Polaris 2014 Annual Report Download - page 58

negative impact of currency movements. The decrease in gross profit percentage resulted primarily from
unfavorable foreign currency fluctuations, new plant start-up costs and higher depreciation and amortization,
partially offset by product cost reduction and higher selling prices.
Gross profit, as a percentage of sales, was 29.7 percent for 2013, an increase of 85 basis points from 2012.
Gross profit dollars increased 21 percent to $1,120.9 million in 2013 compared to 2012. The increases in gross
profit dollars and the increase in gross profit margin percentage resulted primarily from continued product
cost reduction, production efficiencies on increased volumes and higher selling prices, partially offset by
unfavorable foreign currency fluctuations, higher promotional costs and royalty expenses as a result of a
contract dispute resolution.
Operating Expenses:
The following table reflects our operating expenses in dollars and as a percentage of sales:
For the Years Ended December 31,
Change Change
($ in millions) 2014 2013 2014 vs. 2013 2012 2013 vs. 2012
Selling and marketing ................. $314.5 $270.3 16% $210.4 28%
Research and development ............. 148.5 139.2 7% 127.3 9%
General and administrative ............. 203.2 179.4 13% 143.1 25%
Total operating expenses ........... $666.2 $588.9 13% $480.8 22%
Percentage of sales ............ 14.9% 15.6% ǁ72 basis points 15.0% +61 basis points
Operating expenses for 2014 increased 13 percent to $666.2 million, compared to $588.9 million in 2013.
Operating expenses as a percentage of sales decreased 72 basis points in 2014 to 14.9 percent compared to
15.6 percent in 2013. Operating expenses in absolute dollars increased in 2014 primarily due to higher selling,
marketing and advertising expenses related to the launch of new model year 2015 products, including
Slingshot, and the continued roll-out of Indian motorcycles, as well as increased general and administrative
expenses, which includes infrastructure investments being made to support global growth initiatives. Operating
expenses as a percent of sales declined primarily due to lower long-term incentive compensation expenses,
partially offset by higher marketing and advertising expenses related to the launch of various new model year
2015 products.
Operating expenses for 2013 increased 22 percent to $588.9 million, compared to $480.8 million in 2012.
Operating expenses as a percentage of sales increased 61 basis points in 2013 to 15.6 percent compared to
15.0 percent in 2012. Operating expenses in absolute dollars and as a percentage of sales increased in 2013
primarily due to higher selling, marketing and advertising expenses related, in part, to the re-launch of Indian
Motorcycle, increased general and administrative expenses, which includes infrastructure investments being
made to support global growth initiatives and higher accrued incentive compensation due to a higher stock
price. Operating expenses in absolute dollars also increased due to the inclusion of Klim and Aixam operating
expenses in our consolidated financial statements since these companies were acquired in December 2012 and
April 2013, respectively.
32