered a 40 basis point increase
in net income margin from continuing operations to a record 10.1 percent of sales. The combination of
increased sales growth and the expansion of gross margins by 90 basis points drove net income from
continuing operations up 22 percent to $381.1 million, with diluted earnings per share from continuing
operations increasing 23 percent to a record $5.40 per share. These increases came while we continued to
invest in numerous longer-term diversification and growth opportunities.
In 2013, we received a benefit from prior investments while continuing to invest in both product development
and strategic initiatives. In August 2013, we re-launched the iconic Indian Motorcycle brand, headlined by
three all-new models: Chief Classic, Chief Vintage and Chieftain. Additionally, in 2013 we introduced 11 new
ORV products and eight new snowmobile models. Our late 2012 acquisition of Klim, a market leader in the
design, development and distribution of premium technical riding gear for the snowmobile and motorcycle
divisions, performed exceptionally well in 2013. Meanwhile, in the second quarter of 2013, we acquired Aixam,
a leader in the European on-road quadricycles market. Our footprint expanded with the doubling of our
Wyoming, Minnesota research and development facility being completed in 2013, and we broke ground on a
new manufacturing plant in Poland and a new manufacturing plant for our joint venture with Eicher Motors
Limited, which intends to design, develop and manufacture a full range of new vehicles in India and other
emerging markets.
In November 2013, we repurchased 3.96 million shares held by Fuji Heavy Industries Ltd. (‘‘Fuji’’) for
$497.5 million. The repurchase was funded from cash on hand and borrowings under our revolving credit
facility and Master Note Purchases Agreement. The repurchase is expected to decrease our 2014 diluted share
count while leaving available borrowing capacity to fund future growth.
On January 30, 2014, we announced that our Board of Directors approved a 14 percent increase in the
regular quarterly cash dividend to $0.48 per share for the first quarter of 2014, representing the 19th
consecutive year of increased dividends to shareholders. This increase reflects the continued momentum and
potential of our business and the strength of our balance sheet.
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